Spending Down Retirement During Separation

Now it seems every Alabama family lawyer will be advising his or her client to spend down that retirement account on family expenses during separation.

The case is Crowder v. Crowder, Case No. 2120928, (Ala. Civ. App. October 31, 2014). The wife was 10 years younger than the husband. Both parties had significant health impairment. They had an 18-year-old son whose custody and support were not at issue. The transcript from the trial was not available “because of a computer malfunction,” so the Appeals Court worked from a statement of facts agreed to by the parties. The wife was accused of adultery after the parties’ son saw her kissing another man. She moved in with that man after the parties separated, but she produced evidence she had paid him rent.

The marital estate consisted of several parcels of real estate and an IRA, which had been spent down from $264,000 at separation to about $107,000 by the time of trial. The husband had used the IRA for his living expenses, to buy cars for himself and the parties’ son, to pay off marital debts, and to pay pendente lite support to the wife. The trial court awarded the wife assets that the Appeals Court determined constituted about 30% of the marital assets, and the Appeals Court affirmed the trial court’s judgment. The Appeals Court justified its decision at least partially on “the wife’s lack of any significant economic contribution to the marital assets.”

The Appeals Court affirmed the trial court’s awarding of $300 in monthly alimony. The wife had submitted a list of expenses that included spending on grooming, gifts, donations, and movies. The Appeals Court said the trial court could have determined that these amounts were not “necessities.”

Judge Thompson and Judge Moore wrote separate dissents. Judge Thompson’s dissent estimated the value of the assets awarded to the wife at 14% rather than the 30% estimated by the majority, the principal difference being that Judge Thompson used the value of that IRA at separation rather than its value at the time of trial. Judge Thompson also argued that the trial court abused its discretion by classifying two of the assets (one of which had been inherited by the husband) as separate property. Judge Thompson pointed out that each of the assets had served as the parties’ principal residence for at least five years during their marriage. Judge Thompson also challenged the majority’s assertion that the wife had not contributed economically to the accumulation of marital assets. “Such a requirement would endanger the interests of a spouse who does not work outside the home in order to take care of the home and raise the family’s children and who makes sacrifices in order to save for the family’s anticipated future needs.”

Judge Thompson argued the judgment should be reversed and remanded to consider both property division and alimony. He specifically challenged the assertion of the majority that some of the expenses listed by the wife were not for “necessities,” “as opposed to expenses that were normal for the parties’ lifestyle during their marriage and that a party might expect or hope to continue after the divorce.”

Judge Moore dissented separately. He agreed with Judge Thompson that the award to the wife was inequitable but did not agree with him that the IRA should have been valued at its separation level.