Divorce Dex.com: Present Value

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Definition Present Value - the time value of money.

Application in Divorce In divorce actions, the value of a future payment or series of future payments discounted to the current date or to time period zero.

Present value is a way of calculating what today’s money will be worth tomorrow.

In pension appraisals, the present value of a pension is sometimes calculated by discounting the anticipated pension benefits by the "real" interest rate, which is the interest rate with inflation deducted from the market interest rate.

Present value is often used in distribution of pensions.

Usually, present value is calculated by the prevailing interest rate over a period of time.

The present value can be used a leverage factor in property settlement agreements when, for example, one party accepts less for full payment now.

Resources: U.C.C. § 2A-103.

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What is present value?

Present Value is the current worth of a stream of income to be received in the future. In basic terms, the present value, as it applies to pensions, describes the amount of money which would have to be invested or set aside by the pension plan today, so that sufficient funds would be available to pay out the pension amount throughout the employee’s years of retirement. In order to determine present value, the appraiser will employ an appropriate discount rate and estimate the length of time the payments will be received by the pensionholder.

Contributed on 9/19/2007 by: Pension Appraisers, Inc. Allentown, PA [Total Contributions: 12]

Category: Retirement Accounts (Applicable in All States)

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Helpful Tips & Facts

Present Value
Nothing gets cheaper. For the spouse getting support this means that it is a good idea to negotiate a cost of living escalator into the separation agreement. A COLA, as it is called, ties increases in the local cost of living to the agreement, or it assumes a flat percentage increase.

Contributed on 7/31/2007 by: DivorceDex.com Staff
Category: Property Valuations (Applicable in All States)

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Additional Resources

Pension Appraisers, Inc.

Specializes in valuing and distributing retirement benefits in cases of divorce. Established in 1989, Pension Appraisers, Inc. has valued over 15,000 defined benefit and defined contribution pension plans, and assisted attorneys and individuals in drafting over 10,000 Qualified Domestic Relations Orders (QDRO) and Domestic Relations Orders (DRO).

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