Robinette v. Hunsecker: Graying Divorce and Retirement Benefit Allocation
According to the Census Bureau’s American Community Survey, older Americans today are twice as likely to be divorced after 50 than they were just two decades ago. And for the first time ever, this cohort is more likely to be divorced than widowed.
Our Fairfax divorce attorneys understand these individuals have different priorities than their younger counterparts, who are more often grappling with issues of child custody, child support and divvying up the debt. With older couples, the concern shifts to asset and property division, splitting public benefits (such as Social Security or Social Security Disability Insurance) and the proper allocation of private retirement plans and pensions
It’s not that such concerns are absent among younger couples, but they tend to be a greater priority for older divorcees. Consider that while divorce is financially trying for anyone, people in their golden years may not have the same kinds of opportunities to start over. That makes a fair resolution of these issues all the more important.
It’s important to note that in most cases, accrued or vested retirement benefits are considered marital property. That means in a divorce, they should be divided just like any other kind of asset. This includes military pensions, IRAs, veteran’s educational benefits, ERISA funds, employee stock option plans, 401k plans and 4013 plans. However, equitable division can be more complex than it would appear on the surface because the exact value of each plan may be obscure, and the benefits may not be paid out for several years to come.
A recent example of this can be found in the case of Robinette v. Hunsecker, weighed by the Maryland Court of Appeals. Although this is an out-of-state case and domestic relations law can vary among jurisdictions, the same basic legal principles presented in Robinette are applicable here in Virginia. Both states follow an “equitable distribution” model of property division in divorce cases.
Here, the couple married in June 1981, and the pair remained together until 1998, when they separated and soon after divorced. Throughout the course of their union, the husband worked at the local school district, and participated in a pension plan available to workers.
The two executed a divorce settlement agreement, a portion of which entitled the wife to half of her husband’s pension plan benefits accrued during their marriage. Those included potential death benefits. Although the agreement implied the plan was regulated by the Employee Retirement Income Security Act of 1974, it actually was not. This became important later because his plan did not allow for an “alternate payee,” as ERISA does. The agreement in fact required a submission of the plan to the husband’s employer, which neither party did.
Two years later, the husband remarried and filed paperwork with his employer, naming his new wife as the beneficiary of record of his pension. He worked at the school until his death nine years later. His second wife, the personal representative of his estate and the beneficiary of his pension plan, received an initial lump sum payment for death benefits and was slated to receive $2,000 monthly after that.
The ex-wife applied for her portion of the pension and death benefits per the divorce agreement, but the request was denied because she was not named as the beneficiary.
From there, she had to file a complaint in circuit court. Neither party disagreed on the underlying facts, and both sought summary judgment. The court sided with the ex-wife, recognizing that while the second wife had done no wrong, it would be inequitable for the second wife to retain the pension benefits in their entirety, given the earlier divorce settlement agreement. The court further agreed to approve a posthumous “QDRO” (qualified domestic relations order) with the pension fund in order to satisfy the necessary requirements for the ex-wife to collect her rightful portion of benefits.
This order was affirmed by the state court of appeals.
Although the ex-wife secured a favorable outcome in this action, it’s worth noting she would not have had to endure it at all had the settlement been properly drafted with regard to retirement benefit allocation several years earlier.