Iowa Divorce and Family Law

U.S. Supreme Court Accepts Certiorari in QDRO Case

The United States Supreme Court accepted certiorari in the 5th Circuit case of Kennedy v. E.I. Dupont, 497 F.3d 426 (5th Cir. 2007). The issue the Court will consider is limited to whether a Qualified Domestic Relations Order (QDRO) is the only valid way a divorcing spouse can waive her right to receive her ex-husband's pension benefits under ERISA.

The case involves a former spouse who waived her right in the divorce decree to receive any part of her husband's "saving and investment plan" provided by Dupont. The husband was the "participant" in the pension plan; the wife would have been the "alternate payee" had she received a portion of the husband's plan benefits. The plan qualifies as a qualified ERISA plan. After the divorce, the ex-husband/employee never changed his beneficiary designation before his death. The plan paid the ex-wife and the husband's estate sued the pension plan. The 5th Circuit held the waiver of the wife's beneficial interest in the divorce decree was prohibited by ERISA's "anti-alienation" provisions. The 5th Circuit Court of Appeals decided that the only method by which a participant's or beneficiary's interest in an ERISA-covered plan can be accomplished is by QDRO. The court also noted that the cases involving waivers of ERISA-covered life insurance policies are not applicable here since those are welfare plans and not pension plans there therefore the anti-alienation provisions are not applicable. There is a conflict of decisions by the various federal courts of appeal on this issue.

The 5th Circuit Court of Appeals decision is available in PDF format here. (URL last visited 2/20/2008).

Pension ("Defined Benefit") Plan Division under Iowa Law - A Primer

Today's Iowa Supreme Court decision in Faber v. Herman contains a good summary of the various options available when dividing traditional pension plans, so-called "defined benefit" plans. The opinion explains the pitfalls and advantages of each particular method, along with dicta that reinforces the preferred method of dividing such plans by the "percentage"method set forth originally in In re Marriage of Benson, 545 N.W.2d 252, 255 (Iowa 1996) and re-affirmed in In re Marriage of Sullins, 715 N.W.2d 242, 248-49 (Iowa 2006).

Technorati Tags: QDRO, pensions

Securing property judgments - In re Marriage of Keener

Last week's Iowa Supreme Court opinion of In re Marriage of Keener, contains a good summary of the use of judgment liens and other security devices in equitable distribution case involving business property and closely-held business entities.  During their 10 year marriage, the couple accumulated a business with assets of over ten million dollars, but kept all the business assets in wife's name to protect them from creditors.  The trial court ordered that the wife receive the business assets but that she make installment payments to her ex-husband for the property settlement equalization.  Each payment became a judgment when due.  The court granted the husband an equitable lien on the company to secure these payments.  The Iowa Supreme Court found this approach left the husband with insufficient security against the future payments.  First, a judgment for the entire amount should have been issued, with an allowance of periodic payments, so that a judgment lien would attach to the business's real property.  Second, interest on the unpaid amount should accrue.  Third, the "equitable" lien was eliminated and replaced with a judgment lien and a UCC lien against the company stock.

Unmarried "Joint Venture" Property Division

The Iowa Court of Appeals has issued an opinion that deals with a subject that is going to come up ever more frequently as an ever growing segment of the population lives together and does not marry: how to divide the property of unmarried partners when they go their separate ways.

In the case of Scheppele v. Schulz, the unmarried couple purchased a home in 2001 by making a down payment of about $156,000. Each party contributed approximately one-half of this amount, and the remainder was financed by Scheppele, but not Schulz. They then began extensive renovations of the property over the next two years. Each party contributed additional consideration in both cash and services in remodeling the home after the initial purchase. In 2004, their relationship fell apart and Scheppele filed an action "for partition of real estate and accounting."

Although the opinion is unclear exactly what Schulz's preferred method of division would have been, she argued on appeal that the trial court erred when it "relied on the equitable principles governing the termination of a joint venture." Schulz argued that this "doctrine has no application in a case such as this, which involves the personal residence of former romantic partners." The Court of Appeals found it "unnecessary to address this contention, as we would reach the same result whether we applied joint venture principles or the general rules of partition."

From a practical viewpoint, the holding of case emphasizes the risk that is taken in any partnership, romantic or otherwise, when no written agreement addressing the nuts and bolts of what will happen to the partnership's property if and when the partnership dissolves. Iowa appellate decisions clearly hold that in a divorce case under Chapter 598, the court cannot simply perform an "accounting of the marriage," as was done in this case. Unmarried cohabitating couples can reduce this risk of litigation by setting forth in writing exactly how property they accumulate together during the relationship will be divided if their "partnership" falls apart. Without such a written partnership agreement, the court will apply its own rules - ones which are unlikely to be satisfactory to either party.

Who Gets the Engagement Ring if the Marriage Is Called Off

This question seems to come up more often every year:

Male caller:  "Do I get the engagement ring back?  She called off the wedding."

Female caller: "Do I get to keep the engagement ring?  He called off the wedding."

I'm leaving out the "rest of the story" that always accompanies the reasons the wedding was called off.  Why?  Because it doesn't matter under Iowa law:

 

In 1990, the Iowa Court of Appeals adopted the "no fault" approach: "[W]e hold an engagement ring given in contemplation of marriage is an impliedly conditional gift; it is a completed gift only upon marriage.  If the wedding is called off, for whatever reason, the gift is not capable of becoming a completed gift and must be returned to the donor."  Fierro v. Hoel, 465 N.W.2d 669, 672 (Iowa Ct. App. 1990). 

 

If you're interested in more on the subject of diamonds and broken promises, take a look at this dissenting opinion from the Pennsylvania Supreme Court in a 2002 decision.

Effect of Trust Assets on Alimony and Equitable Distribution

In the case of In re Marriage of Rhinehart, at issue was the treatment of the wife's future interest in a trust. The court held that the undistributed income from the trust could not be treated as a current source of financial support that would alleviate the wife's need for alimony; the undistributed income from the trust was not a marital asset that was subject to division. The Iowa Supreme Court also held that the wife's future interest in the trust could be considered when determining equitable division of property.

Military Pension and Compensation Resources

Here are few excellent resources regarding the division, processing, and payment of military retirement benefits and compensation:

1. "The Simple Facts," a summary of the benefits and disadvantages of SBP, briefing slides with text and a trifold brochure, "SBP, Basic Questions Answered," at the SBP section of this Army retirement website.

2. The "Army Benefits ToolArmy Benefits Tool" webpage, applies to all branches of service. It contains explanations for military compensation, pay and entitlements, the Career Status Bonus (CSB), combat zone tax exclusions, SGLI, the Thrift Savings Plan, TRICARE, Combat-Related Special Compensation, USFSPA, Dependency and Indemnity Compensation Rate Tables, and VA benefits.

3. The website for the Army Human Resources Command, contains active duty pay and retirement calculators, TRICARE information, how to earn Reserve retirement points, the value of a point and how to calculate RC (Reserve Component) retired pay based on points. Click on "Links" to quickly navigate the site without the annoying flash-intro.

Employers May Now Charge for QDRO Approval

In a little noticed change, the US Department of Labor issued a "field assistance bulletin" in May, 2003, that permits employers and administrators of ERISA-regulated defined contribution  retirement plans (such as 401(k) plans) to charge QDRO processing expenses.   The Wall Street Journal recently reported that one large plan administrator (Fidelity Investments) now charges for QDROs for 40 of its 200 plans for which Fidelity processes QDRO documents.  The decision to charge is made by each individual employer. 

Here is the text of the DOL "Field Assistance Bulletin" regarding QDRO/QMCSCO fees:

Qualified Domestic Relations Orders (QDROs) and Qualified Medical Child Support Order (QMCSOs) Determinations.

ERISA does not, in our view, preclude the allocation of reasonable expenses attendant to QDRO or QMCSO determinations to the account of the participant or beneficiary seeking the determination.    

It should be noted that, pursuant to 29 CFR § 2520.102-3(l), plans are required to include in the Summary Plan Description a summary of any provisions that may result in the imposition of a fee or charge on a participant or beneficiary, or the individual account thereof, the payment of which is a condition to the receipt of benefits under the plan. In addition, § 2520.102-3(l) provides that Summary Plan Descriptions must include a statement identifying the circumstances that may result in the “ . . . offset, [or] reduction . . . of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits . . .” These requirements are intended to ensure that participants and beneficiaries are apprised of fees and charges that may affect their benefit entitlements.

The views expressed herein supersede the views expressed in AO 94-32A.

           

 

Establishing Value at Trial

In re Marriage of Hoakison illustrates the importance of establishing property values for equitable distribution purposes at trial. The trial court noted, "The Court is unable to make a determination as to the value of hte home and determination of the value of the camper." Nonetheless, the trial court entered what it believe to be an equitable distribution of all property.

On appeal, the Court of Appeals noted:

Since the trial court did not make a finding as to values, the net property distribution is unclear from the court’s ruling. This court said in Bonnette, 584 N.W.2d at 714:

The reason we underscore the importance of assigning values and setting forth the net property distribution is two-fold: (1) to enable the reviewing court to assess whether an equitable division of property was affected; and (2) to aid the parties in better understanding their respective property awards, which would, in some cases, dispense with the need for an appeal.

In re Marriage of Swalley

This decision by the Iowa Court of Appeals is a good primer on alimony and the factors affecting its amount and duration in any particular case. On the subject of property awards, the "key" to whether tax consequences should be considered is whether the sale of an asset is ordered or "otherwise relatively certain." Here, the court found that it was too speculative to predict tax rates 20 years or more in the future to allow an adjustment for tax consequences.