Cincinnati Bar Association - Domestic Relations Institute CLE (April 17, 2015)

I had a wonderful time this past Friday speaking about QDROs at the Cincinnati Bar Association's Annual Domestic Relations Institute CLE, presented by the all-star Domestic Relations Court Committee.  Thank you to all the attendees for such a warm reception (and for staying awake).  

QDROs + Captive Audience = Delighted Eileen

DOPOs & QDROs Keeping You Up at Night? - Advice on Getting it Right

DOPOs & QDROs Keeping You Up at Night? - Advice on Getting it Right

SHOW ME THE MONEY: UPDATE TO MY BLOG POSTS DATED JUNE 12, JULY 1 & AUGUST 21, 2014

Fraley v. Maxey, NO. 2013-CA-001447-MR (Ky. App. 2014)
In Allocating the Marital Portions of 401(k) Accounts, the Non-Participant Spouse is Only Entitled to 1/2 of the Marital Contributions and Appreciation Thereon

Rendered: November 21, 2014
Not To Be Published
Opinion Affirming

Add another notch to my QDRO lipstick case. If you click on “TRACING” on the tag-cloud to the right of this post, you’ll see this is my fourth blog post highlighting this well-settled area of law:  traceable gains on pre-martial contributions are non-marital when the increase does not result from the efforts of either party. (See my blog posts dated June 12, 2014; July 1, 2014, and August 21, 2014).

In jurisdictions such as Kentucky and Ohio, tracing is utilized as an evidentiary vehicle to value and prove the passive increase of pre-marital contributions in a 401(k)-type plan during the period of marriage. [For citations to applicable Kentucky and Ohio statutory and case law, see my blog post dated August 21, 2014.]

Tracing allows one to make an accurate determination of the growth (or loss) on both the marital and non-marital contributions in the account by calculating the rate of return experienced on the account during the marriage. Take the following example from one of my own consulting cases (the story you are about to hear is true; only the names have been changed to protect the innocent), wherein I traced the passive growth of a pre-marital account balance over the span of a ten-year marriage:

The balance in Steven’s 401(k) on his date of marriage was $173,364. At the time of the divorce, the account had grown by $251,266 to $424,630. However, of this $251,266 increase, it was determined that only $144,290 was divisible due to contributions made during the marriage, and passive market growth thereon. Therefore, Steven retained $280,339, in addition to half of the divisible $144,290. 

Without competent evidence, a court may have instead found the full $424,630 divisible – netting $212,315 to each spouse. However, after my tracing of the marital contributions and growth thereon during the marriage, Steven ended up with $352,485, and his spouse with $72,145.  Wow!

What is interesting and notable about Fraley (even after multiple exhilarating blog posts on the subject), is that – unlike Steven’s marriage – the parties were only together three years. The trial court in Fraley initially found that Wife’s Fidelity and TIAA-CREF accounts had increased in value during the three-year marriage in the amount of $72,564.00. Thus, the trial court determined Husband’s share was ½ of that, or $36,282.00. 

However, Wife subsequently filed a motion to alter, amend, or vacate the trial court’s findings of fact. Wife’s motion pointed to competent evidence within the record that traced her pre-marital contributions and passive growth thereon during the marriage, proving the marital portion was only $3,127.00. In response, the trial court amended its findings, concluding that Wife met her burden, and that Husband was only entitled to $1,563.55 (½ of $3,127.00), instead of $36,282.00. Wow! The Court of Appeals, citing to KRS § 403.190(2)(e), affirmed, summarizing:

In allocating the marital and nonmarital portions, we agree with the family court that [Husband] was only entitled to one-half of the total marital contributions and any appreciation in value of the marital portion during the marriage. The nonmarital contributions and any increase in value of those contributions not attributable to the efforts of the parties during the marriage were correctly assigned to [Wife].

Today’s lesson? Don’t make the mistake of thinking a short-term marriage isn’t worth the effort to examine. 

The law holds no secret at this point as to the evidentiary burden itself. What may still be somewhat elusive is understanding how tracing works and identifying the most preferred (and court-approved) methods of tracing. At risk of self-aggrandizing my QDRO Blog (with an admitted readership consisting of only close family and a few other gluttons), I refer you to my previously mentioned three related posts. These posts thoroughly explore relevant state law in Kentucky and Ohio, evidentiary considerations, how-to’s, and even some tips for trial motions.

QDRO PRIMER FOR OHIO FAMILY LAW PRACTITIONERS

Saks v. Riga, 8th Dist. Cuyahoga No. 101091, 2014-Ohio-4930
Lions (Expert Witnesses), Tigers (Coverture), and Bears (Deferred Distribution), Oh My!

Released and Journalized: November 6, 2014
Judgment Affirmed in Part, Reversed in Part, and Remanded

Today’s feature case is just plain good ole’ domestic relations law fun. It hits on several pinnacle issues related to QDROs (or in this case rather, a Court Order Acceptable for Processing (COAP), which divides Federal Employees Retirement System (FERS) pensions). In fact, the issues are so well canvased that this Opinion makes a wonderful primer – or refresher course – for domestic relations attorneys practicing in Ohio.

For starters, both parties in this case were/are attorneys. So that may help explain the need for a 34 page Opinion. After trial, the magistrate divided the parties’ marital property, and ordered Husband to pay monthly child and spousal support and one-half of Wife’s attorney fees. Both parties filed objections to the magistrate’s decision; the trial court overruled all of the objections and adopted the magistrate’s decision except for a few limited modifications. Husband appealed, raising eleven assignments of error. Wife cross-appealed, raising one assignment of error.

I have broken down the relevant issues in Saks v. Riga in an index-like format below, for future quick reference. But I strongly encourage every attorney reading this blog (or just the two, thanks DP and GA) to read this Opinion in full. You know, with all your spare time.

Read More

KY & OH: “EQUITABLE” IS ALWAYS FAIR, BUT NOT ALWAYS EQUAL

Pitman v. Pitman, NO. 2013-CA-000249-MR (Ky. App. 2014)
The Trial Court Has Discretion to Award the Entirety of a Marital Retirement Account to One Party

Rendered:  October 24, 2014
Not To Be Published
Opinion Affirming

Another case where it doesn’t matter whether you are a practitioner in Kentucky or Ohio. The law is essentially the same on this point: Kentucky and Ohio law provide for an equitable division of marital property upon dissolution of a marriage. The word "equitable" means "fair," which does not always equate with an equal division of property. (Say that ten times fast.)

Division is not always 50/50

Division is not always 50/50

While Ohio Revised Code (ORC) § 3105.171 does state that a division shall be equal, it allows the court to order an unequal division if "an equal division of marital property would be inequitable." The statute contains various factors for the court to consider in deciding whether to award an unequal division of marital property.

Kentucky Revised Statute (KRS) § 403.190 has similar effect. Although the statute does not expressly reference an ‘equal division’ of marital assets, as does the ORC, it does require the court to divide marital property in “just proportions” with consideration of “all relevant factors” (including a list of four specific factors). It is well settled that, pursuant to KRS § 403.190, an unequal award of marital retirement benefits is proper if needed to make the overall division of marital property in “just proportions”. See Pitman at page 4, citing Snodgrass v. Snodgrass, 297 S.W.3d 878, 888 (Ky. App. 2009); Smith v. Smith, 235 S.W.3d 1, 17 (Ky. App. 2006); Overstreet v. Overstreet, 144 S.W.3d 834, 839 (Ky. App. 2003). 

In Pitman, the facts are more interesting than the outcome, in that the above-holding is not breaking news. Husband and Wife lived apart much of their marriage, with Wife ultimately raising their son in Kentucky. Wife had a successful business designing “Fabulous Hats” and selling them at various events, including the Kentucky Derby (she was eventually successful enough to have a brick and mortar establishment). During big hat events (pun intended), Husband would come to Kentucky and care for their son while Wife tended to her business. Wife did not disclose her business assets, but during a single event she earned as much as $100K in gross income. 

During the pendency of the divorce, Husband offered that Wife keep her business and in exchange Husband would keep his retirement account, estimated at $25K (both were marital property). Wife did not agree, arguing she contributed to Husband’s ability to earn a living by caring for their son.

After considering the relevant factors set forth in KRS 403.190(1), particularly (1)(a), the trial court awarded Wife’s business to her and Husband’s retirement account to him.  Wife appealed, wanting half of Husband’s account. The Court of Appeals affirmed, finding the trial court did not abuse its discretion.

As I said, nothing newsworthy here, just a reminder that you have license to be creative (pun intended) when negotiating the division of marital assets.  It isn’t necessary that marital assets just get divided down the middle. However, when on the defensive, it may not hurt to remind your client that the trial court can divide the marital piggy any way it deems equitable in light of the parties’ circumstances.