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Turning Points Blog

A family law blog about tying and untying knots and other common threads

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Posts filed under Property & Financial Matters

Geography of divorce: what court has jurisdiction over assets?

May 2010

What do you have to do to get a divorce or a dissolution of marriage in Ohio? You need to meet two simple requirements:

  1. You must live in Ohio for six months and
  2. You must live in one Ohio county for 90 days.

That’s it. Never mind where you  were married or whether your spouse is living in Ohio. None of that matters. Divorce is known in legal circles as an in rem action. Briefly, that means a civil court has jurisdiction over ‘the thing’, the marriage itself. It has no jurisdiction over the person (unless the person is a resident of the state or has certain kinds of contacts with the state, which you can read about below).

Because the court has jurisdiction over the marriages of its citizens, you can establish residency in Ohio in the way described above and get your divorce or dissolution.

BUT there’s an important but. If there are marital assets –a home, a pension, investments— it’s not quite that simple.

Let’s say you married in Georgia and lived in Georgia with your spouse and all your joint assets for a decade. Now you’ve lived in Cuyahoga County, Ohio for six months. You file for divorce and ask for a property division and a share of your spouse’s pension benefit.

Can the Cuyahoga County Court of Common Pleas, Domestic Relations Division grant the divorce? Sure.

Will it divide the property and pension between you and the other party? That’s far less likely. In exercising control over the marriage, the court will also have to exercise control over those marital assets. It will have to decide how to divide the assets. And that means it has to be able to order you and your spouse to do things—provide information, for instance, or sign over to the other party an interest in some asset.

Like every state, Ohio strictly defines when courts have control over non-citizens of the state. The domestic relations court cannot simply reach out and exercise jurisdiction over a spouse who has never lived in Ohio or who, in some cases, has never even been in the state.

Even more important, the U.S. Constitution brings due process considerations into play. In effect, constitutional law says that there must be a minimum level of contact between a person and a state for the civil courts of that state to exercise control over that person.

So the court is not going to take jurisdiction over the marital assets. The only way it might is if you can establish that your spouse meets the constitutional ‘minimum contacts’ standard. If your spouse has been visiting Ohio to do business here over the years or has come up to visit you on a number of occasions, that might meet the standard.

If you can make the argument and present convincing evidence, the court just might decide it has jurisdiction over your spouse’s person, as well as over your marriage. I say might—not will.

But barring that, the court is going to suggest that you go back to Georgia to get your divorce and the property settlement you seek.

Adventures in divorce, private pensions and the DRO, episode 3

April 2010

The last post on this topic was about the best way to get a Qualified Domestic Relations Order (QDRO). In short, you have to get the language just right.

Now and then, however, it happens that a perfectly written DRO, qualified by the plan administrator and thus turned into a QDRO… is wrong.

Back to our heroes, Harry and Mary Band. They finally have a QDRO in place and the pension plan is sending out two checks: one to Mary for her half of the marital portion and another to Harry for the rest of the benefit.

‘Wow! Check’s so small I can’t even see it!’ says Mary.
‘I hardly feel the pinch,’ smiles Harry.

The asset division in their divorce decree says that Mary gets half of Harry’s 20-year pension benefit. Period. Unfortunately, the DRO says that she gets half of the benefit as of the date of divorce. The decree and the QDRO are at odds.

As it happens, the Bands’ divorce was final when Harry had 19.3 years of service in. The way his plan is written, his benefit becomes worth much more at 20 years of service than it was at 19.3 years of service.

The QDRO that the pension administrator follows gives Mary half of the smaller benefit amount. The court intended for her to get half of the larger amount.

How did this incorrect DRO get qualified? Didn’t the pension plan administrator do the math? Of course not. That’s not his job; he just looks at the language of the DRO, not whether it correctly calculates how much each party should get.

Who’s job is to do know the terms of the pension plan and do math? Once again, it is the job of the lawyer. The lawyer has two DRO responsibilities. First, to ensure that the language of the DRO meets the exacting requirements of the law. Second, to ensure that it puts into effect the intent of the terms of the divorce decree.

A divorce decree is a judgment: it decides the rights and responsibilities of the parties. But a DRO is not a judgment—that is, it doesn’t decide anything. It is simply a type of  document that helps put a judgment into effect.

Therefore, an incorrectly calculated QDRO can be changed. Fortunately, most decrees contain a standard paragraph that says the court retains jurisdiction to correct any DRO that doesn’t effectuate the intent of the decree. Even better, courts inherently have that power.

So what can Mary do? Go back to court and get it corrected.

That means more expense, of course. A better strategy from the start is to make sure legal counsel –or the pension experts he uses– has a good grasp of pension law and the ability to correctly interpret pension plan documents.

By the way, when a lawyer acts to prequalify the DRO, he can ask the plan administrator how the DRO language dividing the benefit will be interpreted. In the case of the Bands, the incorrect allocation of benefits would have been caught –and fixed– right away.

Adventures in divorce, private pensions and the DRO, episode 2

April 2010

Now that the difference between DROs and QDROs is clear, we can look at a common problem that comes up with Domestic Relations Orders: getting them qualified.

I’ll start with the moral of this episode: make sure the DRO is pre-qualified. Now the story.

Many people think that when a court issues an order –any order– what it says goes, right or wrong. That’s not necessarily the case for a DRO, which is meant to put into effect the court’s division of pension benefits.

In the first place, courts don’t write DROs, so it’s not safe to assume that because the judge signed the DRO it meets the requirements specified by law. Who does write the DRO? The lawyer representing the beneficiary or a professional pension consultant or the beneficiary herself (usually a very bad idea).

Does that mean it’s going to be qualified and go into effect? No telling. The language ERISA uses and requires is pretty arcane. If the structure and language of the DRO are not in proper ERISAspeak, the DRO will not be qualified.

Take Harry Band from episode 1. He has a defined benefit pension plan. In his case, the Domestic Relations Order did not pass muster with the pension plan administrator, who notified him, his counsel, and Mary Band after the divorce was final. 

Time went by. They wrote another order and took it to the judge, who issued it as a new DRO. Again, the plan refused to qualify it. More time went by. People were busy. Harry Band retired and took his pension.

Mary Band is not receiving her half of the marital portion of those benefits. Now it’s starting to get costly for her to pursue it. Not pointless, by any means. Just costly for everyone– Mary and Harry.

There’s a relatively simple way to avoid this situation. First, get your pension documents together early in the divorce process.

Why? Because it gives your lawyer the information and time needed to draft a DRO and get it pre-qualified by running it by the pension plan administrator before the judge sees it. If the plan administrator is not going to qualify it, they’ll say why not, quite specifically.  Then the DRO can be rewritten and reviewed again… and again… until it qualifies.

That’s how to turn a DRO into a QDRO in time to put smoothly into effect the intention of the court: to make sure the plan issues two checks starting at retirement, one for Harry and one for Mary’s half of the marital portion.

But there’s more than one wrong way to write a DRO. That’s episode 3.

Adventures in divorce, private pensions and the DRO, episode 1

April 2010

When it comes to pensions and divorce, there’s a lot of confusion about how a private pension is divided through the Domestic Relations Order and the Qualified Domestic Relations Order.

Once upon a time, it was virtually impossible for a court to divide the interest in a private pension between two parties. Why? Because of the way the law was written. The Employee Retirement Income Security Act (ERISA) of 1974 made it impossible for any beneficiary or other entity (such as a court) to convey his or her interest in a pension benefit to another person in a way that was binding on the pension plan. Pension plans paid beneficiaries only, nobody else.

In other words, a court could order Harry Band to give half of the marital portion of his benefit to the former Mrs. Mary Band but it had to rely on Mr. Band to write the check on a regular basis. As you might imagine, this led to plenty of litigation.

Then, 1986 legislation said that a pension can be divided through a court order that meets certain, very strict requirements set forth in ERISA. When the plan administrator determines that the order precisely meets those requirements, the plan is then bound by the order—it must send out a check to each of the parties.

The order sent to the plan for review is called a Domestic Relations Order. And, as you probably have guessed, when that order is determined to have met the requirements, it becomes a Qualified Domestic Relations Order—otherwise known as a QDRO—and its terms are put into effect. The plan sends out two checks, as specified.

Sounds fairly easy. But DROs tend to be minefields of misunderstanding and error—mostly honest. In future episodes, I’ll try to point out and clear up some of the confusions.

How courts treat pensions in divorce, Part 2

April 2010


How courts treat pensions in divorce, Part 1

April 2010

If you have earned pension credits in a public or private pension plan, those benefits are  probably one of your two most valuable assets—the other being your house. When you’re ending your marriage, the court is always going to pay particular attention to these assets.

When does a spouse get a share of the pension? As a rule of thumb, assets acquired during a marriage are divided evenly. In some cases where a marriage is of relatively short duration –say, less than two years— the cost of dividing the pension credits may be prohibitive. In all other cases, the court first determines what portion of the total pension benefit was earned during the marriage

How does the court determine how to divide the pension? It follows a basic formula: Figure out what part of the pension was earned during the marriage. That’s called the marital portion. The court then divides that portion in half.

Here’s an example: Say you had your pension for 10 years before you married. Now you’re ending your marriage after 10 years. You expect to retire in 20 years. That means 120 months or one-quarter of your 480-month pension benefit was earned during your marriage. That’s the marital portion. It will be divided in half—fifty percent to you, fifty percent to your spouse. The other three-quarters of your pension, earned before and after your marriage, is yours alone.

Is the marital portion always split 50-50? Ohio law generally says that marital assets are to be divided equally but courts can exercise discretion. In some circumstances, courts have been known to divide the marital portion differently based on many factors.

What if both partners have pensions? Each party shares in the marital portion of the pension of the other, just as above. The calculations can get complicated so you need to make sure you have counsel sophisticated enough to understand pension law. In general, however, courts will keep things simple by writing a separate order for the division of each pension.  

So much for the basics. To really understand what will happen to your pension during divorce, however, you need to know what kind of pension it is. In Part 2 of pensions in divorce, I’ll cover the two most common types of plans.

Divorce, disability benefits, pensions: assets or income?

April 2010

Are disability benefits considered marital assets? Many people assume that they are and will thus be counted in the division of marital property. It’s not quite that simple. There are two basic facts about disability benefits in the context of divorce:

  1. Disability benefits paid out on a regular basis (like workers comp, for instance) are treated as earnings, not assets.  Thus, they count as income for purposes of calculating spousal support and child support.
  2. This is true until the disabled spouse reaches an age when s/he could have retired with a pension benefit.

When that would-be retirement age comes, things change. Say you are on disability but would have been eligible for a public or private pension at retirement (often age 65 but as young as 55). At that time, your disability payments can lose their character as income. When that happens, your disability benefit becomes a disability pension. And a pension is an asset subject to division with a divorced spouse.

These are just the basics. If disability payments are in play when you’re ending your marriage, you want to make sure the disposition of those benefits is done right, for the present and for the future. Make sure your legal counsel has knowledge and experience in this area.

An important note: A military disability is an entirely different creature. I’ll write about that in another post.

Dividing property in divorce: a short primer

November 2009

Ohio statutes and case law propose equal division of property as a place to start. The statute says that ‘the division of marital property shall be equal’ unless equal division is unfair –as it may be for a very short marriage– or if it is established that one spouse has engaged in financial misconduct.

There are many individual situations, however, so a court may make adjustments. Some common examples:

Property. When one spouse can document that they acquired property before marriage and show that it remained separate during the marriage, it will be awarded to that spouse, including appreciation in value that did not come from the effort of the owner. It is deemed ‘separate property’.

Pensions. When one spouse has a pension, courts usually order that the amount of the pension earned during the marriage will be divided evenly between the parties at a value determined on the benefit commencement date. Courts are well aware that the value of benefits changes over time. They generally find that for any year during the marriage that a pension benefit was earned, that benefit should be divided based on its highest value.
Learn more about how courts treat pensions in divorce.

Gifts. Gifts given to one party alone remain the separate property of that party. Often there is a dispute over to whom a gift was given. For example, suppose a significant mortgage was forgiven by one spouse’s parents. It may not be clear that this was a gift to one spouse alone. Careful planning is sometimes appropriate so that the donor’s intent is clearly established.

Unique things. Some things simply can’t be divided– the family dog, for instance, or anything unique, such as the family residence. If you cannot agree, as a rule, the court determines which of you receives that item. If it has significant value, monetary or otherwise, the court will award other property to the other spouse to equalize the value. Sometimes, the court orders an item sold, with the proceeds to be divided.

Dividing private pension benefits in divorce: the documents

November 2009

Dividing pension benefits when a marriage ends is a pretty technical process. You might have a separation agreement that will spell it out. Or your divorce may include many unresolved financial issues. Either way, you should be ready with the particular documents that are needed to divide pension benefits properly:

  • the pension plan and/or trust document
  • the summary plan description
  • the most recent summary annual report
  • the most recent benefits statement provided to the participant
  • the required written regulations explaining the plan’s process for qualifying domestic relations orders (*see the comment below)

Do you have to provide these documents? Technically, no. But your attorney will need to see the documents in order to determine a fair division of pension benefits. And if there is any disagreement, the court will direct you or your spouse to provide them.

Where do you get these documents? From the pension plan administrator. The employer or the union offering the plan can give you the name and contact information for this person, who is required by law to give you the information that you will need to present.

*This last item is technical. The plan administrator will know exactly what you want when you ask for ‘an explanation of your QDRO process.’

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