The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Marriage Penalty Returns Date:  1/19/2013  2:08 AM
Author:  ptheland Number:  117404 of 127637

Over 20 years ago, IIRC, a couple of friends of mine (couple is rignt: married to each other and having two kids), both with Ph.D.s in physics, so they were presumably quite intelligent, and I believe they were, figured out that it really would be a lot cheaper for them to get a divorce. They figured they would still live together, since they loved each other and all.

At that seminar I was at on Thursday, they also mentioned a few airline pilots and their spouses getting divorced, but staying together.

This was when airlines were going bankrupt left and right. (OK - that doesn't nail down a time frame, does it? It was when Delta and a couple others went BK most recently.) Most of the pilots' pension was invested in company stock. If the companies went BK, the stock would become worthless and the pilots' pension liabilities would be transferred to the PBGC. The PBGC has a pretty low maximum pension they insure. So there's a lot of money at stake. The pilots couldn't get to their pensions unless they quit. They might be able to get a job at another airline, but they'd lose all of their seniority and probably have to take a significant pay cut.

So before their airlines went BK, some pilots got a divorce. As part of the divorce property settlement, the pilots agreed to give their entire pension benefits to their ex-spouses. The various divorce courts granted the spouses a QDRO, allowing the spouse to withdraw the current pension without penalty. And they could roll that over into an IRA if they so chose.

Viola! All of the money out of the pension. And no more exposure to losses due to the airline's bankruptcy.

Apparently, often their friends and family were unaware of the divorce. I guess only their hairdresser ... er ... tax preparer knows for sure. ;-)

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us