Summary of Common Family Law Terms (Vol. VII)
We have discussed a great deal of family law terms over the last few years. And like we periodically do as part of this ongoing blog series, we’d like to take a brief timeout to look back on a some of the more noteworthy concepts from the last few months.
Below is Volume VII of my summary of common family law terms.
The previous six are below as a reference.
January 2016: http://nelsonlawgrouppc.com/summary-of-common-family-law-terms/
May 2016: http://nelsonlawgrouppc.com/summary-common-family-law-terms-vol-ii/
August 2016: https://nelsonlawgrouppc.com/summary-common-family-law-terms-vol-iii/
October 2016: https://nelsonlawgrouppc.com/family-law-terms-vol-iv/
January 2017: https://nelsonlawgrouppc.com/summary-common-family-law-terms-vol-v/
March 2017: https://nelsonlawgrouppc.com/summary-common-family-law-terms-vol-vi/
Between those previous six vocabulary blogs, and the 20 terms I have highlighted below, you should have a solid foundation as we move deeper into more complex conversations.
Collateral
Something pledged as security for repayment of a loan, such as a house or a car. If the person with the debt defaults on the loan, they can forfeit ownership to the collateral.
Lien
A legal claim that uses your property as collateral until you as the property owner satisfy a debt. If the property is your homestead, for example, you cannot sell or refinance without first paying the debt in full. Types of liens are IRS liens, mechanics liens, or judgement liens.
Debtor Spouse
A spouse who is listed as the owner of a particular debt.
Promissory Note
The promissory note is a legal agreement between you (the debtor spouse) and your spouse (creditor spouse) that details out the specific parties involved, the amount owed, and the payment terms.
Perfected
This is when one creditor has priority over any current and future unsecured creditors and later-perfected secured creditors. In other words, the money owed to your spouse should be handled first, before any other creditors are paid.
Liabilities
Liabilities are debts that you owe to another person or entity. They are, for lack of a better word, your bills. The most common liabilities involved in a divorce are mortgages, credit card debt, car notes, and taxes.
Partition in Kind
To partition in kind simply means dividing everything based on what the court feels is fair. It is a tactic used by the court for the sale of community property.
Discharge by Sale
A second approach is for the court to order (with or without the parties’ consent) the sale of community property to pay off the community debts. For example, a husband and wife could be ordered to sell their real property and use the proceeds to pay their federal income-tax debt.
Hold Harmless
A hold harmless clause is a statement in a legal contract stating that an individual is not liable for any injuries or damages caused to the individual signing the contract. This can be used in the case where one spouse owes a debt, and can sign to have the other spouse held harmless in the payback of that debt.
Employee Retirement Income Security Act (ERISA)
ERISA is designed to protect employees from squandering their benefits or putting themselves in a position where they can have those benefits seized by creditors.
Qualified Domestic Relations Order (QDRO)
The QDRO (pronounced KWAH-droh) is an exception within the Employee Retirement Income Security Act. A QDRO allows for reassignment of benefits to a spouse in a divorce suit without violating ERISA.
Domestic Relations Order (DRO)
A DRO is any judgement, decree, order, or court-approved settlement that relates to the marital-property rights of a spouse, is made under a state’s domestic-relations law, and contains certain statutorily required information.
Plan Administrator
A financial adviser who is in charge of a retirement plan. This person is responsible for reviewing the DRO to determine whether it complies with ERISA and with any other rules the retirement plan has created to govern the assignment of benefits.
Qualified Private Retirement Plan
A type of retirement plan established by an employer for the benefit of the company’s employees. Qualified retirement plans give employers a tax break for the contributions they make for their employees.
Defined-Contribution Plans
In a defined-contribution plan (example: 401k), both the employee and employer contributes money or stock to an individual account held in the employee’s name. The contributions are usually based on a percentage of the employee’s salary while the value of the employee’s account will depend on the amount of contributions made, plan and income expenses, and the gains and losses of the account’s investments. The employee gets the full balance of the account upon retirement.
Defined-Benefit Plans
This plan type is slightly different in that an employer generally agrees to pay an employee a monthly defined benefit from the date of retirement until the employee dies. A defined-benefit plan can still be considered qualified even if the plan makes distributions before retirement to employees who are 62 or older. A defined-benefit plan usually makes payments to participants with an annuity, which is a stream of monthly payments that continue until some date is reached or some condition is met (usually until the death of the participant).
Vested
Vested means the participant in a retirement plan is guaranteed to be paid the benefit regardless of future employment.
Non-Vested
A nonvested benefit can be forfeited based on certain future events.
Taggart Formula
This is a formula used when the benefits are fully matured at the time of divorce. The interest is calculated by dividing the number of months the parties were married during employment by the total number of months the participant spouse was employed at the time of retirement. The resulting percentage represents the community estate’s interest in the retirement benefits.
Berry Formula
This formula is used when the benefits are not fully matured. The interest is calculated by dividing the number of months the parties were married during employment by the total number of months the participant spouse was employed at the time of dissolution. The resulting percentage represents the community estate’s interest in the benefits.
Please keep this list handy for your easy reference. If you would like us to discuss a particular family law topic in these blogs, please contact our Nelson Law Group, PC office to let us know. We would love to hear from you.
