Throughout the course of this blog’s existence in the family law blogosphere, we have cautioned and advised on the pitfalls of failing to timely divide retirement assets. An entry addressing this issue dating back almost two years can be found here, only showing how this important issue is one that divorcing parties often do not consider, but are faced with after the divorce is finalized. How about on the flip-side of the coin, so to speak? For the party whose retirement asset is to be divided, what is "fair and equitable" for equitable distribution as to when the asset should be divided and at what value?
The Appellate Division recently addressed this issue in the matter of Ejiofor v. Ejiofor, where it reversed and remanded a trial court’s decision for a determination of the current value of the husband’s share of the wife’s retirement accounts.
The facts of relevance are relatively sparse – the parties were married in 1989, separated in December 2004 and divorced in April 2007. On March 15, 2007, a final Judgment of Divorce was placed on the record, incorporating an oral property settlement agreement. The agreement included, in part, that the parties would equally share their retirement and pension accounts. The Judgment included language stating that the accounts would be "evaluated" as of December 15, 2004, "or as close to that date as possible."
Post-judgment litigation followed regarding various equitable distribution provisions of their agreement. In October 2008, following a plenary hearing, the trial court Ordered that the parties obtain an expert appraisal of the retirement assets to determine a proper value for distribution. A little less than a year later, the husband filed a motion asking that the trial court set his share of the wife’s retirement accounts at approximately $51,000 and that a QDRO be prepared providing him with that sum from the wife’s "AIG VALIC" account. The trial court granted the husband’s motion, holding that the value as of December 15, 2004 entitled the husband to the $51,000 sought.
In reversing and remanding the trial court’s decision, the Appellate Division noted first and foremost that the parties’ agreement did not set a date of distribution of the accounts, and also critically did not indicate which party would bear the risk of any diminution in value of the accounts post-December 2004. The wife argued that providing the husband with the $51,000 distribution would be entirely inequitable because the value of her AIG account had decreased substantially due to the down economy, thereby leaving her with a far lesser share of the retirement assets should the decision be upheld.
While the Appellate Division agreed that December 2004 was the appropriate date for valuation of the retirement accounts, it was not equitable for the husband to receive a 50% share based on the 2004 value five years later because any change in value required consideration. Since the agreement was deemed by the Appellate Division to be, at best, ambiguous as to which party would bear the risk (if not both of them) of any decrease in value, and neither party offered evidence as to their respective intents in entering into the agreement, the Appellate Division was required to interpret the language of the agreement "in the most reasonable and fair manner" in light of the parties’ equal bargaining power.
From the standpoint of fairness/reasonableness, the Appellate Division concluded that the negative result of the husband’s decision to wait for five years to move for entry of a QDRO, as well as a lack of evidence that the wife unreasonably delayed such entry (since the parties reasonably disputed the values at issue), fell upon him. The Appellate Division, therefore, reversed and remanded for an expert to determine the cash value of the husband’s share and what amount he could withdraw from the wife’s account, using the December 2004 value and evaluating subsequent change due to market impact.
While it is critical that QDROs be timely prepared and entered, the real moral of the story here is that one party should not be made to suffer the inequity sought by the other party where the agreement does not provide a complete picture and the agreement, in the first place, was designed with fairness in mind.
EDITOR’S NOTE: IF PARTIES ACTUALLY INTEND ON DIVIDING A SPECIFIC DOLLAR AMOUNT AND/OR NOT ACCOUNTING FOR INCREASES/DECREASES IN ACCOUNT VALUES DUE TO MARKET FORCES BETWEEN THE VALUATION DATE AND ULTIMATE DIVISION OF THE ACCOUNTS, THEY SHOULD SAY SO. IN THIS CASE, BY USING A FIXED DATE, ONE PARTY RECEIVED A WINDFALL WHICH WAS OBVIOUSLY UNFAIR. ERIC S. SOLOTOFF