Lead Opinion
OPINION
Aрpellant, Mr. Bailey, seeks a redistribution of assets awarded in a divorce decree. Specifically, he challenges the award to respondent, Mrs. Bailey, of the residential property occupied by the parties during their marriage to offset the award of “his” retirement fund to him. We reverse and remand.
The parties were married in December 1967, separated in February 1983, and divorced in April 1984. Three sons were born during their marriage. At the time of the trial two were teenagers and the youngest was almost eleven years old. Mrs. Bailey was awarded custody of the children. Mr. Bailey was ordered to pay $150 per child in monthly child support.
Both the parties were employed. Mrs. Bailey worked as a school secretary and earned approximately $970 per month. Throughout the fifteen year marriage, Mr. Bailey worked as a teacher for the Jordan School District and earned, at the end of the marriage, approximately $2,300 per month. The trial court awarded no alimo
The only issue on appeal involves the division of the marital assets. Mr. Bailey argues that the division is inequitable because it gives Mrs. Bailey the “liquid” asset (the house) while he has only the deferred asset (the retirement fund). He seeks to have Mrs. Bailey share the retirement plan subject to the same contingencies he is subject to, namely the completion of additional years of employment with the school district, his termination of that employment, or his death.
In determining the value of the retirement fund, the court relied upon testimony of Frank Stuart, who was stipulated tо be a qualified expert. Stuart testified the cash value of the retirement fund was approximately $23,000.
Stuart also testified Mr. Bailey’s account had a present value of $67,591 as of January 1984. That figure reflects all amounts paid into the fund during the marriage, both by Mr. Bailey and the school district; interest to be earned on those amounts up until distribution; the total anticipated distributions, in view of actuarial data, attributable to the appreciated contributiоns made during the marriage; and a discount factor to arrive at a present value of those anticipated future distributions. Stuart refined his valuation of the fund with reference to several other contingencies: study and work life expectancy statistics from the Department of Labor, an annual cost of living salary increase of four percent, and the possibility that Mr. Bailey would leave his job and find other employmеnt.
The trial court found the present value of the retirement account to be $67,591. The court awarded the benefits of the retirement fund exclusively to Mr. Bailey and, as an offset, awarded the residential property exclusively to Mrs. Bailey.
This case involves application of principles set forth in Woodward v. Woodward,
Pension rights, whether or not vested, represent a property interest; to the extent that such rights derive from employment during coverture, they comprise a community asset subject to divisiоn in a dissolution proceeding.
The Court went on to give some direction as to how retirement benefits should be distributed. In Woodward, the value of the retirement benefits was “contingent оn the husband’s decision to remain working for the government.” Id. at 433. Because that contingency made present value of the retirement benefit “difficult if not impossible to ascertain,” the Court held distribution of the asset should be postponed until “the husband chooses to terminate his government employment.” Id.
In support of its decision to postpone distribution, the Utah Supreme Court cited with approval the case of Selchert v. Selchert,
In dividing nonvested pension rights as community property the court must take account of the possibility that death or termination of employment may destroy those rights before they mature. In some cases the trial court may be able to evaluate this risk in determining the present value of those rights (citations omitted). But if the court concludes that because of uncertainties affecting the vesting or maturation of the pension that it should not attempt to divide the present value of pension rights, it can instead award each spouse an appropriate portion of each pension payment as it is paid. This method of dividing the community interest in the pension renders it unnecessary for the court to compute the present value of the pension rights, and divides equally the risk that the pension will fail to vest.
Id. at n. 7.
In Woodward, the Court also cited Kikkert v. Kikkert, 177 NJ.Super. 471,
This interpretation of Woodward is consistent with a case recently decided in the Utah Court of Appeals. In Marchant v. Marchant,
The potential for long lasting financial entanglement is a valid concern in divorce cases. See Kikkert,
In summary, under our interpretation of Woodward, the distribution of retirement benefits should generally be postponed until benefits are received or at least until the earner is eligible to retire. That is particularly true where there is a sparsi
In the instant case, the calculations of present value were based on assumptions that Mr. Bailey would continue working for the school district for another 18.7 years and that he would not die before reaching retirement age. Those contingencies make present value calculations just as difficult to ascertain in the instant case as in Woodward. As was ordered in Woodward, Mrs. Bailey is entitled to one-half of the retirement benefit accrued during the marriage. But unless the court makes specific findings as to reasons for immediate distribution, the retirement asset is not distributable until Mr. Bailey leaves his employment with the school district.
Because the trial court misapplied Woodward, the property award is set aside and the case is remanded for further proceedings consistent with this opinion. Since the denial of alimony referred to the property award, the court may also reconsider Mrs. Bailey’s request for alimony. See Smith v. Smith,
We will briefly address Mr. Bailey’s additional contention on appeal that the land underlying the marital residence was his separate property. In 1970, Mr. Bailey’s mother, Rachel, transferred ownership of a half acre of land to her son and daughter-in-law in joint tenancy. This land adjoined Rachel’s homestead. Mr. Bailey’s mother apparently intended the gift to be an advance upon her son’s inheritance, but title was given to the parties jointly. The parties mortgaged the property and built a home on the land, where they lived until the divorce. The trial court found the market value of the land and home to be $59,-800, which included $25,000 for the value of the land, against which was an outstanding mortgage of $12,000 remaining from the original loan for construction.
The trial court did not find the underlying land to be Mr. Bailey’s separate property, although it did acknowledgе Rachel’s intention that the conveyance be considered an advance on Mr. Bailey’s inheritance. It is to be noted that even if the property is found to be Mr. Bailey’s separate property, it is still subject to equitable division. As stated in Burke v. Burke,
Premarital property, gifts, and inheritances may be viewed as separate property, and in appropriate circumstances, equity will require that each party retain the separate property brought to the marriage. However, the rule is not invariable. In fashioning an equitable property division, trial courts need consider all of the pertinent circumstances.
Id. at 135 (footnotes omitted). See also Smith,
The property award is reversed and the case is remanded for further proceedings consistent with this opinion. No costs awarded.
Notes
. The court found, "In light of plaintiffs current employment, her ability to support herself, and the property division herein, it is reasonable, proper and necessary that the plaintiff be awarded no alimony."
. The trial court found the cash value to be $19,923.
Concurrence Opinion
(concurring in the result):
I am persuaded that remand and reconsideration are appropriate, in view of the confusion about ownership of the real estate and the trial court’s decision not to award alimony apparently, at least in part, because of a more favorable prоperty award than might otherwise have been ordered. See Note 1, supra. It is difficult to evaluate the trial court’s decision absent detailed findings concerning alimony, see, e.ff., Marchant v. Marchant,
As noted in the main opinion, Woodward v. Woodward,
The factors which, under Woodward, require a deferred arrangement were not present in the instant case. Although the present value of the retirement benefits was perhaps difficult to ascertain, it clearly was not impossible to ascertain. The trial court heard, and based its findings as to value upon, the testimony of Frank Stuart.
As Stuart testified, the Utah State Retiremеnt Fund is set up to encourage employees to continue their employment. Consequently, only the employee’s contributions are vested prior to eligibility for participation in plan benefits. Thus, if Mr. Bailey would have quit his teaching job at the time of the divorce he would have been entitled only to the vested amount. The cash value of the retirement fund, i.e., the vested total attributable to Mr. Bailey’s own contributions, was roughly $23,000 according to Stuart.
However, since the matured fund is in the nature of an annuity, Mr. Bailey’s account actually had a present value of $67,-591 as of January 1984. As noted in the main opinion, that figure reflects all amounts paid into the fund during the marriage, both by Mr. Bailey and the school district; interest to be earned on those amounts up until distribution; the total anticipated distributions, in view of actuarial data, attributable to the appreciated contributions made during the marriage; and a discount factor to arrive at a present value of those anticipated future distributions.
Because the value of Mr. Bailey’s retirement fund was in fact ascertained, requiring immediate cash-out of Mrs. Bailey’s share would be within the court’s sound discretion under Woodward — where apparently there was no expert testimony as tо value — if there are assets with which the cash-out can be appropriately effected.
Of course, the spouse who is required to cash out the other’s interest in a retirement fund upon divorce should, ideally, be given the option of how best to meet that obligation. Trial courts should ordinarily not require settlement of the obligation in some mandatory way, as was done here. In addition, the spouse ought usually to have a reasonable time to discharge the obligation in situations where immediate cash-out is not possible but long-term deferral can be avoided. In Rayburn v. Rayburn,
In my judgment, any shift by the trial court to deferred participation by Mrs. Bailey should be the product of concern аbout the lack of such assets as will fairly permit immediate or short-term cash-out of Mrs.
. The conclusion in the main opinion to the contrary is premised on, among other considerations, two factors which seem to have considerable merit: First, “[p]ostponing distribution equalizes the risks and the benefits to both parties” and is therefore fairer, and second, the difficulties of long-term financial entanglеment can now be minimized through the device of a Qualified Domestic Relations Order. The problem with reliance on these factors is demonstrated in this case. The value of the benefits Mrs. Bailey will ultimately receive depends to a large extent on Mr. Bailey's unilateral decision to continue his present employment. If he decides to quit before his benefits are fully vested, the benefits Mrs. Bailey would receive under the formula prеscribed in the main opinion would be a fraction of what she would receive under that formula if he chose to continue working long enough to achieve full vesting. A QDRO concededly avoids one form of undesirable entanglement, namely that which results when one spouse is under an obligation to write the other a check following receipt of a single monthly benefit check, with concomitant risk of tardy payments and ensuing phone calls, letters, and motions. A QDRO does not, however, avoid another form of entanglement, namely that which results when one spouse is left with a perceived need to monitor the affairs and employment decisions of the other, with concomitant risk of interference and protest if one spouse then learns that the other is contemplating a career move which will have disastrous effects on the spouse’s anticipated share of benefits. Testy calls, nasty letters, and motions for modification of divorce decrees might well ensue. More generally, the risks and benefits are not really equalized with deferral where one spouse’s decisions can have such a significant impact on the benefits the other will receive.
. Stuart testified that for the past five years, Mr. Bailey’s salary had actually increased at еight percent per year, a trend which, if continued, would necessitate a higher present value estimate.
. Stuart testified that "particularly in the school system, longevity is quite high and tenure is quite high. And the probability that [Mr. Bailey] would leave and seek other employment is very low.” Mr. Bailey offered no testimony inconsistent with this assessment.
. In his brief, appellant also argues that, under Woodward, the present valuation of a retirement plan and immediate satisfaction of the other spouse’s interest therein should not be required unless "necessary criteria," such as a history of strife and hostility among the parties, are found. The main opinion gives some credence to this suggestion, contemplating "unusual hostility between the parties” as one fact which might support a decision not to defer participation, which the main opinion holds is ordinarily preferable. However, Woodward does not require a finding of actual animosity between the parties before the trial court can determine and award the present value of one’s spouse’s interest in a retirement fund. Instead, the Utah Supreme Court simply recognized that continued financial entanglement is inherently a source of strife and hostility and, thus, is best avoided.