Category: Separation Agreement Language

Divorce Decrees are Final; Make Sure all Retirement Benefits are Addressed

Divorce Decrees are Final; Make Sure all Retirement Benefits are Addressed

Schaad v. Schaad, 5th Dist. Morgan No. CV05-098, 2019-Ohio-2553 (Decided June 19, 2019).

Issue: Can a court redistribute property/order spousal support at the time of retirement, in a manner that differs from the divorce decree, to make the division “equitable?”

Decision: The Fifth District Court of Appeals determined the trial court did not have the ability to order a division of retirement benefits/spousal support, which were inconsistent with the divorce decree.  The Wife in this case had a pension from the State Teachers Retirement System of Ohio (“STRS”).  The parties divorced in 2007.  At the time of divorce, the decree stated that Husband would receive half of Wife’s STRS pension offset by his social security benefit (this is common in State of Ohio plans such as STRS because the Participant’s social security benefit is reduced by virtue of participating in the plan).  With the social security offset, Husband’s portion of Wife’s STRS was calculated to be 43.27%.

In 2010, Wife retired so both her and Husband began receiving their respective portions of the STRS benefit.  After her retirement, Wife became aware that Husband was receiving veterans benefits, which, when combined with his portion of Wife’s STRS benefit, resulted in Husband receiving a higher monthly income than Wife.  In 2018, Wife filed a motion claiming her STRS benefit was divided improperly, in part, because Husband’s veteran benefits were not addressed in the divorce decree.  Husband argued his veterans benefits were separate property and that is why they were not addressed in the decree.  The trial court granted Wife’s motion and vacated the division of property order dividing Wife’s pension – thereby rescinding Husband’s right to the STRS benefit.  The trial court further ordered Husband to pay Wife spousal support, which was never mentioned in the divorce decree, to “equalize” the parties’ monthly incomes.

On appeal, the Fifth District Court of Appeals found the trial court exceeded its authority in altering the divorce decree by revoking Husband’s right to the STRS benefit and requiring Husband to pay spousal support.  The Fifth District held the trial court was without authority to modify the decree after it had been ordered.  Courts are permitted to clarify divorce decrees; however, they cannot not alter them after they are final.

Observation: Divorce decrees, like executed settlement agreements, are final and binding.  It is vitally important that the language in decrees/settlement agreements are correct and cover all retirement assets.  The post-divorce litigation in this matter could have been avoided by simply addressing the Husband’s veterans benefits in the divorce decree.  If the benefits were addressed, even if simply to state they were separate property, there would have been no grounds for Wife to bring her motion.  Although Husband was eventually successful in this action, he incurred additional costs.

How we can help: We can help you with all stages of litigation to ensure that your client receives his/her correct share of the marital retirement benefit.  We provide assistance in discovery of assets, we provide advice on the most advantageous division of the benefits for your client, we help draft/review division language, we help in negotiating settlements, and we can be your expert witness at trial.

Incorrect Dollar Amount in a Separation Agreement

Incorrect Dollar Amount in a Separation Agreement

Kmet v. Kmet, 8th Dist. Cuyahoga No. 107759, 2019-Ohio-2443 (June 20, 2019).

Issue: Can the trial court alter the premarital portion of a retirement account listed in a final Separation Agreement after it has been discovered said amount is incorrect?

Decision: The Eighth District Court of Appeals determined that the parties were bound by the dollar amount listed in the Separation Agreement as the premarital portion and the trial court could not amend said amount—even after it was discovered that the amount was inaccurate. In this case, Husband and Wife entered into a Separation Agreement that listed the parties’ date of marriage as September 26, 1996. Based upon that date, it was determined that the premarital portion of the Husband’s Thrift Savings Plan or “TSP” (a retirement savings and investment plan for federal employees and members of the uniformed services that is similar to a 401(k) plan) was $28,328.29. During the hearing, the Magistrate specifically asked if the $28,328.29 was the premarital portion of the TSP and the rest of the funds were marital property that were to be divided 50/50. The Wife’s attorney answered in the affirmative.

It was later discovered that the parties had used the wrong marriage date. The Husband and Wife were actually married on September 26, 1995—not 1996. As such, the parties amended the original Separation Agreement to reflect the correct marriage date. However, in the amended Separation Agreement, the parties still had the premarital portion of the Husband’s TSP listed as $28,328.29. After the Separation Agreement was revised and incorporated into a decree, the Wife had an amended QDRO drafted to reflect the correct date of marriage. When the QDRO was prepared, it was discovered that the premarital portion of the TSP account was less than $28,328.29. The Husband refused to sign the QDRO that reflected less premarital property. The parties litigated the matter and the Magistrate held that the amount of $28,328.29 was incorrect as it was based on the incorrect date of marriage and the parties should not be held to that amount. The trial court adopted the Magistrate’s decision.

The Husband appealed, claiming that through the original Separation Agreement, the amended Separation Agreement, and the Wife’s attorney’s representations before the Magistrate, the parties had clearly agreed that the premarital portion of his TSP account was $28,328.29. As such, it was improper for the trial court to alter this agreement. The Eighth District agreed with the Husband and reversed the trial court. It recognized that language in a divorce decree is to be interpreted just like any other contract and words in a contract should be given their “ordinary meaning.” Because the original and amended Separation Agreements explicitly listed the premarital portion of the Husband’s TSP as $28,328.29, the parties were bound by that amount. The trial court could not amend the premarital portion—even if that amount was wrong.

Observation: The language in a Separation Agreement is critical. The wrong language can cost your client hundreds, thousands, or even hundreds of thousands of dollars over a lifetime. In such circumstances, aside from the damage to your client, it is possible you could be on the hook for malpractice or, in the very least, your reputation could be harmed.

How we can help: Our team has decades of experience in dividing retirement assets at divorce. We can help you to correctly value the retirement assets, negotiate a settlement, draft the Separation Agreement, and/or draft the QDRO.

Interplay of Local Rules and Separation Language Decision

Interplay of Local Rules and Separation Language Decision

Tekamp v. Tekamp, 12th Dist. Warren No. CA2018-08-092, 2019-Ohio-2382 (Decided June 17, 2019).

Issue: How should a court address gains and/or losses on the alternate payee’s portion of a defined contribution (DC) plan when the agreed-upon divorce decree is silent on the matter and an applicable local rule states gains and/or losses are assumed?

Decision: The Twelfth District Court of Appeals affirmed the Warren County Court of Common Pleas Domestic Relations Division’s (trial court) decision that the Wife’s portion of the Husband’s 401(k) benefit was to be adjusted for gains and/or losses between the date of divorce and the distribution—even though the decree was silent on the matter. The divorce decree in this case, which reflected the parties’ agreed-upon division of the Husband’s 401(k) account, simply stated, in relevant part, that said account was to be “divided 50/50 by QDRO.” The Husband contested a proposed Qualified Domestic Relations Order (QDRO) that awarded the Wife gains and/or losses from the period between divorce and distribution of the funds because the decree was silent on that issue. The trial court disagreed with the Husband’s argument because the trial court’s local rules explicitly state:

Unless otherwise agreed, a QDRO for a defined contribution plan shall contain the following provisions or be governed by these assumptions:

                                *                                             *                                             *

b. the alternate payee’s share of the benefits shall be credited with investment earnings and/or losses from the date of division until contribution[.]

(emphasis added).

The trial court determined, and the Court of Appeals affirmed, that, the above local rule establishes an assumption in the Warren County Court of Common Pleas Domestic Relations Division that, without explicit language to the contrary, gains and/or losses are included for the division of all DC plans.

Observation: For those of you that regularly read our blog, you will notice a theme that we have noticed over the years, the division language for retirement benefits matters. This is just another example. If, as the Husband claimed, the parties truly intended to exclude gains and/or losses from the Wife’s share of the 401(k) benefits, they should have explicitly included this intent in the agreed-upon divorce decree language.

Be aware of the local rules of the court you are in and be careful about the division language in the divorce decree or separation agreement. Otherwise, your client may not be receiving what he/she expected.

How we can help: We offer free separation agreement language on our website, our legal services section can help draft custom separation language for your case; we offer solutions for negotiations, and we of course can draft the QDRO for you.