The Alabama Court of Civil Appeals has used an unusual inference to sustain a division of military retirement plans in an Alabama divorce.
The case is Powe v. Powe, Case No. 2080557 (Ala. Civ. App. November 20, 2009). The parties divorced after a 23-year marriage, and the trial court awarded the wife $500 per month from the husband’s military retirement, which at the time of the division equaled $1,428 per month.
Black letter law on the division of retirement plans in an Alabama divorce is that the party requesting a division must establish the present value of the retirement benefit. Wilson v. Wilson, 941 So. 2d 967 (Ala. Civ. App. 2005); McAlpine v. McAlpine, 865 So. 2d 438 (Ala. Civ. App. 2002). This works more often to bring about injustice (when the unknowing lawyer of a divorcing party fails to jump through all the necessary hoops) than it does to bring about justice, but that’s not the point of this post.
The husband in Powe made two arguments about the retirement plan division, first that the wife failed to establish the present value of his retirement plan and that she failed to establish the amount that had accrued during their marriage. Because he had failed to argue the issue of accrual during the marriage, the appeals court declined to address that issue, leaving only the question whether the wife had failed to establish the present value of the husband’s retirement.
Powe is at once both simpler and more complex than many retirement plan cases, simpler because the husband was already receiving retirement benefits, so there was an ascertainable monthly payment, and more complex because a portion of each month’s check represented disability benefits, which the appeals court said are not divisible in divorce. The appeals court relied on Campbell v. Campbell, Case No. 2070724 (Ala. Civ. App. April 24, 2009) to establish that the present value of retirement benefits “was proved by establishing the amount of monthly benefits the retiree was receiving.”
In wrestling with the mix of retirement and disability benefits, the appeals court noted that the husband’s total pension payment was $1,428 per month and that his tax return showed taxable pension benefits of $1,085 per month. “The remainder of the husband’s $ 1,428 in benefits, then, must be disability benefits, which are not taxable.” Powe at 5. This assertion, while probably accurate, is also apparently unsupported by any evidence in the record and is therefore a bold and surprising inference from a court that makes much of its frequent refusal to act on anything not included in the record before it.
Once having cleared this hurdle of the division between retirement and disability, the appeals court had no trouble with the last piece. Having “ruled” that the husband’s retirement benefits (as opposed to disability) were $1,085, the court found that the $500 the trial court awarded the wife was less than 50% of the husband’s benefit. “Because the husband failed to argue to the trial court that § 30-2-51(b)(2) [dealing with the division of the portion of retirement plans accruing before the marriage] barred an award of his military-retirement benefits to the wife, we must affirm the award of $ 500 per month in military-retirement benefits to the wife.” Powe at 5.
Come to think of it, maybe the Powe ruling does have something to do with the injustice of the Wilson/McAlpine principle after all. Perhaps the appeals court is leaping across inferential moats because it perceives (probably correctly) that the smoothest way to restore a measure of justice to retirement plan division in Alabama divorces is to chip away at the principle one ruling at a time rather than to overturn it expressly.
This question is more about retirement benefits in general than this particular article. My wife intends to petition the court to award her a portion of my retirement benefits that I am already receiving from a RSA retirement, as well as child support. The retirement benefits I am receiving are a significant majority of my monthly income. The question is, should the court award her an amount of my retirement benefit (or alimony in lieu of that benefit) will the child support amount be based upon my total income BEFORE the award/alimony is paid to her, or the remainder of my income once her award/alimony is deducted? A second question is how would such an award of retirement benefits be calculated, before taxes or after taxes? And a third question, in general, how long would the award be in effect, would a judge order me to pay her an amount from my benefit (or alimony) for the rest of my life?
I’m not going to predict what the court will rule, but in general, I would expect most judges to use for child support only the portion of retirement income that you keep (before taxes, just like all other income) and that they would allocate Mom’s portion of the retirement to her.
Your question indicates you are already aware of this, but for the benefit of others reading this, remember that RSA retirement benefits can’t be “awarded” in the normal sense of the word. RSA is not required to respond to a QDRO and will ignore it if received.
If the judge is attempting to approximate the award of retirement benefits, I would expect the award to be for life. If the judge views the RSA retirement benefit merely as a financial source for a support calculation, the award may be for a term of years and may be designed to terminate if the recipient remarries or cohabitates with a person of the opposite sex.
Very helpful answers, thank you. I know this is putting you on the spot, but in your opinion, what are judges in Alabama more likely to do, attempt to approximate the award of retirement benefits as alimony since they can’t award RSA benefits, or view it as a financial source for the support calculation. If the judge attempts to approximate the retirement benefits, can he only do that as alimony, and can alimony be awarded for life?
You’re not putting me on the spot, because I don’t know and am thoroughly comfortable saying so.
Good point about “alimony for life.” It’s a misnomer, because alimony always stops on the remarriage or cohabitation of the recipient.
Okay, last question and I’ll leave you alone. If alimony always stops on remarriage or cohabitation (I see that section of law), what kind of “award for life” could a judge give if he is inclined to approximate retirement benefits?
None that I know of using alimony. Alimony always stops in Alabama on remarriage or cohabitation. The parties can’t agree otherwise, and the court can’t order otherwise.
In my opinion, Powe v. Powe and Campbell v. Campbell were relatively simple cases to affirm by the appeals court. As you know, §30-2-51(b) states, in part, that the judge has discretion to include in the estate of either spouse “the present value of any future or current retirement benefits”. In these cases, both husbands were receiving their “current retirement benefits”. This is not rocket science and there is nothing earth shattering here, the bottom line is the “present value” of their retirement benefits is their taxable “current” monthly annuity. Therefore, there is no accountant, financial planner or other expert testimony needed to determine the present value. When Judge Thomas wrote the holding in Powe v. Powe, she simply used sound judicial wisdom and made a simple mathematical calculation from all the evidence in the record including the fact that the monthly pension was a combined military retirement and military disability benefits.
No inference needed here, just elementary math…taking the annual taxable pension benefits from the husband’s tax return divided by 12 equals the present value of current monthly retirement benefits which are divisible. She clarified that the difference between the husband’s total monthly benefits of $1,428 and his monthly taxable benefit income was the disability benefits which were not divisible and not taxable. A point of clarification that was needed to show that the award did not violate §30-2-51(b)(3) where it states the award “shall not exceed 50% of the retirement benefits”. And of course J. Thomas cited Stone v. Stone to explain why the husband’s disability benefits were not subject to division. I believe this decision by the appeals court affirmed that the trial judge used their common sense, followed the law, and also demonstrated fundamental math skills when the award was decided.
The real issue for some on the bar and bench is with the statute where the required burden lies on the shoulders of the non-covered spouse for determining the “present value” of “future” retirement benefits, not “current” retirement benefits which the appeals court correctly upheld in Campbell and Powe. It is this issue that was decided in Wilson v. Wilson, McAlpine v. McAlpine, and other cases, where the trial courts’ rulings were reversed when the non-covered spouse failed to prove the “present value” of the “future” retirement benefits. So in reality, these two sets of cases are remarkably different.
Regardless, I currently work with the federal government and will not retire for many years. My case is on appeal and in the hands of the Alabama Court of Civil Appeals on this issue of division of future retirement benefits. At trial, the wife did not prove the “present value” of my “future” retirement benefits, nor did she establish the value of those benefits that accrued prior to the marriage. However, the trial judge awarded her 50% of a coverture fraction (number of months married divided by the number of months worked) of my future benefits and used the Wilkinson v. Wilkinson case as the basis for her ruling. Thus, contrary to the law, she was awarded half of the future value of my retirement benefits. Federal regulations require the court order to specifically exclude future pay raises, promotions or cost of living increases otherwise these post marriage benefits will be included when the retirement benefits are divided. In my case, the trial judge did not exclude any of these future salary enhancements and since my annuity is based on my high three salary, the award grants the wife benefits from these future enhancements due to my post marriage efforts.
Our position is that Wilkinson v. Wilkinson has no stare decisis affect and the prevailing case law in Alabama is Brattmiller v. Brattmiller. Thus, it was an error for the trial judge to use the Wilkinson case to justify the award. Additionally, just as in Applegate v. Applegate, my Civil Service retirement benefits estimate report was submitted, yet the trial judge didn’t even consider nor did she base her ruling on that document, but opted to use the more enhanced illegal coverture fraction approach.
Anyway, I have to respectfully disagree with you that there is injustice in the statute as it is written. The state legislature put the relevant appropriate language in there for a good reason…to insure an equitable division of property and alimony. Given it may be challenging, but future annuities are complicated and just as any other marital asset, the absolute or “present value” has to be determined for the trial judge to make a fair decision and an equitable division of assets.
Please, one must consider military personnel and older federal employees, such as myself, do not have social security benefits and this typically is our only source of income in our retirement years, so you darn right it should be a required burden but it is not an impossible or insurmountable task. The present value has been determined in other cases including Carter v. Carter in which the trial court’s decision was upheld in the appeals court. In that case, at trial, the wife brought in a stock broker and financial planner to testify and establish the “present value” of the husband’s retirement. So it is no longer a question of, can it be done? It just depends on whether the non-covered spouse has a competent attorney that knows the law, and isn’t that why we pay an attorney to represent us, to have a working knowledge and understanding of the law? If they do not do what is required by the law or as you say jump through all of the necessary hoops that is merely incompetence and tantamount to malpractice. The lay person pays an attorney for their expertise and knowledge of the law not to be “unknowing”, otherwise, we should go into the court room alone. (And I would assume that Mr. Powe is rather upset with his attorney right now for not arguing at the trial level that the award of benefits to his wife also included premarriage benefits which are prohibited by §30-2-51(b)(2). A reasonable person may glean a hint from the holding that the appeals court most likely would have reversed the trial court’s award had his attorney done his job. It was glaringly apparent from the dates given in the decision that Mr. Powe had 3 years of military service prior to his marriage, and he would have accrued benefits during that period which are not divisible.)
In my case, the wife also has an RSA retirement which she was only a few months shy of being vested so she was able to keep it intact, and of course she has her social security benefits, and the judge awarded her 50%, not of the present value, but of the “future value” of my enhanced retirement benefits. Now the retirement award is an “injustice” that demonstrates ignorance or a lack of understanding of the law by a activist trial judge who reflects the incompetence of one of the “unknowing” lawyers you have refered to.
We shall see if the appeals court affirms or reverses the trial judge’s decision on award of retirement benefits and remands my case back down to the lower court. If they do affirm, they will have eliminated the requirement for proving the “present value” of “future” benefits, approved the inclusion of premarriage benefits in an award, and allowed a coverture fraction for division of future benefits to be used as it is being used in other states. The Court will not be chipping away at the law, they will have essentially changed the law in Alabama!
Please, let’s not forget, the judicial branches of government were established to interpret the law, not legislate or make new law as some liberal judges believe. As the appeals court has previously held, the statute language in §30-2-51 is “plain and unambiguous”. I have faith that the appeals court still possesses the wisdom and restraint to understand their judicial responsibilities and limitations, and they will again uphold the status quo, reverse the trial court’s decision, and not change the law in Alabama.
The decision was released today and by a 3-2 margin…..WE WON!!!!!! The appellate court has reversed the trial court’s decision. The Court has wiped out the entire property award and remanded it back to the trial court.
after reading the information above, I have become enlightened in my own divorce of a few years ago. My former wife has been living with her new boyfriend for some time now (almost a year)and I have been paying alimony the entire time. Does this mean that I can now stop paying and not receive any reprocussions?
Only if you’re confident you can prove she is cohabitating as defined in Ala. Code Sec. 30-2-55. Otherwise, gather your evidence, then seek a modification.
I pay my spouse a part of my military retirement. It is not considered allimony so I am told I cannot claim it as such on my tax return. Is it possible to claim it and if so where?
Payment from a retirement plan as part of a divorce settlement would normally be considered property division, not deductible alimony. So, barring something unusual in the divorce decree, the recipient doesn’t have to pay tax on it and the plan participant doesn’t deduct it.
Lee: As I wrote in my March 12, 2010 post, we won our appeal in the Court of Civil Appeals. The wife filed an application for rehearing and it was overruled by the Court on May 7, 2010. Yesterday, the Baldwin Circuit Court judge released a remand order whereby she completely ignored the appellate court’s reversal of her decision. She again awarded the wife 50% of my civil service retirement, and even went as far as ruling that now I would have to pay for her survivor benefits. The appellate court ruled that the wife had no rights to any of my civil service retirement benefits, including survivor benefits. And the jurisdiction has yet to be transferred back to the trial judge thus voiding her decision, but she moved forward anyway without it!
Where is the judicial integrity?? What course of action can an individual take against such an activist trial judge, who legislates from the bench, to get her to comply with the higher court’s ruling? Many Thanks!
Read the appeals court opinion carefully and then compare it to what the trial judge ruled. If the trial judge disobeyed the appeals court, you should appeal her ruling. However, that seems unlikely. It’s more likely that your trial judge has found a way to rule in the way she believes is appropriate while complying with the letter of the appeals court decision. You and your lawyer need to look at the precise words each court used and then decide whether additional appeal is justified.
Lee: Please refer to my May 18, 2010 post. Before I proceed further and tell you the status of the case, I wanted to inform you that we have met. It was on February 22, 2006 when I had an appointment with you to discuss my pending divorce while my son was at a Samford University scholarship competition. Well, he got some scholarship funds and graduated at the Pete Hanna Center on May 15, 2010 magna cum laude.
Anyway, where I am today in my case. As I indicated in my earlier post, the trial judge has entered an “order on remand” on May 27, 2010 in defiance of the Alabama Court of Civil Appeals. She is forcing my hand and testing my will to fight! After having invested over $23,000 in legal fees for the two days of trial, two post-trial motions and hearings, two mediation sessions, and an appeal to the appellate court, her last rogue decision has set off quite a course of events in my life. The objective is crystal clear and the plan has been laid out.
Again, she has awarded a portion [50%] of my Civil Service Retirement Benefits using the coverture-fraction approach as discussed in the special writings of the concurring opinion in Wilkinson v. Wilkinson, 905 So.2d. 1 (Ala.Civ.App.2004); and even went as far as increasing the the award of retirement benefits to the ex-wife [Plaintiff] by awarding her 100% of my survivor’s benefits without considering the fact that this decision causes a reduction in my gross monthly annuity thus raising the plaintiff’s award to greater than 50% in violation of Alabama law. These special writings were not the holding in the Wilkinson case but were one judge’s examination and discussion of the Alabama statute. The application of the coverture fraction was only suggested as a possibility means for division of Mrs. Wilkinson’s “defined contribution retirement plan” (401K). My retirement plan is a “defined benefit plan”. The value of her plan was $105,000, and the present “value” of my plan is “unknown” as the plaintiff failed to produce any evidence of the “value”, and as the appellate court agreed she never met the evidentiary burden of proving the “amount” that was accrued duing the marriage. Unfortunately, the apellate court declined to further review the other four arguments on the retirement award with her failure to prove the “present value” being one of those four.
The only variable that is known in the coverture fraction formula is the number of months (274) of the parties marriage as the coverture fraction (denominator) setup allows for a change in the number of months I will be in service to the federal government. Granted, the plaintiff was entitled to a portion of my retirement benefits under Alabama law because of the marriage was greater than 10 years….BUT, she never proved the “amount” accrued during the marriage nor the “value” of that same amount. Under the law, that was her burden to prove in order for the judge to exercise discretion to award a portion of these assets in the marital property division……and she failed! Sorry, she should have gotten a better lawyer.
Your opinion to appeal is respected however, I have chosen another side route first. On June 24, 2010, I filed my first Rule 59 motion and requested the lower court “vacate” the unauthorized award and honor the higher court’s decision of reversal. I will give her two opportunities to correct her error, while preserving my evidentiary sufficiency, before we go back up to the applellate court for a second and hopefully final round. But of course, then on remand we return to the Circuit court for the new order and this insanity may continue…….and this is a system of justice?!
As noted, Payne v. Payne (Ala.Civ.App.2010) is new case law on division of retirement assets in Alabama. Now…we shall see if there is to be a Payne v. Payne II because I am the ONE. I can only hope and pray that, if necessary, the honorable judges in the appellate court will exercise their right to address my four remaining arguments, and then Payne v. Payne II will become the latest case law above Brattmiller v. Bratmiller, 975 So2d. 359 (Ala.Civ.App.2007) when it comes to requirement to prove the “present value” of retirement benefits.
Regards.
I have a question that you might be able to answer..
If the wife gets 50% of the military pension,(this is not in dispute) when the burden of the child support is put forth, do they take into consideration that she will be getting 50% of his pension?
example. she makes 2000 a month, he makes 2000 a month in retirement(pension) and then another 1000 in disability and then he makes another 2000 a month in a job…..
will they base his portion on him bringing in 5000 a month and leave hers at 2000, or will they base hers on 3000 and his on 4000.
Thank you for your time.
Most judges I know would use the latter approach. If it’s established that the CP is going to receive pension income, that income gets included in the CP’s income for purposes of child support. And likewise, if it’s established that the NCP is NOT going to receive income because that income is going to someone else, that income is not included in the NCP’s income for purposes of child support.
Is there an attorney available for a serious pending issue?
I’m in mediation now and nothing is signed. My alimony is to be $1250 for life and then 50% of my military (Guard) retirement to commence when I am 60. Currently my military retirement will be $3000 a month with her to receive $1500. I tried to argue with my lawyer for alimony until the retirement begins in 6 years but she is convinced this is somehow a good deal.
I spent 24 years in Air Force. Stationed in Maxwell AFB AL when my ex-husband filed for divorce Apr 2013. I decided to retire Nov 13 since I have small kids and was planning to retire and be stay at home mom prior to the divorce.
My Ex and I have been in divorce for almost 3 years. We got a partial decree.
My ex is married again and wants AL as his home.
I want to leave and go to my home of record.
I was told the judge could make me stay or give custody of kids to my ex.
Do I have any rights? I have no family or reason to stay in AL.
Also ex is retired Navy with disabilty. He gets $4300 a month tax free and I can’t get any in child support. How is that?
Rita Edwards
Retired E8 Air Force
phone: 334-517-6788
cell 334-467-7563
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