Category Archives: Equitable Apportionment

Federal Preemption And The Acronyms For Federal Retirement Plans (a/k/a The “Mysterious Alphabet” Of The Family Court)

If you have the time (or if you are able to take the time) to read through the materials below, then you’ll quickly find that you’ve entered the very murky waters of an area of the practice of family law that often sends chills up and down the spines of family court attorneys – federal preemption and federally-connected retirement or survivor plans [think “QDROs” or “COAPs”].  I’ve simply tried to give you a “taste” of some case law which might cause you to dig a little deeper into the preparation of your clients’ marital settlement agreements or your own trial preparation if your clients’ futures (and certainly your clients’ marital assets) are affected or impacted by these areas.  Good luck out there.

I.  FEDERAL PREEMPTION:

Fisher v. Fisher, 319 S.C. 500, 462 S.E.2d 303 (Ct.App.1995): “Federal preemption did not preclude application of state equitable distribution laws where Congress had not explicitly excluded (military) early separation incentive pay from state apportionment laws.”

  • Social Security benefits

 Simmons v. Simmons, 370 S.C. 109, 634 S.E.2d 1 (Ct.App.2005):  “Although we are sympathetic to Wife’s claim, Social Security benefits simply cannot be divided in an equitable distribution award.  Because Congress preempted the Social Security arena, state courts do not have subject-matter jurisdiction to mandate distribution of such benefits whether by agreement or otherwise.”

  • Military Survivor Benefit Plan annuity

 Silva v. Silva, 333 S.C. 387, 509 S.E.2d 483 (Ct.App.1998):  “Major Silva (husband) and Brigitte (first wife) married in 1972 and divorced in 1985.  In a settlement agreement merged into the divorce decree, husband agreed to designate Brigitte as the beneficiary of his military Survivor Benefit Plan.  The decree provided further that the husband would complete all necessary paperwork and provide documentation that he had done so.  Although sometime during their marriage husband had named Brigitte as his spouse beneficiary, he failed to comply with the court’s order and execute the necessary forms to ensure that Brigitte, as a former spouse, would receive the benefits.

 In 1987 husband married Wendy (second wife).  In December 1992 husband died.  Because husband failed to complete the paper work that would allow Brigitte as his former spouse to collect the SBP annuity, Wendy, as husband’s widow, began receiving the annuity pursuant to the default provisions of the SBP.

 In 1994 Brigitte filed suit in circuit court seeking to (1) impose a constructive trust over the SBP payments being received by Wendy, (2) order an accounting of all SBP proceeds, and (3) disgorge all payments already received by Wendy.  At trial, Brigitte’s attorney conceded that husband assumed that Brigitte would receive the benefits because Brigitte was still named as the spouse beneficiary.  The attorney also stated Brigitte was not alleging husband was guilty of fraud, deceit, or malice by his inaction.  The trial court refused the requested relief.

 “The SBP (military Survivor Benefit Plan) was created by Congress in 1972.  The system was designed to provide an annuity payable to a retired service member’s surviving spouse or child upon the service member’s death. … A 1982 amendment expanded SBP coverage, allowing a service member the right to designate a former spouse as the beneficiary. … The following year Congress clarified the 1982 amendment and provided a retired participant the right to name a former spouse as the beneficiary if at the time of retirement the service member had designated the spouse as the beneficiary and the couple subsequently divorced.  To do so, however, the service member was required to notify the appropriate government official in writing within one year     following the date of the decree of divorce, dissolution or annulment.

 …A former spouse is allowed only one year from the date of the court order or filing to do so (write the appropriate government official upon the failure or refusal of the service member to have sent this written request).  Congress has further provided that the SBP annuity ‘is not assignable or subject to execution, levy, attachment, garnishment or other legal process.’

…We find the reasoning of the Georgia court persuasive and conclude that the provisions of the SBP make clear Congress’s intention to occupy the field under these particular circumstances.”

  • Employment Retirement Income Security Act (ERISA)

 Walsh v. Woods, 371 S.C. 319, 638 S.E.2d 85 (Ct.App.2006):  “Any and all State laws insofar as they relate to employee benefits plans are preempted by ERISA.  This Court has recognized that the preemptive effect of ERISA is a broad one.

 …While ERISA related claims involve subject-matter jurisdiction, 29 U.S.C.§1132(3)(1) vests both state and federal courts with concurrent subject-matter jurisdiction of certain civil actions brought by the participants or beneficiaries against an employee benefit plan.  Nevertheless, under preemption principles, federal ERISA law must control our decision on the issue of Wife II’s claim to the SSB (surviving spouse benefits).

(Factual note:  In the present case, at the time husband retired in 1989, the SSB vested in Wife I because the two were still married.  Although husband had a ninety-day  window prior to his retirement in which he could have, with Wife I’s written consent, removed her as a beneficiary of the SSB, this was not accomplished.  After husband retired, even if Wife I had agreed to waive her SSB, she could not do so under ERISA.  Wife I’s purported waiver in the divorce agreement was ineffective to waive the SSB because ERISA does not allow a beneficiary to waive SSB after a plan participant retires.  …  ERISA provides SSB may not be paid to a spouse who marries a participant after the participant’s retirement.”]

 …It does seem untoward that husband should not be able to have a component of his qualified joint and survivor annuity awarded to Wife II, rather than a woman from whom he has was divorced and did not have a relationship with for years before his death.  However, in keeping with our reading of federal law, there is no other resolution possible.”

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Panhorst v. Panhorst And The Cheshire Cat

From Wikipedia: “The Cheshire Cat is a fictional cat popularised by Lewis Carroll in Alice’s Adventures in Wonderland and known for its distinctive mischievous grin. While most often celebrated in “Alice”-related contexts, the Cheshire Cat predates the 1865 novel and has transcended the context of literature and become enmeshed in popular culture, appearing in various forms of media, from political cartoons to television, as well as cross-disciplinary studies, from business to science. One of its distinguishing features is that from time to time its body disappears, the last thing visible being its iconic grin.”

Here’s the scene (this is an absolutely true story): I’m holding court in Richland County in my very first week as a family court judge, and on my docket is a contested hearing with the infamous Douglas Kosta Kotti and another family law attorney, and before I start their case I invite them back into my chambers for a quick pretrial conference and to introduce myself to them.  The two attorneys are cordial to each other and are both wary of me (justifiably so), and within a millisecond of being seated, Douglas K. Kotti blurts out, “Judge, I don’t know why we’re here.  This case is governed by Panhorst v. Panhorst, and (the opposing attorney) wants to get into property and debts these folks had years ago and those things are gone…they’re GONE, Judge….well before the wife ever filed her Complaint.  It’s clearly a Panhorst case, and we’re wasting your time with it.”  Wow, I thought … pretty cool start.

The opposing attorney then began by quietly, carefully, artfully, and rather skillfully laying out his position as to why the parties’ marital assets and marital debts were “in play”; and every time this attorney completed a single thought, Douglas Kotti would mutter “it’s a Panhorst case, man”.  Well, after about the third such “exchange” between the attorneys, Doug Kotti was now down to simply saying “Panhorst“, but this time I was watching him more closely, and he was turning his head away from the other attorney…and D. Kotti was smiling.  The other attorney could not see this ever-broadening smile, but that attorney was fuming by now…and I have to admit that I egged it on (somewhat) by asking Kotti if he “cared to elaborate” on his position, and HE knew I was into his ploy.  “Judge, one word – Panhorst.”  And with that, the other attorney let out a scream in that office as he pointed his finger at DKK and said almost nose-to-nose: “G…d…it! If you say Panhorst one more time I’m going to knock the ever-living s..t out of you right here, in this office, in front of this judge!!!”

And with that, DK looked that attorney straight in the eye and almost breathlessly whispered, “Panhorst“.  And then the strangest thing happened right in front of my eyes: K completely disappeared inside that office except for the last thing visible: the largest smile I have ever seen on a face of man or beast!  A thing to behold.

And Doug Kotti – a/k/a “The Cheshire Cat” – forever became a legend to me…and we’ve been fast friends from that day forward.

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Your Client’s Financial Declaration – The Most Important (And Often The Most Poorly Prepared) Document In Family Court Litigation

If you’ve practiced family law in South Carolina for any length of time and attended mandatory CLEs where one of the presenters was a South Carolina Court of Appeals judge, how many times have you heard that judge state (1) if the issue is related to equitable apportionment of the marital estate, then the family court judge’s order is required to have addressed in some form all of the “15 equitable apportionment factors” – or – (2) if the issue is related to alimony, then the family court judge’s order is required to have addressed in some form all of the “13 statutory alimony factors”?

And if you are the “prevailing attorney” and have been requested by your trial judge to prepare the proposed order, how would you explain to your client why the trial judge’s appealed order was “remanded” by an appellate court for (your?) failure to have expressly addressed these various, point-by-point “factors” in the order?

While remanding a case back to the family court can be costly to your client (if you’re continuing to charge a fee for this “scenario” which you may have created) and certainly time-consuming, a failure to have prepared and presented to your trial judge a client’s financial declaration which is accurate, truthful to the best knowledge of the client, thorough and thoroughly prepared (with annotations and footnotes, if necessary, or having an attached, detailed “marital assets addendum”) is a fatal error by the attorney, which can (and most often will) have a substantial effect on the financial issues decided by your trial judge.

And yet the financial declaration remains one of the most poorly prepared documents covering the entire spectrum of family court litigation.

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A “Guest Blog Post” From Family Law Attorney Nancy Jo Thomason – “The Ease (And Sense Of Security) In Filing A Family Court Transcript Of Judgment”

My good friend, and mentor, Barry Knobel, recently wrote a blog about protecting your family court client’s potential assets in a divorce case by filing a lis pendens at the commencement of the action, and that blog concluded with a reference to filing a transcript of judgment as “additional protection”.  The blog could not have been more timely.

Recently, I had my first opportunity in my 21-year family law career where I found it necessary to file a family court-authorized transcript of judgment, and I asked Barry if he would be willing to let me share with you the very simple steps necessary to perfect such a lien.  Since I don’t have my own blog (and rarely have anything new or useful to offer), Barry said he would welcome my being his “guest blogger” so that I could share my experience with you.

There are two sections found in Title 20 (domestic relations) of the South Carolina Code of Laws which govern the filing and enrolling of a transcript of judgment with the clerk of court’s office – South Carolina Code Ann. §20-3-670 and §20-3-680. The first section gives you the authority to record the transcript of judgment; the second actually gives you the form to use and file. Very easy!

In my case, my client (the wife) is to receive certain payments when some land which was solely in the former husband’s name is sold. Since a title search might “miss” the order entered by the family court, it was essential to file, record, and index a transcript of judgment which would better protect her financial interest in this property.

The husband’s attorney and I agreed to include a “transcript of judgment” provision in the parties’ divorce decree, and I then sent the judge both the decree and the transcript of judgment. Continue reading →

“Consider These Tax And Social Security Consequences When Splitting Assets In A Divorce” – an article by Liz Skinner for Investment News

Several days ago my CPA, Thomas W. Cox, of Cox, Cauley & Richardson in Anderson, SC, sent me an article entitled “Consider These Tax (And Social Security) Consequences When Splitting Assets In A Divorce”.  The article is written by Liz Skinner for Investment News, and although brief, it provided several interesting and helpful “points for consideration” for family law attorneys who may have clients currently, or close to, falling into these “tax and Social Security categories” (for the family law attorney, these areas are often the “black holes” of family law).

It will only take you a few minutes to read this article, and you may find it immediately beneficial regarding your currently pending cases.

Here’s the link to the article: “Consider These Tax Consequences When Splitting Assets In A Divorce”.

And, as always, good luck out there.

Practicing Family Law In The 21st Century – Series Post No. 4 – Part 2: The Attorney’s Dilemma – “The Attorney’s Notion Of Fairness – Trying To Attain The Unattainable”

In Part 1 of this series post I tried to frame a “dilemma” that family court mediators frequently encounter in their efforts to reach the shared understanding with the parties and their attorneys that achieving a satisfactory (and satisfying) resolution of the litigants’ case has very little, if anything, to do with the “cosmetics of fairness” (e.g., the “look” of fairness versus the actual substance of a workable agreement).  And I had provided a “link” to an amazing Oklahoma family court case where the wife was awarded one billion dollars in cash and other assets, but was not at all “satisfied” with the decision, finding it to be inequitable (in other words, it didn’t look fair, based, apparently, on the total approximate value [$18,000,000,000] of the husband’s “worth”).

I concluded Part 1 by including an excerpt from the April, 2014 South Carolina Court of Appeals opinion in the case of Simcox-Adams v. Adams; and in transitioning into Part 2 in this series, I want us to “revisit” an interesting part of that excerpt:

“Finally, we believe equity dictates this result … ‘stating the time honored equitable maxim that all courts have the inherent power to (do) all things reasonably necessary to ensure that just results are reached to the fullest extent possible.'”  (All case citations are omitted.)

Re-read that excerpt again very carefully.  Where would the word “fair” fit into this maxim?  Could “fair” be inserted in place of the word, “just” (e.g., “…to ensure that fair results are reached to the fullest extent possible”).  But wait a minute, why would this maxim include the words “to the fullest extent possible“?  Why would we need to conditionally qualify the terms “just” or “fair” with the words “fullest extent possible”?  After all, fair means fair, doesn’t it?  And as a family law attorney, certainly we know what “fair” means in the resolution of family court litigation … and your clients certainly know what “fair” is supposed to look like.

And so we have now arrived at every family law attorney’s dilemma – the “crossroads” where the attorney’s notion of fairness must square up with the client’s … where the attorney is compelled by circumstances only marginally within his or her control to attain the unattainable – perfect fairness.

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Practicing Family Law In The 21st Century – Series Post No. 4 – Part 1: The Mediator’s Dilemma – “The Fallacy Of Fairness”

I’m hoping this new post will find you interested enough to spend some of your valuable time traveling down this road with me; and I, of course, always hope that you’ll ultimately find it to be beneficial to your clients and you.

You’ll first need to read the following recently published article to understand what I intend to accomplish with this latest post (this series will be in at least two, if not three, separate parts):

“Ex-Wife Of US Oil Baron To Appeal $1 Billion Divorce Award”

And then read this “follow-up story” which was printed several days later:

“Oklahoma Oilman’s Ex-Wife Plans To Appeal Nearly $1 Billion Divorce Settlement”

Briefly, in Oklahoma after a 9-week trial, the family court judge awarded the wife one billion dollars [if I’m counting the zeroes correctly, I believe that’s $1,000,000,000] … and her attorney stated that this amount was “not equitable” to his client, because the husband’s current worth was approximately $18,000,000,000, and that the wife would appeal the family court judge’s decision.

In an effort to create some measure of scope as to the size of the wife’s award, Forbes Magazine listed the 1000th wealthiest person in the world as having an estimated “worth” of $1.8 billion dollars.  I’ll also break it down this way: if your gross income was $100,000 a year, it would take you 10,000 years to earn one billion dollars.

However, in this Oklahoma case, as in so many others in South Carolina and across this nation, the amount of this award had absolutely nothing to do with this wife’s ability to sustain and enjoy the quality of her life and her lifestyle, at its maximal level, forever … rather, it had everything to do with this “fallacy of fairness” which every family court mediator encounters in virtually every mediation where the parties are dividing up “things” which they possessed “as of the commencement date of (their) marital litigation”.

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“QDROs Demand The Attention Of CPAs” – an article by Ray A. Knight, CPA/PFS, J.D., and Lee G. Knight, Ph.D

My CPA had sent me these materials on QDROs last week, and this weekend I had a chance to read it.
This recent article, “QDROs demand the attention of CPAs”, was authored by Ray A. Knight and Lee G. Knight.
I realize that most (if not all) family law attorneys “farm out” these QDROs to other attorneys or law firms or individuals who or which prepare your QDROs for you (e.g., it’s quicker, it’s cheaper, they know what they’re doing and I don’t, etc., etc.); however, in the “world of unintended consequences” inhabited by us family law attorneys, ultimately you are the one professionally and ethically responsible for protecting the financial futures of your clients well into their future(s).
Consequently, it may help if you have a working knowledge of the basics of QDROs, and this seemed to be an excellent article for your review.  I hope you’ll take the time to read it.

Revisiting Crossland v. Crossland

On July 2, 2014, a unanimous South Carolina Supreme Court in Crossland v. Crossland reversed a 2012 decision of the South Carolina Court of Appeals on all issues (alimony, equitable division, and attorney’s fees), fully reinstated the family court judge’s order, and in the process gave South Carolina’s family court bench and bar one of the most impactful opinions rendered by our appellate courts in years.

The Crossland opinion offered a broadened view and an in depth discussion affecting an array of significant family law areas including:

  • how an appellate court determines whether a judge has “abused his or her discretion” in rendering a decision;
  • the application of the “alimony factors”;
  • a footnoted discussion regarding future modification of an alimony award;
  • the family court judge’s broad discretion to award alimony and determine the amount of the award without being held to any mathematical formula or “bright-line rules”;
  • a detailed discussion regarding “imputation of income” and “earning capacity”;
  • the appropriate test or standard for the family court judge to employ regarding when and how to measure or determine the financial impact of a party’s eligibility to receive “government benefits”, such as Social Security retirement benefits;
  • the application of the “equitable apportionment factors”;
  • the implication of the appellate courts’ favoring a 50-50 division of the marital estate in long-term marriages; and
  • the application of the factors governing an award of attorney’s fees and litigation costs.

I want to take three excerpts from this opinion which I believe might be of interest, significance and importance to the family law bar (I’m omitting any statutory or case law cited within these excerpts):

“An award of alimony rests within the sound discretion of the family court and will not be disturbed absent an abuse of discretion. …  The inartful use of an abuse of discretion deferential standard of review merely represents the appellate courts’ effort to incorporate the two sound principles underlying the proper review of an equity case.  Those two principles are the superior position of the trial judge to determine credibility and the imposition of a burden on an appellant to satisfy the appellate court that the preponderance of the evidence is against the finding of the trial court.” (Emphasis added)

“Wife seems to ask this Court to create a rule that income should never be imputed on the basis of eligibility for government benefits; however, a bright-line rule is not only unnecessary in light of existing case law, but also inadvisable. … We leave it largely to the family court judge’s discretion, however, to determine what is an appropriate alimony award in light of the circumstances of each individual case.  Formulaic principles and bright-line rules will only hinder the ability of family court judges to reach an equitable result in this individualized, fact-sensitive area of law. …“. (Emphasis added)

“This Court has held while there is certainly no recognized presumption in favor of a fifty-fifty division, we approve equal division as an appropriate starting point for a family court judge attempting to divide an estate of a long-term marriage. … The purpose of the general fifty-fifty division is to protect the non-working spouse who undertook the household duties, and to prevent an award ‘solely based on the parties’ direct financial contributions’ “. (Emphasis added)

I would strongly encourage that you make a number of copies of the Crossland case and place a copy in every case file which involves any of the issues addressed in this opinion, because I’m reasonably certain that your family court judge will have a copy of this case on his or her bench, and will be referring to it frequently in the decision-making process.