What is an actuary? And why would an actuary be involved in a divorce? As you may know, divorce sometimes involves complicated financial matters, such as splitting retirement accounts (see this article about that). Actuaries can help a great deal with splitting retirement accounts. This article explains a bit about why an actuary would be involved in a divorce.
What is an actuary?
I’ve seen various definitions of actuaries, including this one on Wikipedia. The definitions don’t seem particularly well-suited to divorce in Illinois. So I’m going to make up my own definition of an actuary as it applies to dividing retirement accounts in an Illinois divorce.
Definition of an actuary: An actuary is a person who is very good at math, statistics, probability. Real actuaries take a lot of tests that are really hard. If a retirement account has both marital and non-marital funds in it, the actuary can provide guidance as to how the funds should be characterized.
Why use an divorce actuary?
Suppose your case involves a timeline like this:
- 2005: You start contributing to a 401k at work
- 2012: You get married. Your continue contributing to your 401k.
- 2018: You file for divorce in Illinois.
If that is your timeline, than your 401k contains the following amounts:
- Non-marital contributions: Money you contributed before you were married.
- Marital contributions: Money you contributed after you were married.
- Non-marital gains: Gains you made and dividends you earned based upon non-marital contributions.
- Marital contributions: Gains you made and dividends you earned based upon marital contributions.
You divorce will involve splitting the 401k with your spouse – but more specifically, will involve splitting the funds in categories 2 and 4.
How do I find a divorce actuary?
As a divorce lawyer in Illinois, I have to deal with actuaries from time-to-time. You can always find your own actuary, possible through the Society of Actuaries. Or, you can contact me and I can refer you to an actuary who is familiar with splitting retirement plans in divorce.
If you already have a lawyer, then perhaps your lawyer has an idea for what actuary would be good for your case. However, if you are reading this article and discovery things that your lawyer hasn’t told you, it might be time to think about getting a new lawyer – see this article about that.
Do we really need an actuary for all this?
Well . . . sort of.
Retirement accounts are usually worth a lot of money. In fact, they are usually worth so much that people would really feel bad if they gave too big a percentage to the other side.
You can always hire whomever you want to value your retirement account, and to tell you what portion of an account is marital, and what is non-marital. For example, many people previously hired Wendy Drefahl of WFA Econometrics. But I never referred clients to that business. Wendy Drefahl was based in Wisconsin, was not a lawyer, was not an actuary, did not have an advanced degree in finance, and was not a CPA.
Long story short, if you need financial analysis of a retirement account, it might be best to hire a professional actuary to analyze the account.
How does an actuary work with a divorce lawyer?
When I use a divorce actuary, I have the actuary analyze a particular account. I will then use the figures generated in a marital settlement agreement, or will perhaps use them in litigation. A divorce actuary normally acts as a consultant to a divorce lawyer in Illinois.