Contributing Author: Dianne L. Schechter
On May 23, 2017, the Fourth Appellate District for the Court of Appeal of the State of California filed an opinion in the case of In re the Marriage of Misti and Tim Janes (Cal. App. 4th, E065668).
Misti and Tim Janes were married in September 1992 and separated on February 13, 2009. The dissolution of marriage judgment was filed on April 19, 2010, in Riverside County Superior Court, with a marital termination date of April 13, 2010. The settlement agreement attached to the judgment stated that Ms. Janes was awarded $113,392 from Mr. Janes' 401(k) retirement account through Sentinell Benefits.
On February 26, 2014, Ms. Janes received a letter from Fidelity Investment, stating Fidelity was directed by the Plan Administrator of the HEICO Corporation Plan, pursuant to a qualified domestic relations order (QDRO), to segregate $113,392 “with no earnings calculated through the date of segregation.” The letter stated the QDRO provides that Ms. Janes is entitled to $113,392.00 of the HEICO Corporation Plan as of February 24, 2014, with no earnings calculated through the date of segregation and that Fidelity had established an account for her in the amount of $113,392.
On March 21, 2014, Ms. Janes' attorney sent a letter to HEICO Corporation indicating there was no QDRO and demanded the Fidelity transaction be unwound. HEICO Corporation complied.
On December 12, 2014, Ms. Janes sought approval of a proposed QDRO directing Fidelity Investments to segregate $113,392 plus gains and losses (realized and unrealized) income and expenses (accruals). Mr. Janes opposed this request and asserted the dissolution judgment awarded Ms. Janes a lump sum of $113,392 and did not award gains and losses on that amount. Mr. Janes also asserted that awarding gains to Ms. Janes amounted to a modification of the dissolution judgment and the family court lacked jurisdiction to modify the judgment. Ms. Janes argued she was not seeking modification of the judgment because the judgment was silent on gains and losses. The court offered to hold a hearing on whether gains, losses, and interest should be awarded.
Mr. Janes filed his brief and Ms. Janes filed a response brief. The court concluded that awarding gains to Ms. Janes would not be a modification of the judgment. She was not changing the division of the asset as her separate property was still $113,392, but she will also take the gains or losses on that amount of money. The family court did not change anything about the judgment in issuing its ruling and agreed with Ms. Janes' position.
This case is important because it highlights the significance of language in a marital settlement agreement/judgment of dissolution. If the intent of the parties is that a specific dollar amount assigned to an alternate payee is not to be adjusted for earnings, losses or interest on the amount assigned, then the order must specify so. Without such language in the order, the alternate payee is otherwise entitled to an adjustment of the assigned dollar amount for earnings, losses, and interest through the date the account is segregated. Moreover, if a specific dollar amount is intended to be an equalizing payment as opposed to part of the regular division of community property, then it must be clearly stated in the marital settlement agreement.
The language of marital settlement agreements is extremely important and ultimately affects the language of QDROs dividing retirement accounts. If you are currently negotiating a martial settlement agreement which involves division of retirement benefits or require a QDRO or other domestic relations order pursuant to a judgment of dissolution, contact the experienced attorneys of Butterfield Schechter LLP today. With our combined 75 years of experience preparing orders dividing retirement benefits, we can guide you through the language to utilize to properly protect your interest according to the division you actually intended.