Awarding Retirement Plans in Alabama Divorce

By now you’re probably familiar with the Alabama statute governing division of retirement plans in divorce, Ala. Code § 30-2-51(b). Is there ever a time when a retirement plan should be divided not under § 30-2-51(b) but under the general provision for marital property division, § 30-2-51(a)? In Smith v. Smith, Case No. 2040310 (Ala. Civ. App. December 9, 2005), the Alabama Court of Civil Appeals says no.

Here’s the text of Ala. Code § 30-2-51:

§ 30-2-51. Allowances to spouses at time divorce granted

(a) If either spouse has no separate estate or if it is insufficient for the maintenance of a spouse, the judge, upon granting a divorce, at his or her discretion, may order to a spouse an allowance out of the estate of the other spouse, taking into consideration the value thereof and the condition of the spouse’s family. Notwithstanding the foregoing, the judge may not take into consideration any property acquired prior to the marriage of the parties or by inheritance or gift unless the judge finds from the evidence that the property, or income produced by the property, has been used regularly for the common benefit of the parties during their marriage.

(b) The judge, at his or her discretion, may include in the estate of either spouse the present value of any future or current retirement benefits, that a spouse may have a vested interest in or may be receiving on the date the action for divorce is filed, provided that the following conditions are met:

(1) The parties have been married for a period of 10 years during which the retirement was being accumulated.

(2) The court shall not include in the estate the value of any retirement benefits acquired prior to the marriage including any interest or appreciation of the benefits.

(3) The total amount of the retirement benefits payable to the non-covered spouse shall not exceed 50 percent of the retirement benefits that may be considered by the court.

(c) If the court finds in its discretion that any of the covered spouse’s retirement benefits should be distributed to the non-covered spouse, the amount is not payable to the non-covered spouse until the covered spouse begins to receive his or her retirement benefits or reaches the age of 65 years, unless both parties agree to a lump sum settlement of the non-covered spouse’s benefits payable in one or more installments.

In the Smith case, the husband had an IRA that consisted entirely of premarriage retirement benefits and the interest they had generated.
Before the divorce complaint was filed, the husband liquidated this IRA and transferred the proceeds to his attorney’s trust account. Because of the husband’s action, the IRA did not exist when the divorce complaint was filed and was therefore not covered by § 30-2-51(b).

Apparently based on the wife’s argument at trial that the husband had earlier used some of the proceeds from this IRA for the benefit of the marriage, the trial court ordered an equal division of the funds from the IRA held in trust by the husband’s attorney. The wife appealed on several issues, and the husband appealed on several issues, including this one.

The Appeals Court looked to the plain language of the statute. It noted that § 30-2-51(b) says nothing about considering retirement benefits as marital property based on the use of the benefits of the marriage. Instead, said the Appeals Court, the disposition of retirement benefits depends entirely on the vesting of the benefits, the length of the marriage, and when the benefits were accumulated.

The Appeals Court also said that the interpretation urged by the wife would lead to irrational results “that we cannot conclude were intended by our legislature.” The Appeals Court remanded the case to the trial court for a new trial on the issue of the division of the husband’s retirement benefits.

Separately, the Appeals Court found deficient the trial court’s division of certain of the husband’s retirement plans because of insufficient evidentiary foundation. Specifically, the Appeals Court said that the trial court had divided plans to which the husband had contributed prior to the marriage, during the marriage, and after the complaint for divorce was filed, all without any evidence from the wife as to the value of the plans at the time of the marriage or at the time the divorce complaint was filed. “In other words, the [trial] court’s retirement-benefits award contains premarriage retirement benefits, and income and appreciation thereon, and postcomplaint retirement benefits, and income and appreciation thereon, in violation of § 30-2-51(b).”

23 comments to Awarding Retirement Plans in Alabama Divorce

  • Daby Brown

    Is Section (b) dependant upon satisfying section (a) requirement of the § 30-2-51. Allowances to spouses at time divorce granted. In other words, if the spouse has separate estate and/or it is sufficient for the maintenance of the spouse, then can the judge include retirement benefits into the division of property.
    If so, is there a point at which the payments will cease and under what conditions? (Remarriage, death, etc.) Example: 30 yom married to 31 yof, 4 children, 3 properties, divorce at 10 years of military service for the 30 yom of which they spent together in wedlock. Alabama courts divide property between the two (considered estates?) and 31 yof is granted 50% of retirement. 30 yom retires at 20, starts recieving retirement benefits and 31 yof recieves her 50%. Is this right, and when, and under what conditions, do the payments to theh 31 yof stop?

  • mary

    My ex and I were divorced in 2002. He worked at TVA from 1993 until now. Would I still be entitled to half of his retirement when: 1. he agreed to it in the divorce
    2. the time we were married was from 1986 to 2002.

    Please advise.

  • When you say “he agreed to it,” do you mean the judge ordered it or that you and he chat about it and at one point he said okay? For you to enforce it now, you need it in the decree.

  • mary

    I filed the complaint for the divorce and he signed a waiver stating that he agreed and did not want an attorney, but it is not stated in my actual decree.

  • What I’m asking is whether the divorce decree says something about your sharing your Ex’s retirement. On the assumption that it does not, you probably don’t have any means of getting it now. I’m sorry.

  • Jim R.

    I reside in the state of Alabama I was married for 20 years. My wife decided to leave and wanted a divorce, she filed and we used the same attorney ( I thought that she would regret her decision and that she would return to the marriage). She moved out in January and she filed the papers in June. In the papers, she was awarded 38 percent of my retirement as of June 2008. Needless to say, once the papers were signed, the date was Sept 2008. During that time, my stock fell drastically and she was given the VALUE of the stock in June 2008 to equal the 38 percent amount, which was about 49 percent of the money that I had in retirement. Now, I have to pay the penalties and can not even afford to pay her the rest of the money that she feels that I “owe” her unless the stock gains in value…….which is not likely , or I take out a loan! ( consider the fact that I am also having to pay the penalties incurred!!!!) Please advise me! Is there anything that I can do at this point? I am not financially able to pay her at this point. I also keep my 5 year old son half of the time, and pay her her full child support so that I can see him as often as I can. Is the economy down turn and unforseen circumstance and is there any protection that I might have?

  • I strongly suspect there’s nothing you can do about the distribution of your retirement plan; it sounds as if you and your Ex agreed on language that “froze” her share even if the value of your account declined. If you’re sure you want to take on the child support issue you can, but be prepared for Mom to simply restrict the time you spend with your child rather than allowing you to decrease child support.

  • Delilah A.

    I was married 17years. my husband was apart of the alabama teachers retirement program and his supplemental retirement TIAA creff was matched at 6%. Of course we took advantage of the 6% matching and saved more in his account than mine at a return of 3% from the University system. We are divorcing and it is my understanding that we both are entitled to each others retirements, being the supplemental TIAA creff and the Teachers retirment. He accumulated alot of shares in his supplemental retirement fund. What is the going percentage the courts are granting the spouses. Our divorce is based on irreconcilible differences.

  • I’m not aware of any “going percentage.” And in particular, you should talk over with your attorney how to handle the fact that the court can’t award you any of his RSA pension.

  • Jen

    My husband and I were married less than ten years. He voluntarily agreed to transfer a portion of his retirement benefits to me as part of our Settlement Agreement. It is in the divorce order. Can we use a QDRO to complete this transfer, even though we were married less than ten years? (We are both citizens of AL)

  • Yes, you can. The 10-year restriction does not affect the role of the QDRO.

  • I’m trying to comprehend what was written here and else where. I am married and going thru a divorce. I am 42 and she is 36. She had what i perceived and my attorney perceive to be an affair while I’m working over here in Afghanistan. My future ex wife, is asking for half of my retirement, I retired on June 01, 2008 from the Army after 20 years 2 months and 15 days. We were married on 15 may 1998. I entered service on 16 March 1988. The way i read the rules for division of retirement pay is that she could get up to half of my retirement check that was earned while i was married to her, since i was in the army for 10 years of the accumulation of time to get the retirement does that mean she would be only entitled up to half of the amount, as in, instead of 50% she could get 50% of 50%. Is my interpretation correct?

  • Perhaps. I say “perhaps” because nobody has told Alabama judges yet how they should allocate a retirement plan account whose life exceeds the length of the marriage. Many judges do it exactly as you describe, using the simplest of math. Others ask the parties to determine what the account was worth at the date of marriage and what it’s worth today, and then they allocate the increase in value. I don’t know for sure, but I would think you would rather your judge use the simple math. The latter approach probably results in a larger allocation to your STBX.

  • Wally

    I have an RSA retirement which I am drawing after 26 years of service. My STBX and I were married the last 11 years of my state employment before I retired. We have agreed to joint physical custody of our children, and division of all other assets, we are only contesting her claim to my retirement benefits. She firmly believes, even after meeting with her lawyer, that my retirement is considered a marital asset to be divided. Several questions: As asked above, is the application of 30-2-51(b) dependent on 30-2-51(a) being true, in other words, only if her estate is insufficient for her maintenance? While her income is less than mine, she makes a considerable salary and has her own IRA. Also, how will the court handle her claim since it cannot award her my RSA benefits? “The judge, at his or her discretion…” is very broad. How much discretion can he use? Can a judge apply common sense to the circumstances, (ie: she’s leaving me because she doesn’t love me and never did, I have always been the primary homemaker and caregiver to the children even while working full time, she has a degree and and excellent job) and choose in his discretion to give her none of my retirment? And finally, do I read 30-2-52 correctly that her misconduct (infidelity) in the marriage can be considered by the judge in giving her nothing, and does she have to have been caught red-handed or can good circumstantial evidence showing a pattern of behavior sway the judge to use his discretion to give her nothing?

  • First, let’s acknowledge the bad news for you. When it comes to the question whether your retirement plan is a marital asset, she’s right and you’re wrong. However, I should acknowledge that you’re not the only one who’s wrong. Many judges (who are covered by RSA, coincidentally) agree with you (i.e. they’re wrong too). So for starters, if you are lucky enough to get one of those wrong judges, you’ll get to keep all your retirement and not share it with your STBX.

    I really wouldn’t put many eggs in that “insufficient for her maintenance” argument. I don’t see or hear many cases where it’s used successfully.

    Yes, a judge has a great deal of discretion about whether to allocate retirement. And yes, her misconduct and yours are both relevant as the judge makes that decision.

    You’re quite correct in stating that the judge is unable to order RSA to pay part of your benefit to your STBX. What the judge can do, however, is to order you to pay to her some portion of your retirement benefit each month as you receive it.

  • Wally

    I’m confused then, because the referenced sections of Alabama law state that a judge “may include” in my estate my retirement benefits, and make an allowance to her from my estate. So how is it part of my estate, and a joint marital asset at the same time? Is there a sectin I am missing that defines what are marital assets?

  • Not really. The statutory language is imprecise. Yes, the same asset can be part of “your estate” for purposes of Ala. Code § 30-2-51 and still be considered “marital” for purposes of allocation.

  • Melvin

    Hi, my wife of barely 10 years has filed for divorce. She has a good job and make double of my income. I have about $10,000 in my retirement and she has almost $75,000. Is it possible that I’m entitled to half, since it’s marital property? Also, should we transfer the amount into my 401K or will I be able to ask her to withdraw it and pay cash along with the other settlements?

  • The judge probably would view as marital assets the portion of your retirement and your wife’s retirement that has accrued during your 10+ year marriage. That doesn’t mean, however, that they will be divided equally.

    Transferring part of a retirement plan to a separate plan in the name of a divorcing spouse is not a taxable event. Once you take the money out and spend it, however, you will be liable for income taxes and perhaps penalties on the withdrawn portion.

  • Chuck Harden

    2 questions please. Divorcing my wife of 30 years in Alabama. Her lawyer indicated that her non-vested schools retirement accounts should not be a part of the settlement, but that all my vested retirement accounts should be – is this true? May not make a difference, but I committed adultery and have admitted it. Military retirement is also in play as well as other investments and 2 houses. Kids are all gone. Is an “equitible distribution” 50% in these cases or am I goning to have a hard time because of what I did?

  • You have run headlong into one of the great anomalies of retirement plan law in Alabama. Many (but certainly not all) judges in Alabama have reached the erroneous conclusion that RSA retirement shouldn’t be classified as an asset available for division, but other retirement plans (for example military retirement) should be. They’re wrong, wrong, wrong, but that makes them no less sure, sure, sure. I can’t say whether this figures into the equation, but it’s worth noting that the judges themselves are all covered by RSA retirement.

    It’s possible that this misinterpretation has arisen also in part because RSA does not respond to a QDRO. That is, you cannot instruct RSA (as you can with the military or the administrator of an ERISA plan) to divide the retirement plan and assign a portion of it to a divorcing spouse.

  • Blake K

    My wife filed for divorce in 2008. She dropped the divorce later that year. I filed in 2009. I dropped the divorce in 2009. We’ve been separated since 2008. I started a retirement in 2009, after we were separated. I filed in 2012 to move on with my life. After almost 5 years of being separated, my attorney said I may have to share my retirement account with her. Is this true? My wife has agreed in writing that she doesn’t want any of my existing retirement money. Thanks

  • I would trust your attorney’s advice. However, if you and your wife agree in an uncontested divorce that you are to keep your retirement, the judge will honor that agreement.

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