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When addressing a pension in divorce, remember the COLA

For many New York couples who are going through a divorce, a pension is the biggest asset they will have to address. As you approach this topic, however, it is important to keep in mind that dividing a pension is not as simple as picking a dollar amount or percentage.

When splitting a pension, one of the most important things to consider is the cost of living adjustment that happens most years. Failing to mention the cost of living adjustment in your divorce settlement can be detrimental -- leaving you with much less than you otherwise would have received. Consider the following scenario.

Your ex-spouse will receive a pension of $5,000 a month upon retirement. You have been married for a long time, so you work out an agreement to split the pension. You get 50 percent of the $5,000 each month. Once your ex retires, you start getting $2,500 a month. What you failed to consider, however, is that the total payments rise annually with the cost of living.

By not mentioning that your 50 percent will include the cost of living, you could end up watching your ex's "half" of the pension rise while yours remains constant at $2,500.

This scenario is just one example of why attention to detail is essential when working out a divorce settlement. Forgetting to address seemingly minor issues can make you vulnerable to being taken advantage of during divorce proceedings. A good way to avoid this is to work with an attorney experienced in divorce proceedings. Understanding all possible outcomes of your choices can help ensure you make the right ones.

Source: The Huffington Post, "Three Costly Divorce Settlement Mistakes and How to Avoid Them," Christian Denmon, Jan. 21, 2014

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