July 30, 2006
Case Law Development: Splitting Pensions Means Splitting Risk and Reward
The Indiana Court of Appeals provides a concise and well-written opinion on valuation of pensions that I especially like because of the lesson one can impart to students about the importance of learning from precedent when drafting settlement agreements.
Indiana courts have previously held that "absent express language stating otherwise, a settlement agreement dividing a pension plan implicitly contemplates that both parties will share all of the rewards and risks associated with an investment plan." In this case, the divorcing couple entered into an agreement that stated:
wife is awarded one-half of the value in the husband's 401(k) and one-half of the value in the husband's pension plan as of this date and that the Court should enter a Qualified Domestic Relations Order (prepared by wife's attorney) to convey wife's interest in husband's pension and 401(k) plan. This Court retains jurisdiction to amend the Qualified Domestic Relations Order as may become necessary.
As of the date of this agreement, one-half of husband's pension would have been $80,700.64. But the actual division of the pension was considerably delayed, so that at the date of the division of the pension, one-half its value would be $90,711.13. Husband argued that the settlement agreement dictated the prior amount; Wife argued that the language was ambiguous regarding subsequent increases or decreases in value so that the latter sum was the proper allocation in light of prior precedent.
The court agreed with Wife and concluded that "the best interpretation of the provision in question, as gleaned from the words employed in that provision and elsewhere in the Property Settlement, and consistent with [prior case law], is that [Wife] was entitled to an amount equal to one-half of the amount in [Husband's] pension fund as of March 7, 2003, plus any appreciation in value of that amount as of the date the QDRO became effective, or November 24, 2003.
Shorter v. Shorter, 2006 Ind. App. LEXIS 1462 (July 28, 2006)
Opinion on the web (last visited July 29, 2006 bgf)
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