FLC Updated Written Materials 22613

24th Annual Family Law Conference

Thursday, March 7 ‐ Friday, March 8, 2013 Bristlecone Conven on Center

Ely, Nevada

15 CLE hours

(including 2 Ethics hours and 3 hours of Nuts & Bolts)

EVIDENCE AND EVIDENCE AND

F INANCIAL DISCLOSURE:F INANCIAL DISCLOSURE:

TELL ING THE STORYTELLING THE STORY

WEDNESDAY, March 6

4 ‐ 6 p.m. Registra on — Bristlecone Conven on Center / White Pine Room

THURSDAY, March 7

7 ‐ 8 a.m. Breakfast Buffet —BCC / Main Room 7 ‐ 6:30 p.m. Registra on — BCC / White Pine Room 8 ‐ 11:15 a.m. Nuts & Bolts of Family Law Practice — BCC / Main

Room (3 CLE hours) Ed Kainen, Esq., Kainen Law Group, PLLC Gary Silverman, Esq., Silverman, Decaria & Ka elman

This annual overview of family law prac ce is presented by the authors of Nuts & Bolts of Family Law and is intended to benefit those new to the prac ce of family law. Separate registra on required.

11:30 ‐ 12:30 p.m. Lunch Break —BCC / Main Room 12:30 ‐ 2 p.m. Supreme Court Update: The latest in rule

developments and advice from the Court — BCC / Main Room (1.5 CLE hours)

Jus ce Mark Gibbons, Supreme Court of Nevada, moderator

Panel, Supreme Court of Nevada Bob Cerceo, Esq., The Abrams Law Firm

2 ‐ 2:15 p.m. Break — BCC / Main Room 2:15 ‐ 4:15 p.m. Evidence and the New Financial Disclosure Form

— BBC / Main Room (2 CLE hours) Dixie Grossman, Esq., Silverman, Decaria & Ka elman, moderator

Hon. Bridget Robb Peck, 2nd Judicial District Court Todd Torvinen, Esq., The Law Office of Todd Torvinen Susan Brackney, CPA/ABV/CFF, MST, Gaub Inc.

4:15 ‐ 4:30 p.m. Break — BCC / Main Room 4:30 ‐ 6:30 p.m. Civility ≠ Weakness: Ethics and Civility Review —

BCC / Main Room (2 CLE Ethics hours) Shelly Booth Cooley, Esq., The Cooley Law Firm, moderator

Josef Karacsonyi, Esq., The Dickerson Law Group, moderator

Jus ce James Hardesty, Supreme Court of Nevada Hon. Bill Henderson, 8th Judicial District Court Hon. William Po er, 8th Judicial District Court Hon. Robert W. Teuton, 8th Judicial District Court Hon. Egan Walker, 2nd Judicial District Court

6:45 p.m. ‐ ?? WINE TASTING — Mr. G’s

PARALEGAL TRACK: Evalua ng, Obtaining and Organizing the Discovery and Evidence of Your Case* ‐ Elk’s Lodge

11:30 ‐ 1 p.m. Lunch—Introduc ons, Overview and Opening a Case

1 ‐ 1:15 p.m. Break 1:15 ‐ 2:30 p.m. Common Eviden ary

Issues in the Courtroom 2:30 ‐ 3 p.m. Break 3 ‐ 4 p.m. Real and Special Property

Division Issues

ADVANCED ATTORNEY TRACK BCC/Juniper, Sage & Pinion Rooms

2:15 ‐ 6:30 p.m. Overlay Issues in High Wealth Cases

Jennifer Abrams, Esq., The Abrams Law Firm, moderator

Marshal Willick Esq., Willick Law Group, moderator

Mike Rosten, CPA, CFE, Forensic Accoun ng & Li ga on Support Services

Separate registra on required.

Schedule

Don’t forget to visit the exhibitors in the convention

center lobby.

FRIDAY, March 8 7 ‐ 8 a.m. Breakfast Buffet — BCC / Main Room 8 ‐ 9:30 a.m. Re rement Plan Division— BCC / Main Room (1.5 CLE hours)

Eric Pulver, Esq., Reno Family Law, moderator Hon. Bryce Duckworth, 8th Judicial District Court Marshal Willick, Esq., Willick Law Group

9:30 ‐ 9:45 a.m. Break — BCC / Main Room 9:45 ‐ 11: 15 a.m. Trust Issues in Divorce— BCC / Main Room

(1.5 CLE hours) Katherine Provost, Esq., The Dickerson Law Group, moderator

Hon. Chuck Weller, 2nd Judicial District Court David Grant, Esq., Grant, Morris, Dodds, PLLC

11:15 ‐ 12:30 p.m. Lunch Break —BCC / Main Room 12:30 ‐ 1 p.m. Family Law Section Meeting — BCC / Main Room 1 ‐ 5 p.m. VOTING for Execu ve Council Members — BCC Only section members whose dues are current may vote.

1 ‐ 1:30 p.m. Case & Legisla ve Update — BCC / Main Room

(0.5 CLE hours) Katherine Provost, Esq., The Dickerson Law Group Dixie Grossman, Esq., Silverman, Decaria & Ka elman

1:30 ‐ 1:45 p.m. Break — BCC / Main Room 1:45 ‐ 3:15 p.m. Making Your Alimony Case— BCC / Main Room

(1.5 CLE hours) Kris ne Brewer, Esq., Brewer Blau Law Group, moderator

Gary R. Silverman, Esq., Silverman, Decaria & Ka elman

Shawn M. Goldstein, Esq., Jimmerson Hansen Hon. Bill Henderson, 8th Judicial District Court

3:15 ‐ 3:30 p.m. Break — BCC / Main Room 3:30 ‐ 5 p.m. Limited Funding for Business Valua on and

Admi ng Reports— BCC / Main Room (1.5 CLE hours)

Bob Cerceo, Esq., The Abrams Law Firm, moderator Thomas Standish, Esq., Jolley Urga Wirth Woodbury & Standish

PARALEGAL TRACK* — Elk’s Lodge

8:30 ‐ 9:30 a.m. NRCP 16.2 9:30 ‐ 9:45 a.m. Break 9:45 ‐ 11 a.m. Preparing Short and Long

Financial Declara on Forms

11 ‐ Noon Technology Update,

Asset Searches and Private Inves gators Noon ‐ 1 p.m. Lunch 1 ‐ 2 p.m. Pu ng on a Child

Custody Case * The paralegal track is taught by several speakers includ‐ing but not limited to members of the Family Law Execu‐ve Counsel.

Schedule (cont’d)

7 ‐ 10 p.m. Annual Banquet Bristlecone Main Room

Entertainment , Awards, Dancing & Keynote

Address from the Hon. David A. Hardy, Chief Judge of the 2nd Judicial District Court

Financial Disclosure Form

General

6252 South Rainbow Blvd., Suite 100Las Vegas, Nevada 89118P. 702.222.4021 F. 702.248.9750www.TheAbramsLawFirm.com

Presented by

Jennifer V. Abrams, Esq.

Page 1

•Information

Case InformationCase Information

Personal InformationPersonal Information

Employment / DisabilityEmployment / Disability

Attorney InformationAttorney Information

Page 2

•Income

Most RecentPaycheck Stub

• Only regular income or salary for that pay period

Section 1A

Section 1A

• Use ‘Pay Frequency Table’

• Monthly income will automatically populate

Section 1B

• Monthly AverageEnd of December Paycheck

10,659.60 YTD Overtime÷ 12 _ Months Elapsed for Year

888.30 Average Monthly Overtime

End of July Paycheck

6,218.10 YTD Overtime÷ 7 Months Elapsed for Year

888.30 Average Monthly Overtime

Income Information From:

StatementsPaycheck StubsW2, 1099, etc.

Income Information From:

StatementsPaycheck StubsW2, 1099, etc.

Section 1B

Section 1C

Total Gross Monthly Income

Page 3

•Deductions

Section 2A

• Actual Monthly Amount

Income Tax Withholding

Use Actual Monthly Amount

Deductions often decrease over the tax year in higher

income brackets

For more detailed information – please refer to

IRS Publication 15 – Employer’s Tax Guide

Section 2A

• Actual Monthly Amount

Pay attention!• If the monthly

paycheck is split, some employers take these deductions out in one pay period and not the other

Max Yearly Contribution2013

401(k)$17,500403(b)

TSPTraditional IRA

$5,500Roth IRA

SIMPLE IRA $12,000SEP-IRA $51,000

Section 3 – Income Summary

Gross Monthly IncomeMonthly Deductions

Page 4

•Children•Household

• Monthly Averages

Expense Information From:

Bank StatementsReceipts

• Monthly Averages


Bank StatementsReceipts

Page 5

•Expenses


Bank/Loan StatementsCredit Card StatementsUtility BillsReceipts







Page 6

•Asset & Debt•Signature

For the most updated versions of theGeneral & Detailed

Financial Disclosure Forms- please visit -

www.TheAbramsLawFirm.com

Moderators: Shelly B. Cooley, The Cooley

Law FirmJosef Karacsonyi, The

Dickerson Law Group

Civility is not a sign of weakness, and sincerity is always subject to proof.

John F. Kennedy

Panel:Justice James W. Hardesty,

Nevada Supreme CourtHon. Bill Henderson, 8th

Judicial District CourtHon. William S. Potter, 8th

Judicial District CourtHon. Robert W. Teuton, 8th

Judicial District CourtHon. Egan Walker, 2nd

Judicial District Court

The NRPC are “rules of reason.” NRPC 1.0A(a)Some Rules are imperatives: “shall” or “shall not.” Define proper conduct for purposes of professional discipline. NRPC 1.0A(a)Other Rules are permissive: “may.” Define areas under the Rules in which the lawyer has discretion to exercise professional judgment. No disciplinary action should be taken when lawyer chooses not to act or acts within the bounds of discretion. NRPC 1.0A(a)

Most duties flowing from the client-lawyer relationship attach only after client has requested the lawyer to render legal services and the lawyer has agreed to do so. NRPC 1.0A(b)But there are some duties (i.e. duty of confidentiality) that attach when the lawyer agrees to consider whether a client-lawyer relationship shall be established. NRPC 1.0A(b)Principles of substantive law external to NRPC determine whether client-lawyer relationship exists. NRPC 1.0A(b)

ADVOCATEDefinition: A person who assists, defends, pleads or prosecutes for another. (Black’s Law Dictionary)

A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law. A lawyer for the defendant in a criminal proceeding, or the respondent in a proceeding that could result in incarceration, may nevertheless so defend the proceeding as to require that every element of the case be established.

(a) A lawyer shall make reasonable efforts to expedite litigation consistent with the interests of the client.

(b) The duty stated in paragraph (a) does not preclude a lawyer from granting a reasonable request from opposing counsel for an accommodation, such as an extension of time, or from disagreeing with a client’s wishes on administrative and tactical matters, such as scheduling depositions, the number of depositions to be taken, and the frequency and use of written discovery requests.

(a) A lawyer shall not knowingly:(1) Make a false statement of fact or law to a tribunal or fail to correct a false statement of

material fact or law previously made to the tribunal by the lawyer;(2) Fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the

lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or(3) Offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a witness

called by the lawyer, has offered material evidence and the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminal matter, that the lawyer reasonably believes is false.

(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.

(c) The duties stated in paragraphs (a) and (b) continue to the conclusion of the proceeding, and apply even if compliance requires disclosure of information otherwise protected by Rule 1.6.

(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.

A lawyer shall not:(a) Unlawfully obstruct another party’s access to evidence or unlawfully alter, destroy or

conceal a document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act;

(b) Falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law;

(c) Knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists;

(d) In pretrial procedure, make a frivolous discovery request or fail to make reasonably diligent effort to comply with a legally proper discovery request by an opposing party;

(e) In trial, allude to any matter that the lawyer does not reasonably believe is relevant or that will not be supported by admissible evidence, assert personal knowledge of facts in issue except when testifying as a witness, or state a personal opinion as to the justness of a cause, the credibility of a witness, the culpability of a civil litigant or the guilt or innocence of an accused; or

(f) Request a person other than a client to refrain from voluntarily giving relevant information to another party unless:

(1) The person is a relative or an employee or other agent of a client; and(2) The lawyer reasonably believes that the person’s interests will not be adversely

affected by refraining from giving such information.

(a) A lawyer shall not seek to influence a judge, juror, prospective juror or other official by means prohibited by law.(b) A lawyer shall not communicate ex parte with a judge, juror, prospective juror or other official except as permitted by law.(c) Subject to the limitations imposed by this Rule or by law, it is a lawyer’s right, after the jury has been discharged, to interview the jurors to determine whether their verdict is subject to any legal challenge. A lawyer shall not communicate with a juror or prospective juror after discharge of the jury if the juror has made known to the lawyer a desire not to communicate, or the communication involves misrepresentation, coercion, duress or harassment. The scope of the interview should be restricted and caution should be used to avoid embarrassment to any juror or to influence his or her action in any subsequent jury service.(d) A lawyer shall not engage in conduct intended to disrupt a tribunal.(e) Before the jury is sworn to try the cause, a lawyer may investigate the prospective jurors to ascertain any basis for challenge, provided that a lawyer or the lawyer’s employees or independent contractors may not, at any time before the commencement of the trial, conduct or authorize any investigation of the prospective jurors, through any means which are calculated or likely to lead to communication with prospective jurors of any allegations or factual circumstances relating to the case at issue. Conduct prohibited by this Rule includes, but is not limited to, any direct or indirect communication with a prospective juror, a member of the juror’s family, an employer, or any other person that may lead to direct or indirect communication with a prospective juror.

When a lawyer knows or reasonably should know the identity of a lawyer representing an opposing party, he or she should not take advantage of the lawyer by causing any default or dismissal to be entered without first inquiring about the opposing lawyer’s intention to proceed.

TRANSACTIONS WITH PERSONS OTHER THAN CLIENTS

In the course of representing a client a lawyer shall not knowingly:

(a) Make a false statement of material fact or law to a third person; or

(b) Fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

(a) In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person, or use methods of obtaining evidence that violate the legal rights of such a person.(b) A lawyer who receives a document relating to the representation of the lawyer’s client and knows or reasonably should know that the document was inadvertently sent shall promptly notify the sender.

(a) A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.(b) A lawyer who knows that a judge has committed a violation of applicable rules of judicial conduct that raises a substantial question as to the judge’s fitness for office shall inform the appropriate authority.(c) This Rule does not require disclosure of information otherwise protected by Rule 1.6 or information gained by a lawyer or judge while participating in an approved lawyers assistance program, including but not limited to the Lawyers Concerned for Lawyers program established by Supreme Court Rule 106.5.

State Bar of Nevada, Bar Counsel, David A. Clark: (800) 254-2797

It is professional misconduct for a lawyer to:(a) Violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another;(b) Commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects;(c) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;(d) Engage in conduct that is prejudicial to the administration of justice;(e) State or imply an ability to influence improperly a government agency or official or to achieve results by means that violate the Rules of Professional Conduct or other law; or(f) Knowingly assist a judge or judicial officer in conduct that is a violation of applicable rules of judicial conduct or other law.

Eighth Judicial District Court Rules Rule5.04. Standards of conduct: All lawyers and pro se litigants involved in matters before the family division should aspire to compliance with the American Academy of Matrimonial Lawyer’s standards of conduct, the Bounds of Advocacy (1991 Edition).Other District Courts of the State of Nevada have not (yet) adopted the AAML Bounds of Advocacy.

The primary purpose of the Goals is to guide matrimonial lawyers confronting moral and ethical problems. The Goals are directed to the “gray” zone where even experienced, knowledgeable matrimonial lawyers might have concerns, and constitute an effort to provide clear, specific guidelines in areas most important to matrimonial lawyers. The Goals aspire to a level of practice above the minimum established by the Rules of Professional Conduct.

Candor, courtesy and cooperation are especially important in matrimonial matters where a high emotional level can engulf the attorneys, the court and the parties. Allowing the adverse emotional climate to infect the relations between the attorneys and parties inevitably harms everyone, including the clients, their children and other family members. Although lawyers cannot ensure that justice is achieved, they can help facilitate the administration of justice.Combative, discourteous, abrasive, "hard ball" conduct by matrimonial lawyers is inconsistent with both their obligation to effectively represent their clients and their role as problem-solvers. Good matrimonial lawyers can be cordial and friendly without diminishing effective advocacy on behalf of their clients. In fact, candor, courtesy and cooperation: (1) facilitate faster, less costly and mutually-accepted resolution of disputes; (2) reduce stress for lawyers, staff and clients; (3) reduce waste of judicial time; and (4) generate respect for the court system, the individual attorney and the profession as a whole.

7.1 An attorney should strive to lower the emotional level of marital disputes by treating counsel and the parties with respect.

Some clients expect and want the matrimonial lawyer to reflect the highly emotional, vengeful relationship between the spouses. The attorney should explain to the client that discourteous or uncivil conduct is inappropriate and counterproductive, that measures of respect are consistent with competent and ethical representation of the client, and that it is unprofessional for the attorney to act otherwise.

Ideally, the relationship between counsel is that of colleagues using constructive problem-solving techniques to settle their respective clients’ disputes consistent with the realistic objectives of each client. Examples of appropriate measures of respect include: cooperating with voluntary or court-mandated mediation; meeting with opposing counsel to reduce issues and facilitate settlement; promptly answering phone calls and correspondence; advising opposing counsel at the earliest possible time of any perceived conflict of interest; and refraining from attacking, demeaning or disparaging other counsel, the court or other parties.

The attorney should make sure that no long-standing adversarial relationship with or a personal feeling toward another attorney interferes with negotiations, the level of professionalism maintained, or effective representation of the client. Although it may be difficult to be courteous and cooperative when opposed by an overzealous lawyer, an attorney should not react in kind to unprofessional conduct. Pointing out the unprofessional conduct and requesting that it cease is appropriate.

7.2 An attorney should stipulate to undisputed relevant matters, unless inconsistent with the client’s legitimate interests. If the client’s permission is required, the attorney should encourage the client to stipulate to undisputed matters.

CommentThe attorneys' stipulation to undisputed matters

avoids unnecessary inconvenience and wasted court time. The attorney seeking a stipulation should do so in writing, attempting to state the true agreement of the parties. Other counsel should promptly indicate whether or not the stipulation is acceptable.

7.3 An attorney should not deceive or intentionally mislead other counsel.

CommentAttorneys should be able to rely on statements by other

counsel. They should be able to assume that the matrimonial lawyer will correct any misimpression caused by an inaccurate or misleading prior statement by counsel or her client. Although an attorney must maintain the client’s confidences, the duty of confidentiality does not require the attorney to deceive, or permit the client to deceive, other counsel.[80] When another party or counsel specifically requests information which the attorney is not required to provide and which the attorney has been instructed to withhold or which may be detrimental to the client's interests, the attorney should refuse to provide the information, rather than mislead opposing counsel.

1. The matrimonial lawyer is approached by opposing counsel, whoasks: "Although my client realizes there is no hope for reconciliation, he is desperate to know whether his wife is seeing another man. Is she?" The attorney knows that the wife has been having an affair. It would be proper for the attorney to indicate an unwillingness or inability to answer that question, but it would be improper either to suggest that the client has not had an affair, or to tell opposing counsel lurid details on the condition that they not be disclosed.

2. The attorney believes that the opposing party has engaged in activity that the party would not want made public. It is improper to bluff the other side into settlement by hinting that the matrimonial lawyer will use damaging evidence of the conduct if that evidence does not exist. It is also improper to threaten public disclosure if the evidence exists, but would likely be inadmissible or irrelevant at trial.

7.4 An attorney should neither overstate the authority to settle nor represent that the attorney has authority that the client has not granted.

CommentIn either case presented in the Goal, the attorney

has improperly induced reliance by other counsel that could damage the attorney-client relationship. A matrimonial lawyer who is uncertain of his authority — or simply does not believe that other counsel is entitled to know such information —should either truthfully disclose his uncertainty, or state that he is unwilling or unable to respond at all.

7.5 An attorney should not induce or rely on a mistake by counsel as to agreed upon matters to obtain an unfair benefit for the client.

CommentThe need for trust between attorneys, even those representing

opposing sides in a dispute, requires more than simply avoiding fraudulent and intentionally deceitful conduct. Misunderstandings should be corrected and not relied upon in the hope that they will benefit the client. Thus, for example, the attorney reducing an oral agreement to writing not only should avoid misstating the understanding, but should correct inadvertent errors by other counsel that are inconsistent with prior understandings or agreements. Whether or not conduct or statements by counsel that are not necessarily in her client's best interests should be corrected may not always be clear and will depend on the particular facts of a case. The crucial consideration should be whether the attorney induced themisunderstanding or is aware that other counsel's statements do not accurately reflect any prior agreement. It is thus unlikely that tactical, evidentiary or legal errors made by opposing counsel at trial require correction.

1. In an effort to compromise a dispute over maintenance (alimony), the parties agree that payments be made that are deductible by the husband and taxable to the wife. While reviewing the agreement, the attorney for the wife realizes that the language will not create the tax consequences both sides had assumed and will, in fact, benefit his client because the payments will be treated neither as deductible alimony to the husband nor taxable to the wife. The matrimonial lawyer should disclose this discovery to opposing counsel.

If, however, counsel's mistake goes to a matter not discussed and agreed upon — either explicitly or implicitly, the obligation to the client precludes disclosure of the mistake without the client's permission. Thus, if alimony was agreed upon without any discussion of tax consequences, the wife's lawyer would not be obligated to provide the language necessary to make payments tax deductible by the husband and includable by the wife.

2. The lawyer for the wife prepares a stipulation erroneously providing for the termination of maintenance upon the remarriage of either party. If the husband asks his attorney if it is really true that by his remarriage he can terminate his liability to pay any further maintenance, the attorney should correct the mistake in the stipulation or a judgment entered upon it. The lawyer should bring it to the attention of opposing counsel.

7.6 An attorney who receives materials that appear to be confidential should refrain from reviewing the materials and return them to the sender, as soon as it becomes clear they were inadvertently sent to the receiving lawyer.

There are many circumstances in which an attorney receives materials that were inadvertently sent by another attorney or party. Such instances have been increasing due to the use of e-mail, the ability to send simultaneous faxes to multiple persons, and the sheer volume of materials provided through discovery in complex cases. If the materials are not harmful or confidential, no issue is raised. If, however, the materials were not intended to be provided and contain confidential information, the temptation to use them to the client’s benefit is great.

The courts’ and ethics committees’ treatment of inadvertent disclosure of confidential materials is not uniform. Some courts have followed the ABA Standing Committee approach (below) that the materials should be returned unread. Other courts have taken the position that any unforced disclosure of attorney-client privileged communications destroys confidentiality and terminates the privilege, not only for the communications disclosed, but also for all related communications.[84]

A number of courts have taken an intermediate approach, holding that the right of receiving counsel to make use of inadvertently sent materials depends on a number of factors. For example, one court indicated that it would look to five factors in determining whether a document had lost its privilege: “(1) The reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production; (2) the number of inadvertent disclosures; (3) the extent of the disclosure; (3) any delay and measures taken to rectify the disclosures; (5) whether the overriding interests of justice would be served by relieving the party of its error.”

Regardless of how courts might resolve the issue of the extent to which voluntary (though unintended) disclosure waives confidentiality for purposes of attorney-client privilege, the ethical issue concerning the proper conduct of the receiving attorney remains. This Goal is consistent with ABA Formal Opinions in providing that once the inadvertence is discovered, the receiving attorney should not further examine the materials and should return them to the sending lawyer.In providing that the receiving lawyer was ethically obligated to return inadvertently sent confidential materials, the ABA Committee relied on the following factors: “(i) the importance the Model Rules give to maintaining client confidentiality, (ii) the law governing waiver of the attorney-client privilege, (iii) the law governing missent property, (iv) the similarity between the circumstances here addressed and other conduct the profession universally condemns, and (v) the receiving lawyer’s obligations to his client.”This Goal is also consistent with 7.5 that an attorney should not rely on a mistake by opposing counsel, but should instead correct inadvertent errors. And, since the decision whether to rely on inadvertent errors by another counsel is one of “means,” the error is “appropriate for correction between the lawyers without client consultation.”

1. The wife’s lawyer receives an e-mail addressed to the husband from the husband’s lawyer. In many cases that would be sufficient to indicate that the wife’s lawyer was an unintended recipient. If, however, the receiving lawyer has a reasonable basis to believe a copy was intended for him, he may read the message unless and until it becomes evident that the message was unintentionally sent to him.

2. The lawyer for the husband has sought discovery of numerous documents from the wife relating to issues in the case. In response to the document request, the wife’s attorney sends over ten large boxes of materials. While reviewing the documents, the husband’s lawyer discovers in a seemingly unrelated file, a letter from the wife’s attorney to the wife that begins: “As to your question about your use of drugs prior to your marriage to Husband . . . .” Unless the husband’s lawyer has a reasonable basis to believe the letter was provided intentionally, was relevant, and was not otherwise confidential, the lawyer should stop reading and return the letter to the wife’s attorney.

7.7 An attorney may use materials intentionally sent from an unknown or unauthorized source unless the materials appear to be confidential. Confidential materials should be deposited with the court and a ruling sought.

Attorneys occasionally receive papers from outside of the expected sources. Such materials may have been sent anonymously. The materials should be treated differently depending on both their source (if known) and apparent nature.Clearly confidential or privileged material, regardless of the sender, should be returned to the other lawyer, preferably unread. If the materials are the subject of a proper discovery request but were improperly withheld, the receiving lawyer should deposit them with the court and seek a ruling as to their proper disposition.[88]Documents not clearly confidential may be used by the receiving attorney. For example, a lawyer receiving an unmarked envelope containing statements of undisclosed accounts in the name of theother party may use the materials. A receiving lawyer who believes the materials were intentionally withheld from a response to a proper discovery request should report the fraud to the court.

7.8 An attorney should cooperate in the exchange of information and documents. An attorney should not use the discovery process for delay or harassment, or engage in obstructionist tactics.

As a basic rule of courtesy and cooperation, attorneys should try to conduct all discovery by agreement, never using the discovery process to harass other counsel or their clients. This principle applies both to attorneys attempting to obtain discovery and to those from whom discovery is sought.[89] The discovery rules are designed to eliminate or reduce unfair surprise, excessive delay and expense, unnecessary and futile litigation, and the emotional and financial cost of extended and overly adversarial litigation. In addition, pretrial discovery often results in settlements more beneficial than protracted litigation. In no area of the law are these benefits more important than in matrimonial law, where the necessity of future dealings between the parties and the interest in protecting the emotional and psychological stability of children necessitate avoiding unnecessary litigation and acrimony. It is in the interest of all parties (including the client) to assist, rather than resist, legitimate discovery.Consistent with this view of discovery in family law cases as information gathering rather than as adversarial weapon, a number of jurisdictions have now adopted codes of professional courtesy and have imposed mandatory disclosure requirements on all divorcing spouses.[90] In many states the fiduciary responsibility for interspousal disclosure is confirmed explicitly by statute, rule, or in approved discovery request forms.

It is in the interest of all counsel and the parties to avoid improper tactics. In a misguided effort to advance the interests of their clients, attorneys may be tempted to wear down the opposing party or counsel by means of oppressive “hardball” discovery tactics. These tactics do not advance the legitimate interests of clients and are clearly improper. Improper discovery conduct under this Goal includes: avoidance of compliance with discovery through overly narrow construction of interrogatories or requests for production; objection to discovery without good faith basis; improper assertion of privilege; production of documents in a manner designed to hide or obscure the existence of particular documents; direction to parties and witnesses not to respond to deposition questions without adequate justification; requests for unnecessary information that does not bear on the issues in the case; and requests for sanctions before making a good faith effort to resolve legitimate discovery disputes.

Counsel’s behavior during depositions is as important as behavior before the court. Because most cases are settled rather than tried to a court, the deposition process may be a party’s only measure of acceptable behavior when solving the problems of the parties, currently and in the future. Attorneys therefore should conduct themselves in deposition with the same courtesy and respect for the legal process as is expected in court. For example, they should not conduct examinations or engage in other behavior that is purposely offensive, demeaning, harassing, intimidating, or that unnecessarily invades the privacy of anyone. Attorneys should attempt to minimize arguments during deposition, and if sensitive or controversial matters are to be the subject of deposition questioning, when not contrary to the client’s interests, the deposing attorney should consider discussing such matters in advance to reach any appropriate agreements.

With the focus of discovery being the legitimate pursuit of information rather than strategic confrontation, attorneys should not coach deponents by objecting, commenting, or otherwise acting in a manner that suggests a particular answer to a question, or object for the purpose of disrupting or distracting the questioner or witness. Objections should only be made in the manner and on grounds provided by applicable court rules. Attorneys should not intentionally misstate facts, prior statements or testimony. Such conduct increases the animosity without legitimate purpose.Although not required under this Goal, the Fellows of the Academy believe that a mandatory disclosure provision would best promote the cooperative, problem-solving approach of the Bounds of Advocacy. Therefore, the Academy recommends adoption in each state of a mandatory discovery provision.N.R.C.P. 16.2

7.9 An attorney should grant to other counsel reasonable extensions of time that will not have a material, adverse effect on the legitimate interests of the client.

CommentThe attorney should attempt to accommodate

counsel who, because of schedule, personal considerations, or heavy workload, requests additional time to prepare a response or comply with a legal requirement. Such accommodations save the time and expense of unnecessary motions and hearings. No lawyer should request an extension of time to obtain an unfair advantage.

7.10 An attorney should clear times with other counsel and cooperate in scheduling hearings and depositions.

CommentGood faith attempts by attorneys to avoid scheduling

conflicts tend to avoid unnecessary delays, expense to clients and stress to attorneys and their staff. In return, other counsel should confirm the availability of the suggested time within a reasonable period and should indicate conflicts or unavailability only when necessary. As prior consultation concerning scheduling is a courtesy measure, it is proper to schedule hearings or depositions without agreement if other counsel fails or refuses to respond promptly to the time offered, raises unreasonable calendar conflicts or objections, or persistently fails to comply with this Goal.

7.11 An attorney should provide notice of cancellation of depositions and hearings at the earliest possible time.

CommentAdherence to this Goal will avoid unnecessary

travel, expense and expenditure of time by other counsel, and will also free time for the court for other matters. The same principles apply to all scheduled meetings, conferences and production sessions with other counsel.

7.12 An attorney should submit proposed orders promptly to other counsel before submitting them to the court. When submitted, other counsel should promptly communicate approval or objections.

CommentProposed orders following a hearing should

generally be submitted at the earliest practicable time.

7.13 An attorney should not seek an ex parte order without prior notice to other counsel except in exigent circumstances.

CommentThere are few things more damaging to a client's

confidence in his lawyer, or to relationships between lawyers, than for a party to be served with an ex parte order about which his lawyer knows nothing.[93] Even where there are exigent circumstances (substantial physical or financial risk to the client), or where local rules permit ex parte proceedings, notice to, or the appearance of, other counsel usually will not be able to prevent appropriate relief from issuing.

7.14 An attorney should not attempt to gain advantage by delay in the service of filed pleadings or correspondence upon other counsel.

CommentWhen pleadings or correspondence are mailed or

delivered to the court, copies should normally be transmitted on the same day and in the same manner to all other counsel of record. An identical method need not be employed, so long as delivery on the same day will be achieved. For example, if the court is one block from counsel's office and opposing counsel's office is 50 miles away, it would be acceptable to hand deliver a document to the court and to fax it to counsel so that it arrived on the same day.

The Standards address the responsibility of the family lawyer to be civil to clients, opposing counsel and the Court. Civility is an important obligation of a lawyer.

1. Treat the client with respect.

2. Try to keep the client on an even emotional keel and avoid characterizing the actions of the other party, opposing lawyers, and judicial officials in emotional terms.

3. Be aware of counseling resources and be prepared to refer the client to counseling where appropriate.

4. Where a client has an exaggerated or unrealistic view of his or her options in any given situation, explain matters as carefully as possible in order to assist the client to realistically assess the situation.

5. Respond promptly to client requests for advice or information.

6. Consider the availability and appropriateness of forms of alternate dispute resolution.

7. Where a client wishes to pursue a claim or motion for purely hostile or vindictive purposes, explain to the client the reasons why the client should not do so.

8. Do not assist a client in pursuing a claim for primary custody or visitation where the purpose of the claim is to obtain bargaining leverage in order to achieve a purely economic objective.

9. Avoid any communication to client about the judge, the other lawyer, or the other party that will contribute to disrespect for the legal process.

10. Encourage clients to comply with all court orders.

1. Be honest in all communications with opposing counsel. Do not intentionally misrepresent any factual or legal argument.

2. Be respectful and courteous in all oral and written communications with the opposing side.

3. Do not engage in conduct, oral or written, that promotes animosity and rancor between the parties or their counsel.

4. Use a demeanor and conduct during a deposition or other out-of-court meeting that would be no less appropriate than it would be in the courtroom.

5. Do not engage in harassing or obstructive behavior.

6. Honor reasonable requests for routine extensions of time, unless a client’s position will be adversely and materially affected.

7. Confer in good faith with opposing counsel on scheduling matters.

8. Do not utilize the manner of service of pleadings or discovery requests to disadvantage the opposingcounsel.

1. Act with complete honesty; show respect for the court by proper demeanor; and act and speak civilly to the judge, court staff and adversaries.

2. Avoid frivolous litigation and non-essential pleading in litigation.

3. Explore settlement possibilities at the earliest reasonable date, and seek agreement on procedural and discovery matters.

4. Avoid delays not dictated by a competent and justified presentation of a client’s claims or defenses.

5. Strive to protect the dignity and independence of thejudiciary, particularly from unjust criticism and attack.

PunctualityPreparednessProfessionalism

Court calendar time is scarce. Be on time. Identify issues in dispute and areas of agreement before entering the courtroom. Judges will know when you do not, and appreciate it when you do.

Judges care most about a thorough understanding of the facts and a proper application of the law. Judges care least about personality and professional disagreements between lawyers. Personal and professional disagreements are unnecessary distractions to the courts.

Return telephone calls and respond to letters. Opposing counsel will surely blame you when given the opportunity. Write each letter as if it will become an exhibit within the court file. Win and lose with equal amounts of grace.Never mislead or deceive the court. Never mislead or deceive opposing counsel.The judiciary is an independent branch of government, yet it is without purse or sword. It is legitimized by reciprocal dignity and respect. Civility engenders dignity and respect.Civility facilitates frequent and meaningful communication between attorneys. Frequent and meaningful communication is essential to pre-trial agreements and resolution. Incivility has a price – You become subject to possible sanctions for bad behavior. Close calls from the Court will not go in yourclient’s favor because subtle distinctions in the law become lost when mired in the incessant fist-pounding.

“Civility � Weakness: Civility and Ethics Review”

Nevada Court Rules

NEVADA RULES OF PROFESSIONAL CONDUCT

ADVOCATE

Rule 3.1. Meritorious Claims and Contentions. A lawyer shall not bring or defend a proceeding,or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is notfrivolous, which includes a good faith argument for an extension, modification or reversal of existinglaw. A lawyer for the defendant in a criminal proceeding, or the respondent in a proceeding thatcould result in incarceration, may nevertheless so defend the proceeding as to require that everyelement of the case be established.

Rule 3.2. Expediting Litigation.

(a) A lawyer shall make reasonable efforts to expedite litigation consistent with the interests ofthe client.

(b) The duty stated in paragraph (a) does not preclude a lawyer from granting a reasonablerequest from opposing counsel for an accommodation, such as an extension of time, or fromdisagreeing with a client’s wishes on administrative and tactical matters, such as schedulingdepositions, the number of depositions to be taken, and the frequency and use of written discoveryrequests.

Rule 3.3. Candor Toward the Tribunal.

(a) A lawyer shall not knowingly:

(1) Make a false statement of fact or law to a tribunal or fail to correct a false statement ofmaterial fact or law previously made to the tribunal by the lawyer;

(2) Fail to disclose to the tribunal legal authority in the controlling jurisdiction known to thelawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or

(3) Offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or awitness called by the lawyer, has offered material evidence and the lawyer comes to know of itsfalsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to thetribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminalmatter, that the lawyer reasonably believes is false.

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(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a personintends to engage, is engaging or has engaged in criminal or fraudulent conduct related to theproceeding shall take reasonable remedial measures, including, if necessary, disclosure to thetribunal.

(c) The duties stated in paragraphs (a) and (b) continue to the conclusion of the proceeding, andapply even if compliance requires disclosure of information otherwise protected by Rule 1.6.

(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known tothe lawyer that will enable the tribunal to make an informed decision, whether or not the facts areadverse.

Rule 3.4. Fairness to Opposing Party and Counsel.

A lawyer shall not:

(a) Unlawfully obstruct another party’s access to evidence or unlawfully alter, destroy or conceala document or other material having potential evidentiary value. A lawyer shall not counsel or assistanother person to do any such act;

(b) Falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to awitness that is prohibited by law;

(c) Knowingly disobey an obligation under the rules of a tribunal except for an open refusalbased on an assertion that no valid obligation exists;

(d) In pretrial procedure, make a frivolous discovery request or fail to make reasonably diligenteffort to comply with a legally proper discovery request by an opposing party;

(e) In trial, allude to any matter that the lawyer does not reasonably believe is relevant or that willnot be supported by admissible evidence, assert personal knowledge of facts in issue except whentestifying as a witness, or state a personal opinion as to the justness of a cause, the credibility of awitness, the culpability of a civil litigant or the guilt or innocence of an accused; or

(f) Request a person other than a client to refrain from voluntarily giving relevant informationto another party unless:

(1) The person is a relative or an employee or other agent of a client; and

(2) The lawyer reasonably believes that the person’s interests will not be adversely affectedby refraining from giving such information.

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Rule 3.5. Impartiality and Decorum of the Tribunal and Relations With Jury.

(a) A lawyer shall not seek to influence a judge, juror, prospective juror or other official bymeans prohibited by law.

(b) A lawyer shall not communicate ex parte with a judge, juror, prospective juror or otherofficial except as permitted by law.

(c) Subject to the limitations imposed by this Rule or by law, it is a lawyer’s right, after the juryhas been discharged, to interview the jurors to determine whether their verdict is subject to any legalchallenge. A lawyer shall not communicate with a juror or prospective juror after discharge of thejury if the juror has made known to the lawyer a desire not to communicate, or the communicationinvolves misrepresentation, coercion, duress or harassment. The scope of the interview should berestricted and caution should be used to avoid embarrassment to any juror or to influence his or heraction in any subsequent jury service.

(d) A lawyer shall not engage in conduct intended to disrupt a tribunal.

(e) Before the jury is sworn to try the cause, a lawyer may investigate the prospective jurors toascertain any basis for challenge, provided that a lawyer or the lawyer’s employees or independentcontractors may not, at any time before the commencement of the trial, conduct or authorize anyinvestigation of the prospective jurors, through any means which are calculated or likely to lead tocommunication with prospective jurors of any allegations or factual circumstances relating to thecase at issue. Conduct prohibited by this Rule includes, but is not limited to, any direct or indirectcommunication with a prospective juror, a member of the juror’s family, an employer, or any otherperson that may lead to direct or indirect communication with a prospective juror.

Rule 3.5A. Relations With Opposing Counsel. When a lawyer knows or reasonably should knowthe identity of a lawyer representing an opposing party, he or she should not take advantage of thelawyer by causing any default or dismissal to be entered without first inquiring about the opposinglawyer’s intention to proceed.

3

TRANSACTIONS WITH PERSONS OTHER THAN CLIENTS

Rule 4.1. Truthfulness in Statements to Others.

In the course of representing a client a lawyer shall not knowingly:

(a) Make a false statement of material fact or law to a third person; or

(b) Fail to disclose a material fact to a third person when disclosure is necessary to avoidassisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

Rule 4.2. Communication With Person Represented by Counsel. In representing a client, alawyer shall not communicate about the subject of the representation with a person the lawyer knowsto be represented by another lawyer in the matter, unless the lawyer has the consent of the otherlawyer or is authorized to do so by law or a court order.

Rule 4.3. Dealing With Unrepresented Person. In dealing on behalf of a client with a person whois not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. Whenthe lawyer knows or reasonably should know that the unrepresented person misunderstands thelawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.The lawyer shall not give legal advice to an unrepresented person, other than the advice to securecounsel, if the lawyer knows or reasonably should know that the interests of such a person are orhave a reasonable possibility of being in conflict with the interests of the client.

Rule 4.4. Respect for Rights of Third Persons.

(a) In representing a client, a lawyer shall not use means that have no substantial purpose otherthan to embarrass, delay, or burden a third person, or use methods of obtaining evidence that violatethe legal rights of such a person.

(b) A lawyer who receives a document relating to the representation of the lawyer’s client andknows or reasonably should know that the document was inadvertently sent shall promptly notifythe sender.

Rule 8.3. Reporting Professional Misconduct.

(a) A lawyer who knows that another lawyer has committed a violation of the Rules ofProfessional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness

4

or fitness as a lawyer in other respects, shall inform the appropriate professional authority.

(b) A lawyer who knows that a judge has committed a violation of applicable rules of judicialconduct that raises a substantial question as to the judge’s fitness for office shall inform theappropriate authority.

(c) This Rule does not require disclosure of information otherwise protected by Rule 1.6 orinformation gained by a lawyer or judge while participating in an approved lawyers assistanceprogram, including but not limited to the Lawyers Concerned for Lawyers program established bySupreme Court Rule 106.5.

Rule 8.4. Misconduct.

It is professional misconduct for a lawyer to:

(a) Violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induceanother to do so, or do so through the acts of another;

(b) Commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness orfitness as a lawyer in other respects;

(c) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(d) Engage in conduct that is prejudicial to the administration of justice;

(e) State or imply an ability to influence improperly a government agency or official or to achieveresults by means that violate the Rules of Professional Conduct or other law; or

(f) Knowingly assist a judge or judicial officer in conduct that is a violation of applicable rulesof judicial conduct or other law.

EIGHTH JUDICIAL DISTRICT COURT RULES

Rule 5.04. Standards of conduct. All lawyers and pro se litigants involved in matters before thefamily division should aspire to compliance with the American Academy of Matrimonial Lawyer’sstandards of conduct, the Bounds of Advocacy (1991 Edition).

5

American Bar Association Section of Family Law

I. To Client

1. Treat the client with respect.

2. Try to keep the client on an even emotional keel and avoid characterizing the actions of the other party, opposing lawyers, and judicial officials in emotional terms.

3. Be aware of counseling resources and be prepared to refer the client to counseling where appropriate.

4. Where a client has an exaggerated or unrealistic view of his or her options in any given situation, explain matters as carefully as possible in order to assist the client to realistically assess the situation.

5. Respond promptly to client requests for advice or information.

6. Consider the availability and appropriateness of forms of alternate dispute resolution.

7. Where a client wishes to pursue a claim or motion for purely hostile or vindictive purposes, explain to the client the reasons why the client should not do so.

8. Do not assist a client in pursuing a claim for primary custody or visitation where the purpose of the claim is to obtain bargaining leverage in order to achieve a purely economic objective.

9. Avoid any communication to client about the judge, the other lawyer, or the other party that will contribute to disrespect for the legal process.

10. Encourage clients to comply with all court orders.

These Standards address the responsibility of the family lawyer to be civil to clients, opposing counsel, and the Court. Civility is an important obligation of a lawyer.

Civility Standards

American Bar Association

Section of Family Law

II. To Opposing Counsel 1. Be honest in all communications with opposing

counsel. Do not intentionally misrepresent any factual or legal argument.

2. Be respectful and courteous in all oral and written communications with the opposing side.

3. Do not engage in conduct, oral or written, that promotes animosity and rancor between the parties or their counsel.

4. Use a demeanor and conduct during a deposition or other out-of-court meeting that would be no less appropriate than it would be in the courtroom.

5. Do not engage in harassing or obstructive behavior.

6. Honor reasonable requests for routine extensions of time, unless a client’s position will be adversely and materially affected.

7. Confer in good faith with opposing counsel on scheduling matters.

8. Do not utilize the manner of service of pleadings or discovery requests to disadvantage the opposing counsel.

III. To the Court 1. Act with complete honesty; show respect for the court

by proper demeanor; and act and speak civilly to the judge, court staff and adversaries.

2. Avoid frivolous litigation and non-essential pleading in litigation.

3. Explore settlement possibilities at the earliest reasonable date, and seek agreement on procedural and discovery matters.

4. Avoid delays not dictated by a competent and justified presentation of a client’s claims or defenses.

5. Strive to protect the dignity and independence of the judiciary, particularly from unjust criticism and attack.

American Bar Association Section of Family Law

321 N Clark St • Chicago, IL 60610 Phone: 312-988-5145 • Fax: 312-988-6800

[email protected] • www.abanet.org/family

RETIREMENT PLAN DIVISION:

WHAT EVERY NEVADA DIVORCE

LAWYER NEEDS TO KNOW

by

Marshal S. WillickWILLICK LAW GROUP

3591 East Bonanza Rd., Ste. 200Las Vegas, NV 89110-2101

(702) 438-4100fax: (702) 438-5311

website: willicklawgroup.come-mail: [email protected]

February 1, 2013

BIOGRAPHY

Marshal Willick is the principal of the Willick Law Group, an A/V rated Family Law firm in LasVegas, Nevada, and practices in trial and appellate Family Law. He is a Certified Family LawSpecialist, a Fellow of both the American and International Academies of Matrimonial Lawyers,former Chair of the Nevada Bar Family Law Section and former President of the Nevada chapter ofthe AAML. He has authored many books and articles on Family Law and retirement benefits issues,and was managing editor of the Nevada Family Law Practice Manual.

In addition to litigating trial and appellate cases in Nevada, Mr. Willick has participated in hundredsof divorce and pension cases in the trial and appellate courts of other states, and in the drafting ofvarious state and federal statutes in the areas of pensions, divorce, and property division. He haschaired several Committees of the American Bar Association Family Law Section, AAML, andNevada Bar, has served on many more committees, boards, and commissions of those organizations,and has been called on to sometimes represent the entire ABA in Congressional hearings on militarypension matters. He has served as an alternate judge in various courts, and frequently testifies as anexpert witness. He serves on the Board of Directors for the Legal Aid Center of Southern Nevada.

Mr. Willick received his B.A. from the University of Nevada at Las Vegas in 1979, with honors, andhis J.D. from Georgetown University Law Center in Washington, D.C., in 1982. Before enteringprivate practice, he served on the Central Legal Staff of the Nevada Supreme Court for two years.

Mr. Willick can be reached at 3591 East Bonanza Rd., Ste. 200, Las Vegas, NV 89110-2101. Hisphone number is (702) 438-4100, extension 103. Fax is (702) 438-5311. E-mail can be directed [email protected], and additional information can be obtained from the firm web sites,www.willicklawgroup.com and www.qdromasters.com.

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mailto:[email protected],

http://www.Willicklawgroup.com.

http://www.qdromasters.com

TABLE OF CONTENTS

I. INTRODUCTION; ALPHABET SOUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. Why Bother Dealing With Pensions? Duty and Liability. . . . . . . . . . . . . . . . . 1

B. A Ridiculously-Brief History of Major Developments from 1969 toPresent – and Lots of Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

C. The Modern Landscape of Pensions in Divorce Cases. . . . . . . . . . . . . . . . . . . . 5

1. State versus Federal Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2. General Community Property and Nevada Statutory Law. . . . . . . . . . 8

3. Nevada Case Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

II. IDENTIFICATION OF PENSION PLANS IN DIVORCE ACTIONS. . . . . . . . . . . 12

A. Means of Acquiring Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

1. The Client Interview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2. Informal and Formal Discovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

B. Knowing It When You See It. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1. The Basics to Watch For. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2. Vestedness and Maturity; Nevada Red Herrings. . . . . . . . . . . . . . . . . 14

3. Place of Accrual; Technicality and Practicality. . . . . . . . . . . . . . . . . . 16

C. The Time Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1. Defined Benefit Types of Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2. Variations in Final Date of Accrual. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3. Variations in Qualitative/Quantitative Approach to Spousal Shares.18

4. Variations Regarding Payment Upon Eligibility. . . . . . . . . . . . . . . . . 21

5. Should the Time Rule Apply to Defined Contribution Plans?. . . . . . 21

D. Overview of the Major Retirement Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1. Private Pensions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2. Civil Service Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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a. CSRS & FERS Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

b. The Thrift Savings Plan (TSP). . . . . . . . . . . . . . . . . . . . . . . . . . 27

(1) Withdrawal and Borrowing of Money from theTSP During Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

(2) Withdrawal and Borrowing of Money from the TSP After Retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . 28

(3) Court-Ordered Divisions of the TSP. . . . . . . . . . . . . . . 29

(4) Survivorship Benefits for the TSP. . . . . . . . . . . . . . . . . 30

c. Medical Benefits: FEHB/CHCBP.. . . . . . . . . . . . . . . . . . . . . . . 30

3. Military Benefits.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

a. Retirement Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

b. Survivor’s Benefits (SBP). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

c. Medical Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

d. TSP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

e. Special (Jurisdiction) Caution for Military Cases. . . . . . . . . . 42

4. Nevada Government Plan (PERS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

a. Retirement Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

b. Survivor’s Benefits.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

5. Other Government Pension Plans & Social Security. . . . . . . . . . . . . . 48

III. VALUATION OF PLANS IN DIVORCE ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 49

A. Vestedness and Maturity Revisited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

B. Valuation Variations Among Types of Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 51

C. Valuation of Ancillary Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

D. Age Gaps and Discount Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

IV. DIVISION/DISTRIBUTION OF BENEFITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

A. Public versus Private Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

B. Timing: Prepare Retirement Orders Before the Divorce. . . . . . . . . . . . . . . . . 54

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C. The Requirement of Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

D. Reservations of Jurisdiction; Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 56

E. Disability Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

F. Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

G. Transmutation versus Severance Pay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

H. Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

I. Non-Qualified Plans.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

J. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

K. Practicalities and Cautions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

L. Offsets: How to Do (and Not Do) Them.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

M. Security Interest QDROs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

V. GUIDE FOR JUDGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

A. During the Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

B. At Trial or Prove-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

C. Upon Submission of a Decree, QDRO, or Pension-Division Order. . . . . . . . 68

VI. CONCLUSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

TABLE OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

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I. INTRODUCTION; ALPHABET SOUP

A. Why Bother Dealing With Pensions? Duty and Liability

Many practitioners fail to pay sufficient attention to pension and retirement plans when evaluatingthe community or other property available for distribution upon divorce. This is a mistake. It is atthis point a truism that retirement benefits, usually the most valuable asset of a marriage, aredivisible upon divorce to at least the degree to which they were accrued during the marriage. This1

is particularly true of certain kinds of employment, such as the military, in which frequent moves arethe norm and there is often less opportunity to accumulate large real estate equity.

What is surprising is the near-universal lack of appreciation of this fact. Most people still working,asked what their most valuable assets are, don’t even think to mention their slowly-accruingretirement benefits, even though those benefits are quite commonly more valuable than everythingelse the parties have combined, including the equity in the marital residences.

It is the far better practice to deal with retirement benefits fully and accurately during the divorceitself, instead of deferring the matter to be dealt with “later.” Some States do not permit a spouse2

who does not receive a portion of pension benefits to bring a partition action at a later date to dividethose benefits, and parties often relocate after divorce. The jurisdictional rules could require thematter to be resolved in such States.

When partition is unavailable, the only mechanism for recovery for a divested spouse may be amalpractice suit against divorce counsel, in which the potential liability is the value of the benefitlost by the shortchanged spouse. Courts hearing such cases have stated that any attorney practicingdivorce law is charged with knowing about the existence, value, and mechanics of dividing anyretirement benefits that might exist. An offhand remark by a reviewing court could point a litigant3

directly toward seeking compensation by erring counsel.4

In short, ignoring pension benefits is just not an option – it leaves the divorce attorney subject tomalpractice liability. It is likewise critical for the benefits not just to be mentioned, but to beaddressed competently. Just making some vague reference such as “the benefits are to be dividedin accordance with the time rule,” or “the wife may submit a pension division order” is likewise an

See, e.g., Annotation, Pension or Retirement Benefits as Subject to Assignment or Division by Court in1

Settlement of Property Rights Between Spouses, 94 A.L.R.3d 176; Marshal Willick, MILITARY RETIREMENT BENEFITS

IN DIVORCE (ABA 1998) at xix-xx.

See In re Marriage of Bergman, 168 Cal. App. 3d 742, 214 Cal. Rptr. 661 (Cal. Ct. App. 1985) (there is no2

good reason to perpetuate litigation indefinitely when retirement benefits can and should be divided at the same time asthe parties’ other property).

See Smith v. Lewis, 530 P.2d 589 (Cal. 1975) ($100,000 malpractice award for failing to list and divide a3

military reservist retirement); Cline v. Watkins, 66 Cal. App. 3d 174, 135 Cal. Rptr. 838 (Ct. App. 1977); Medrano v.Miller, 608 S.W.2d 781 (Tex. Civ. App. 1980); Aloy v. Mash, 696 P.2d 656 (Cal. 1985); Martin v. NorthwestWashington Legal Services, 43 Wash. App. 405, 717 P.2d 779 (Wash. Ct. App. 1986) (lawyer and firm found liable forfailure to inquire about, discuss, or seek division of client’s husband’s military pension in a dissolution case where theattorney was on notice that one of the parties was a member of the Armed Services); Bross v. Denny, 791 S.W.2d 416(Mo. Ct. App. 1990) ($108,000 malpractice award where attorney did not know that he could seek division of militaryretirement after change in the law).

See, e.g., Carlson v. Carlson, 108 Nev. 358, 832 P.2d 380 (1992) (in NRCP 60(b) case, Supreme Court noted4

that “Arguably, Trudy’s counsel should have more diligently pursued information about the pension or, at least, movedfor a continuance until she determined the actual value of the pension”).

invitation to malpractice liability. If retirement benefits are mentioned, however poorly, later courtsmay refuse to correct a mis-distribution, leading directly back to litigation directed against the5

divorce lawyer that allowed the mis-distribution to occur.

The non-uniform national law governing partition of omitted or mis-distributed assets thereforemakes it imperative for counsel to address all pension benefits during the divorce case itself, as amatter of prudent, if not defensive, practice.

B. A Ridiculously-Brief History of Major Developments from 1969 to Present –and Lots of Acronyms

Starting in the late 1960s, some States were coming to recognize the importance of pension,retirement, and other deferred benefits in divorce actions. The 1970s saw the law of property6

division throughout the country evolve toward “equitable distribution,” which increasinglyresembled a community property scheme in which divorce courts were to ascertain, and divide, theproperty acquired by both parties during the marriage.

Most people in this country earning retirement benefits work for private employers. Most privateemployee-benefit plans, or “pension plans” in the United States today are qualified under, and7

governed by, the Employee Retirement Income Security Act of 1974, known as “ERISA,” codified8

at 29 U.S.C. § 1001 et seq.

The intention of the law was to ensure that employees actually received the deferred benefits thatthey were promised, due to the perception that there was widespread abuse of employees in theprivate sector. ERISA and the Internal Revenue Code (“IRC”) are the controlling bodies of law formost private plans. Those laws, and the regulations of the Department of Labor, IRS, and thePension Benefit Guaranty Corporation, control nearly all pension, profit sharing, stock bonus, andother retirement plans provided by private industry employers.

But ERISA, as originally enacted, did not explicitly contemplate divorce. And then, in the 1980s,all kinds of developments occurred, nearly simultaneously, affecting the economic lives upondivorce of virtually all folks in America who worked for a living (and their spouses), whether theyworked in the private or public sectors.

See, e.g., Thorne v. Raccina, 136 Cal. Rptr. 887, 203 Cal. App. 4 492 (Ct. App. 2012) (refusing post-divorce5 th

correction of decree providing to spouse less than her full time-rule portion of military retirement, in the absence of fraudand when spouse could have sought independent counsel before divorce but elected not to do so).

See LeClert v. LeClert, 453 P.2d 755 (N.M. 1969); In re Marriage of Fithian, 517 P.2d 449 (Cal. 1974).6

A plan providing for retirement benefits or deferred income, extending to or beyond the end date of covered7

employment. See 29 U.S.C. § 1002(2)(A). This includes pension plans, profit sharing plans, “401(k)” plans, and someemployee stock ownership plans. It does not include any kind of government plans – Civil Service, Military, state orlocal government, etc. It also does not include certain other types of private-employer benefits, such as severance paybenefits and vacation plans, or IRAs or SEP-IRAs, which are governed by other laws.

Pub. L. No. 93-406, 88 Stat. 829 (Sept. 2, 1974).8

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ERISA provided that pension benefits could not be “assigned or alienated.” This created a dilemma9

in jurisdictions recognizing that retirement benefits constituted valuable community or maritalproperty rights. Many courts found a common law exception for domestic relations orders, but the10

legal landscape was confused until the passage in 1984 of the Retirement Equity Act (“REA”),11

which provided that certain domestic relations orders, containing specific terms, must be acceptedand honored by ERISA-qualified pension plans. It was that law that created “QDROs,” – QualifiedDomestic Relations Orders.

Virtually any judgment, decree, or order dealing with alimony or support for a spouse, formerspouse, child, or other dependent made according to local domestic relations law is considered adomestic relations order, or “DRO” under ERISA/REA. It becomes a Qualified Domestic12

Relations Order, or “QDRO,” and must be recognized and enforced by an ERISA plan, when itcreates or recognizes one of the listed classes of persons as an “Alternate Payee” with a right to13

receive all or any portion of the benefits normally payable to a participant in that plan, contains thevarious required terms for such an order, and omits anything that would dis-qualify it fromqualifying.

At about the same time (the 1980s), similar (but not identical!) developments were altering divorcesfor those working in the public sector.

On June 26, 1981, the United States Supreme Court issued its opinion in McCarty v. McCarty. The14

Court determined that state community property laws conflicted with the federal military retirementscheme, and thus were impliedly pre-empted by federal law. The majority held that the apparentcongressional intent was to make military retirement benefits a “personal entitlement” and thus thesole property of individual service members, so the benefits could not be considered as communityproperty in a California divorce. The Court invited Congress to change the statutory scheme ifdivisibility of retired pay was desired.15

29 U.S.C. § 1056(d)(1); Internal Revenue Code (“IRC”) § 401(a)(13)(A).9

See, e.g., American Tel. & Tel. Co. v. Merry, 592 F.2d 118 (2 Cir. 1979) (alimony order impliedly exempted10 nd

from ERISA preemption).

Pub. L. 98-397, 98 Stat. 1426 (Aug. 23, 1984).11

See 29 U.S.C. § 414(p)(1)(B). More specifically, it is a decree, judgment, or other order providing for12

payment of child support, spousal support, or marital or community property payment to a spouse, former spouse, child,or other dependent of a participant in a qualified retirement plan.

Normally, any spouse, former spouse, child or other dependent of a participant who is recognized by a13

domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respectto such participant.

McCarty v. McCarty, 453 U.S. 210, 101 S. Ct. 2728 (1981).14

453 U.S. at 235-36, 101 S.Ct. at 2743.15

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It was, and Congress reacted by enacting the Uniformed Services Former Spouses Protection Act(“USFSPA”) on September 8, 1982. The declared goal of the USFSPA at the time of its passage16

was to “reverse McCarty by returning the retired pay issue to the states.” By fits and starts, every17

State in the Union eventually permitted military retirement benefits to be divided as property.18

The primary purpose of the USFSPA was to define state court jurisdiction to consider and usemilitary retired pay in fixing the property and support rights of parties to a divorce; the point hereis that the federal statute was essentially an enabling act permitting States to address the subject, sotreatment of retired pay was again made dependent on State divorce laws. There is no specific titlerequired for a military pension division order, but an order dividing military retirement benefits hascome to be known as a Military Benefit Division Order (“MBDO”) or more technically as labeledin 10 U.S.C. § 1408(a)(2), “Order Incident to Decree.”

Also outside the scope of ERISA are retirement benefits of federal Civil Service employees. Thoseworking in the U.S. Civil Service have had a retirement system in place in some form since 1920,which is the date from which the “old” system (“Civil Service Retirement System,” or “CSRS”) forthose who began service before January 1, 1984, can be traced. The retirement system is essentiallya defined benefit plan, which takes into account years of service and highest salary in determininga monthly sum to be paid to an employee from the date of retirement until death.

The entire system was altered for incoming employees in a “new” system (“Federal Employees’Retirement System,” or “FERS”), for those who began service on or after January 1, 1984.19

Also commonly known as the “Federal Uniformed Services Former Spouses Protection Act,” or FUSFSPA,16

or as “the Former Spouses Act,” or in some references simply as “the Act.” 10 U.S.C. § 1408 (amended every year ortwo since 1983).

“The purpose of this provision is to place the courts in the same position that they were in on June 26, 1981,17

the date of the McCarty decision, with respect to treatment of nondisability military retired or retainer pay. The provisionis intended to remove the federal pre-emption found to exist by the United States Supreme Court and permit State andother courts of competent jurisdiction to apply pertinent State or other laws in determining whether military retired orretainer pay should be divisable [sic]. Nothing in this provision requires any division; it leaves that issue up to the courtsapplying community property, equitable distribution or other principles of marital property determination anddistribution. This power is returned to the courts retroactive to June 26, 1981. This retroactive application will at leastafford individuals who were divorced (or had decrees modified) during the interim period between June 26, 1981 andthe effective date of this legislation the opportunity to return to the courts to take advantage of this provision.” S. Rep.No. 97-502, 97th Cong., 2nd Sess. 15, (1982), reprinted in 1982 U.S. Code Cong. & Ad.News 1596, 1611. See alsoSteiner v. Steiner, 788 So. 2d 771 (Miss. 2001), opn. on reh’g; Mansell v. Mansell, 490 U.S. 581, 109 S. Ct. 2023 (1989)(some partial federal pre-emption may remain after passage of the USFSPA).

Legislative History, Pub. L. No. 97-252; S. Rep. No. 97-502. As of June 26, 1981, all community property18

States, and most equitable distribution States, treated military retired pay as marital property subject to division. Thetwo last “title” states, Mississippi and West Virginia, have since then adopted equitable distribution schemes.

See 5 U.S.C. §§ 8331, 8401; Pub. L. 99-335 (1986).19

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Those defined benefit plans are administered by the Office of Personnel Management (“OPM”)under extensive separate federal regulations. An order dividing Civil Service retirement benefits20

is required by regulation to be titled “COAP.”21

The new system also created a defined contribution retirement account called the “Thrift SavingsPlan” (“TSP”). In 2001, the defined contribution program was also made available to those in the22

armed forces. An order dividing a TSP account is a “RBCO.”23

And, virtually simultaneously with the federal efforts in the 1980s, various States actively cookedup new or refined retirement schemes for those employed by State governments.

In Nevada, State public employees fall under the Public Employees’ Retirement System (“PERS”),which in its modern form has existed since 1975, but was entirely revised and reorganized in 1993. Those who put the Nevada PERS regulations together chose to (confusingly) use the same titles, etc.,as are in the federal ERISA law, and even copied some of the statutory language from the far larger,and more complex, federal law. However, a State pension plan (such as PERS) does not fall withinERISA, and the federal statutes do not apply to the plan, or to the benefits. Instead, there is anentirely different set of (State) laws that govern distribution of PERS benefits.

C. The Modern Landscape of Pensions in Divorce Cases

All those developments laid the groundwork for the confusion now seen. Those practicing lawbefore the mid-1980s were overwhelmed with a mind-boggling array of new plans, opportunities,rules, requirements, and acronyms, while at the same time the benefits regulated by those planscontained an ever-increasing percentage of the actual wealth owned by most people.

The resulting legal landscape is one where few parties appreciate the importance of retirementbenefits, and relatively few lawyers understand what they are and how they work. This has led tomassive confusion, delay, and accidental loss in family law, estate planning, and every other fieldtouching upon the property of husbands and wives. It also created a cottage industry of folksclaiming to “help” with all these assets and programs, the large majority of whom are mere formpeddlers with no real clue of what they are doing or how anything works, who often make thingsworse.

Still, knowledge of a relative handful of critical concepts by lawyers, estate and financial planners,and others, can make all the difference between adequately addressing a client’s concerns or failing

See Court Orders Affecting Retirement Benefits, 57 Fed. Reg. 33,570 (July 29, 1992) (codified at 5 C.F.R.20

Parts 831 et seq.) The new regulations addressed the employee annuity (the pension), refunds of employee contributions,and survivor’s benefits, but not the Thrift Savings Plan (“TSP”), which was set up to work like a 401(k), and isadministered separately.

“Court Order Acceptable for Processing.” 5 C.F.R. § 838.803.21

Created by the 1986 statute creating FERS, the TSP is a defined contribution type of plan for federal22

employees. The TSP is expressly excluded from the regulations governing the CSRS and FERS retirement benefits. 5 C.F.R. § 838.101(d). Instead, It is administered by a Board entirely separate from the OPM (the Federal RetirementThrift Investment Board). 5 U.S.C. § 8435(d)(1)-(2), 8467; 5 C.F.R. Part 1653, Subpart A.

For “Retirement Benefits Court Order.”23

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to do so. Providing the basic information necessary for lawyers and judges to identify and addresspension questions in divorce is the purpose of these materials.

1. State versus Federal Law

There are enormous variations among the technical requirements of the various administering bodiesfor valid orders dividing retirement plans, but after the cases of the 1980s, a few unifying principleswere clarified.

First, the question of whether retirement benefits are divisible and, if so, how they should be divided,is overwhelmingly a matter of State law. As the United States Supreme Court put it: “We haveconsistently recognized that ‘the whole subject of the domestic relations of husband and wife, parentand child, belongs to the laws of the States and not to the laws of the United States.’”24

Generally, therefore, States are free to distribute property as they see fit, and every variety ofretirement benefit is a property interest, and therefore at issue upon divorce. Sometimes, however,Congress wishes to “occupy the field” in a particular question of law, and generally, it has the powerto do so, even when it results in unintended consequences of unjust enrichment and inequity.25

Much more often, federal law is only seen where principles such as due process and equal protectionbear on the divisibility of retirement benefits, or it is necessary to comply with the technicalrequirements of a federal agency administering retirement benefits. Preemption is explained, againby the United States Supreme Court, as necessary for a federal system, but to be very strictly limitedbecause of the obvious opportunity for abuse and inequity:

Because domestic relations are preeminently matters of state law, we have consistentlyrecognized that Congress, when it passes general legislation, rarely intends to displace stateauthority in this area. Thus we have held that we will not find preemption absent evidencethat it is “positively required by direct enactment.”26

On the rare occasion when state family law has come into conflict with a federal statute, thisCourt has limited review under the Supremacy Clause to a determination whether Congresshas “positively required by direct enactment” that state law be pre-empted. . . . Before astate law governing domestic relations will be overridden, it “must do ‘major damage’ to‘clear and substantial’ federal interests.”27

Rose v. Rose, 481 U.S. 619, 625, 107 S. Ct. 2029, 95 L. Ed.2d 599 (1987).24

See Carmona v. Carmona, 603 F.3d 1041 (9 Cir. 2010) (revised op’n on rehearing) (permitting a former25 th

spouse who had bargained away certain benefits for value to nevertheless make a claim to them despite her agreement,the order of the divorce court, and the wishes of the employee, due to the happenstance of the timing of divorce andretirement, and the preemptive scope of ERISA).

Mansell v. Mansell, 490 U.S. 581, 587, 109 S. Ct. 2023, 2028 (1989), quoting Hisquierdo v. Hisquierdo, 43926

U.S. 572, 581, 99 S. Ct. 802, 808, 59 L. Ed. 2d 1 (1979) (quoting Wetmore v. Markoe, 196 U.S. 68, 77, 25 S. Ct. 172,176, 49 L. Ed. 390 (1904)).

Rose v. Rose, 481 U.S. 619, 625, 107 S. Ct. 2029, 95 L. Ed.2d 599 (1987).27

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It is for this reason that State divorce courts can, for example, order that a spouse of a militarymember is entitled to 100% of the retirement benefits, although disposable retired pay is defined byfederal law as not more than 50% of such benefits. It is why a court can order a retiree who has28

waived military retirement benefits for disability, as allowed under the federal retirement scheme,to nevertheless personally pay to the former spouse the amount that is not directly payable by thefederal pay center.29

Even in ERISA cases – arguably the single most highly pre-empted area of retirement benefits –Congress may require that various benefits of federal employees are or are not in existence, but itis for the States to determine who should get what benefits upon divorce.30

Second, the technical webs of laws governing division of retirement benefits are complex, and evenmany of those litigating retirement benefits cases, or deciding their distribution upon divorce, orforming legislation governing retirement benefit law, are often uninformed or confused as to whatbenefits exist, or how they are administered. Sometimes, this confusion is innocent; other times, notso much.

In Nevada, for example, the legislative history of NRS 125.155 reveals that most of thosecommenting seemed to understand the difference between defined benefit (pension) plans, anddefined contribution (account balance) plans. But the history indicates that the Legislature wasrepeatedly told that the PERS plan was “unique” in refusing to actually make payments to a formerspouse until the retiree actually retires.

In fact, there is nothing at all “unique” about that plan attribute – it is true of every plan that has onlya “divided payment stream” form of benefit, rather than a “divided interest” form – including themilitary and Civil Service retirement plans governing millions of retirees. All such plans prohibitthe plan from paying anything to a former spouse until the member’s actual retirement. And in allsuch pension plans, orders requiring the payment to a former spouse upon eligibility of the employeeto retire requires the worker to pay the former spouse directly, out of pocket, until actual retirementand payments from the retirement plan begin.

Courts, properly, tend to be deferential to the legislative branch in construing legislativeenactments. But that deference is misplaced where the legislative record shows that the laws were31

structured based upon mistaken facts. Courts are sometimes required to go to some lengths to

See, e.g., Ex parte Smallwood, 811 So. 2d 537 (Ala. 2001), cert. denied, 534 U.S. 1066 (2001); Grier v.28

Grier, 731 S.W.2d 931 (Tex. 1987) (USFSPA did not limit the amount of retirement benefits that could be apportionedunder Texas community property law, but only the percentage subject to direct payment); Deliduka v. Deliduka, 347N.W.2d 52 (Minn. Ct. App. 1984).

Shelton v. Shelton, 119 Nev. 492, 78 P.3d 507, 511 (Nev. 2003); see also Krapf v. Krapf, 786 N.E.2d 318,29

326 (Mass. 2003); Hisgen v. Hisgen, 554 N.W.2d 494, 498 (S.D. 1996); Resare v. Resare, 908 A.2d 1006 (R.I. 2006).

“When Congress provided that a benefit should be available to ‘surviving spouses,’ see, e.g., 29 U.S.C. §30

1055(a)(2), it expressly left to state law the determination of the identity of such surviving spouse.” Torres v. Torres,60 P.3d 798, 817 (Haw. 2003).

See Edgington v. Edgington, 119 Nev. 577, 80 P.3d 1282 (2003) (the legislative intent behind ambiguous31

terms must be ascertained from the statute’s terms, and its objectives and purpose, “in line with what reason and publicpolicy” dictate).

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fashion orders complying with plan requirements while still satisfying their primary duty to do equityto the parties before the court.32

2. General Community Property and Nevada Statutory Law

Pensions have been recognized as community property by community property States for manydecades, and that recognition was extended to unvested and unmatured pension benefits long33 34 35

ago. Statutory and case law throughout the country now recognizes pension benefits as marital36

property with near-uniformity.

Rationales for that recognition usually include that the benefits accrued during marriage, that incomeduring marriage was effectively reduced in exchange for the deferred pension benefits, and that thechoice was made to forego possible alternative employment which would have paid more in currentwages, in order to have the pension.

There is little Nevada statutory law specifically directed to retirement benefits. Instead, they fallunder the general definition of community property in NRS 123.220: “all property” acquired aftermarriage, with certain exceptions. All such property is divided under NRS 125.150 – the key statutegoverning division of property upon divorce – which mandates an equal distribution of communityproperty, in the absence written reasons for finding a “compelling reason” to make an unequaldisposition.37

3. Nevada Case Law

Nevada case law has long held that property acquired during marriage is presumed to be communityproperty, and that the presumption can only be overcome by clear and convincing evidence. The38

See, e.g., Waltz v. Waltz, 110 Nev. 605, 877 P.2d 501 (1994), in which the Court had to construe poor32

phrasing as an allocation of “permanent alimony” in order to provide payments clearly agreed to, but technicallydisallowed by the so-called “10 year rule” limiting allocations of military retirement benefits as property.

See LeClert v. LeClert, 453 P.2d 755 (N.M. 1969); Busby v. Busby, 457 S.W.2d 551 (Tex. 1970); In re33

Marriage of Fithian, 517 P.2d 449 (Cal. 1974) (recognizing the importance of retirement benefits as a marital asset).

A “vested” pension is one that, having been earned and accrued, is beyond the power of the issuing authority34

to withdraw. See LeClert v. LeClert, 453 P.2d 755 (N.M. 1969) (exploring definitions of “vestedness” and “maturity”of retired pay).

Id. A “matured” pension is one in which a particular employee is eligible for present payments from a plan.35

See In re Marriage of Brown, 544 P.2d 561 (Cal. 1976); Copeland v. Copeland, 575 P.2d 99 (N.M. 1978);36

In re Marriage of Luciano, 104 Cal. App. 3d 956, 164 Cal. Rptr. 93 (Cal. Ct. App. 1980); Forrest v. Forrest, 99 Nev.602, 668 P.2d 275 (1983).

NRS 125.150(1)(b). The statute also contains an exception to the statutory mandate of equal division where37

“otherwise provided” by either a premarital agreement or NRS 125.155.

See, e.g., Todkill v. Todkill, 88 Nev. 231, 495 P.2d 629 (1972).38

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first Nevada case explicitly noting that retirement benefits earned during a marriage are divisiblecommunity property was apparently Ellett.39

In Forrest, relying on the line of California opinions dividing the gross sum of all retirement40

benefits, the Nevada Supreme Court held that “retirement benefits are divisible as community41

property to the extent that they are based on services performed during the marriage, whether or notthe benefits are presently payable.” In other words, the Court held that all forms of retirement42

benefits, whether or not vested, and whether or not matured, are community property subject todivision.43

In Walsh, the divorce decree had stated only that the wife was awarded “half of the retirement44

benefits,” even though the husband clearly had accrued a portion of the retirement benefits beforemarriage. The Court construed the decree as meaning half of the retirement benefits earned duringmarriage.

O’Hara was not a divorce case. It involved a married Nevada PERS participant who chose the45

maximum monthly annuity, providing no survivor’s benefits, upon retirement. She died shortly afterretirement, and her widower sued the retirement board, seeking to alter the benefit option selectionto include a survivorship benefit for himself. In the context of an ongoing marriage, the NevadaSupreme Court found that the “community property interests of a nonemployee spouse do not limitthe employee’s freedom to agree to terms of retirement benefits,” and ruled that the employee maychoose any available options so long as “the community property interest of the nonemployee spouseis not defeated.”

The next year, in Gemma, the Nevada Supreme Court turned to the issues of PERS retirement46

benefits in the context of divorce. The Court reiterated that Nevada law permits the division ofunvested retirement benefits, and discussed the two possible methods of distributing a spouse’s shareof those benefits, by way of determining the present value of the pension and awarding half to each

Ellett v. Ellett, 94 Nev. 34, 573 P.2d 1179 (1978).39

Forrest v. Forrest, 99 Nev. 602, 668 P.2d 275 (1983).40

See In re Marriage of Gillmore, 629 P.2d 1 (Cal. 1981); In re Marriage of Brown, 544 P.2d 561 (Cal. 1976).41

Forrest, 99 Nev. at 607, 668 P.2d at 279.42

Throughout the legislative history of NRS 125.155, everyone involved seemed oblivious of the existence or43

holding of Forrest. The various witnesses – and legislators – indicated enormous confusion about the meaning of“vestedness” of retirement benefits, and seemed to have no knowledge that if unvested retirement benefits are divided,no money is paid to a former spouse until and unless the worker becomes eligible to receive benefits. Rather, theyappeared to be addressing the non-existent “problem” that a spouse could be paid a portion of a retirement benefit thatis never earned. Unless parties make an arm’s length deal to cash out a potential spousal interest under Sertic, no such“problem” should even be possible.

Walsh v. Walsh, 103 Nev. 287, 738 P.2d 117 (1987).44

O’Hara v. State ex rel. Pub. Emp. Ret. Bd., 104 Nev. 642, 764 P.2d 489 (1988).45

Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989).46

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spouse (requiring a cash out of the nonemployee spouse’s share), or by a “time rule” division of thebenefits themselves, stating that the latter is preferred.

Addressing the possibility that the employee spouse might continue employment past the date onwhich he could retire, thereby delaying payment to the former spouse of the spousal share of thebenefits, the Court adopted the holdings and reasoning of two widely-cited California cases: “Theemployee spouse cannot by election defeat the nonemployee spouse’s interest in the communityproperty by relying on a condition solely within the employee spouse’s control.” The Court further47

specified that a trial court could reserve jurisdiction to adjust such an award in the event that theemployee by “extraordinary efforts” (as opposed to normal promotions and cost of living increases)greatly increases the value of the retirement benefits after divorce.48

Almost exactly a year after Gemma, the Court considered the divorce of a Judge from a legalsecretary in Fondi. The trial court had calculated the marital percentage of the amount the Judge49

would have received from PERS if he retired on the date of divorce. On appeal, that holding wasreversed, and the Court clarified its holding in Gemma to specify not only application of the timerule, but also use of the “wait and see” approach, under which the community has an interest in thepension benefits ultimately received, not just the pension accrued as of the date of divorce.

Further, the Court clarified in Fondi that the burden is on the employee spouse to prove that post-divorce extraordinary efforts were made in order to change the mathematical analysis, instead of theburden being on the non-employee spouse to show that no such efforts were made. The Courtdistinguished the legal division of the benefits, which occurs at divorce, from actual collection ofbenefits by the spouse, which is to take place at the employee’s eligibility for retirement.50

In Carlson, the Nevada Supreme Court ordered the set aside of a property distribution under NRCP51

60(b), where a private pension had been greatly undervalued in the original divorce proceedings. During marriage, the parties had chosen a form of retirement benefit with a survivorship option, butthe divorce decree did not qualify under ERISA to cause survivor’s benefits to be paid to the spouse. On remand, the court therefore directed that the trial court amend the decree to constitute a QDROto provide those survivorship benefits to the former spouse.

The same year, in Carrell, the Nevada Supreme Court reversed a district court decree52

characterizing a portion of the husband’s share of pensions as “spousal support” instead of property. Citing Walsh, supra, and NRS 125.150(5)&(7), the Court explained that retirement benefits earned

Gemma v. Gemma, 105 Nev. 458, 463-64, 778 P.2d 429 (1989), quoting from In re Marriage of Luciano,47

164 Cal. Rptr. 93, 95 (Ct. App. 1980) and In re Marriage of Gillmore, 629 P.2d 1, 5 (Cal. 1981). As noted above,Gillmore was approvingly cited and relied upon by the Nevada Supreme Court since 1983 in Forrest.

Gemma v. Gemma, 105 Nev. at 462-63, 778 P.2d at 431-32.48

Fondi v. Fondi, 106 Nev. 856, 802 P.2d 1264 (1990).49

This point was made much more clearly in the subsequent decision in Sertic v. Sertic, 111 Nev. 1192, 90150

P.2d 148 (1995).

Carlson v. Carlson, 108 Nev. 358, 832 P.2d 380 (1992).51

Carrell v. Carrell, 108 Nev. 670, 836 P.2d 1243 (1992).52

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during marriage are community property, and so are not subject to future modifications, whereasspousal support can be modified upon a showing of changed circumstances, remarriage, or death.

In Waltz, the divorce decree had awarded the entire military retirement to the husband, but ordered53

him to pay to the former spouse, by military allotment, the sum of $200 plus cost of livingadjustments, as “permanent alimony.” This had been done because the military pay system did notallow direct payments to a spouse with an overlap of military service and marriage of less than tenyears. The decree had been formulated to make sure the spouse actually received her property award,under the rubric of “permanent alimony” as allowed by NRS 125.150(5).

In Sertic, the trial court had ordered immediate distribution of the value of the wife’s share of the54

Civil Service Retirement System (CSRS) pension. The Nevada Supreme Court reversed, stating thatproviding the spouse with anything other than a time-rule distribution could only be done uponcertain special findings not present in that case.

The Court further clarified that “actual division” under the “wait and see” approach (which may bedone at trial) is not the same as present distribution of the pension asset itself. Further, the Courtmore clearly stated that the normal distribution of a spousal share of a retirement is to be upon theemployee spouse’s first eligibility for retirement, and that if a worker does not retire at firsteligibility, the worker must pay the spouse whatever the spouse would have received if the workerdid retire at that time.55

Wolff was another PERS case involving a Highway Patrol officer. The employee spouse became56

eligible to retire three months after divorce, but elected to keep working. The district court hadcalculated the spousal share of the retirement and ordered the husband to pay that sum to the wifefrom his salary until he actually retired. The lower court also tried to “reflect” that the husband waspaying taxes on his current salary, and so awarded a couple hundred dollars less per month in“Limited Temporary Spousal Support” until the husband retired, as a “reasonable equivalency.”

Citing Walsh and Carrell, the Nevada Supreme Court held that pension payments cannot be57 58

classified as temporary spousal support, because such support is subject to possible futuremodification. The Court found the lower court’s lowering of payments to reflect “the taxableconsequences” of the payments was “arbitrary” and held that it violated the equal distributionpresumption of NRS 125.150(1)(b).

The Nevada Supreme Court rejected the husband’s attack on Gemma, which he had argued was“fatally flawed” for non-recognition of the “passive appreciation of the sole and separate portion”of the retirement during the marriage, and explicitly reaffirmed its holdings in Gemma, Sertic, andFondi. The Court specifically affirmed the lower court’s order that the wife’s share would not revert

Waltz v. Waltz, 110 Nev. 605, 877 P.2d 501 (1994).53

Sertic v. Sertic, 111 Nev. 1192, 901 P.2d 148 (1995).54

Inexplicably, the legislative history of NRS 125.155 is devoid of any mention of this case, or its reasoning.55

112 Nev. 1355, 929 P.2d 916 (1996).56

103 Nev. 287, 738 P.2d 117 (1987).57

108 Nev. 670, 836 P.2d 1243 (1992).58

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to the husband if she predeceased him, but would instead continue being paid to her estate,explaining that the community interest was divided upon divorce to two sole and separate interests,59

so that even if her estate was not listed as an alternate payee as defined in NRS 286.6703(4), theestate was entitled to the payments that she would have received if alive.60

II. IDENTIFICATION OF PENSION PLANS IN DIVORCE ACTIONS

A. Means of Acquiring Information

1. The Client Interview

The easiest means of starting the search for pension benefits is asking for the full employmenthistory of both spouses during the initial client interview. Further investigation is warranted if eitherparty has ever worked for the United States government (i.e., the Civil Service, including the PostOffice), the United States Armed Forces (including the Reserves or National Guard), a state or localgovernment, a corporation of any appreciable size, an employer that reasonably should have usedunion labor, or a professional corporation.

2. Informal and Formal Discovery

Most private pension plan administrators will gladly provide a copy of all plans offered by theemployer, and summaries of those plans, upon a telephone or written request; much is freelyavailable on the Internet. Information about a specific employee, however, will usually not bereleased without a release from that person, or under subpoena. Private pension plan informationrequests should be directed to plan administrators (not just employers).

The United States Civil Service also generally requires a release form or subpoena. In military cases,the pay centers should release, upon request, date of first eligibility to retire, date of first eligibilityto receive retirement benefits, date of retirement, last unit assignment, final rank, grade, and pay,present or past retired pay, or other such information as may be required to enforce an award orrevise it so as to make it enforceable. The military will not respond to a subpoena issued by the61

Clerk’s office, but requires an original judge’s signature. Military information requests must bedirected to the proper branch of service.

It is a good practice to request and provide all materials relating to pension or retirement benefits(and, perhaps, a release form to obtain back-up and supplemental documentation) in initial discoveryand disclosures. Later, interrogatories or requests to produce can be sent for updated information. 62

Citing 15A Am. Jur. 2d Community Property § 101 (1976).59

As discussed below, PERS refuses to enforce this holding.60

65 Fed. Reg. 43298 (July 13, 2000), providing that in addition to any disclosures permitted under 5 U.S.C.61

§ 552a(b) of the Privacy Act, a former spouse who receives payments under 10 U.S.C. § 1408 (i.e., the USFSPA) isentitled to information, as a “routine use” pursuant to 5 U.S.C. § 552a(b)(3), on how their payment was calculated toinclude what items were deducted from the member’s gross pay and the dollar amount for each deduction.

At the time of this writing, NRCP 16.2 requires disclosure of all documents establishing the value of a62

pension or retirement benefit.

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Cases indicate that this is another area where just failing to affirmatively seek out information couldlead to liability on the part of the lawyer.63

B. Knowing It When You See It

1. The Basics to Watch For

In dealing with any retirement program, the practitioner should pay attention to the followingessential elements:

1. What will be available (and the form – whether a monthly annuity, or with a lumpsum option), and whether there might be more than one plan associated with aparticular wage-earner.

2. The amount of the benefit that is divisible community property, under the time rule,direct tracing, or some other analysis.

3. When that sum is to be first available for distribution, and what steps might be takenby either party to accelerate or delay that availability.

4. What, if any, survivor benefits might be accorded to a former spouse in addition toor in place of the retirement benefits, and who will pay for them.

5. Whether any ancillary benefits are available (most importantly, medical benefits).

After these basics come a few other matters that should be consciously addressed in every divorcecase involving pension benefits before the case is over:

1. What notices are required to be given, within what time limits, to which authorities,in order to make sums payable to the spouse or permit the transfer of other interests.

2. What effect a present or future disability claim by the retiree or the former spousecould have on payment of benefits (and what, if anything, you can do about it inadvance).

3. Whether and what post-divorce actions of either of the parties (such as nominationof the wage-earner of a second spouse as beneficiary, or remarriage of the formerspouse) could affect the distribution of benefits provided by the Decree, and what canor should be done about those possibilities.

Failure to deal with all of those factors in litigation or negotiations, and especially in the courtorders, could lead to unforeseen and unfortunate results for parties, or counsel, or both.

It is worth noting that not every spousal interest affects the wage-earner. Most commonly, forexample, a spousal entitlement to make a claim for Social Security benefits under a worker’sexperience rather than his or her own work experience has no effect at all on the sum payable to thewage-earner. And the Nevada Supreme Court has expressly forbidden the direct allocation of those

See T. Harrison, “IRS Grabs Ex-Wife’s Pension Share; Malpractice `Warning Bell’ for Divorce Lawyers,”63

Lawyers Weekly USA, Sept. 27, 1993, at 1.

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benefits, or their use as offsets or purporting to indirectly “take them into consideration” in64

distributing property.65

Practitioners should distinguish the “benefits” expected to be provided by a plan from the “value”of that plan, and distinguish both of those terms from “contributions.” Benefits are what the retireewill actually receive upon retirement, usually phrased as a right to receive certain sums on a certain66

schedule. The value of a pension interest, on the other hand, is generally considered to be equal tothe cost, at any given time, of acquiring an annuity that would pay equivalent benefits. Contributions, whether from the employee, the employer, or both, do not necessarily have anycorrespondence to either the benefits of a plan or its value at any given time. Failure to perceivethese distinctions can lead to gross over- or under-valuation of the assets at issue.

It is important to note that pension interests are property and not alimony. The Nevada SupremeCourt has expressed its intention to stress that distinction based upon the non-modifiability ofpension awards, whereas alimony is generally modifiable, and to generally prohibit classifying onekind of payment as the other.67

2. Vestedness and Maturity; Nevada Red Herrings

A “vested” pension is one in which the employee has met certain conditions (usually, length ofservice) which stop an employer from arbitrarily preventing the employee’s enjoyment of benefits. A “matured” pension is one in which a particular employee is eligible for present payments from aplan. In some jurisdictions (the number of which continues to decline), lack of vestedness ormaturity causes pensions to be considered “mere expectancies” or otherwise non-divisible. It istherefore most important to consider these factors when involved in multi-jurisdictional cases.

Nevada is in line with the majority and clear trend in this area. The Nevada Supreme Court hasexplicitly stated that retirement benefits are generally divisible as community property “to the extentthat they are based on services performed during the marriage, whether or not the benefits are

Boulter v. Boulter, 113 Nev. 74, 930 P.2d 112 (1997).64

Wolff v. Wolff, 112 Nev. 1355, 929 P.2d 916 (1996) (social security benefits are not “a form of deferred65

compensation, and therefore not . . . community property subject to division between the spouses” and cannot be givenany consideration in “offsetting” one spouse’s community property interest in the other spouse’s retirement benefits. Acerbically, the Court added that it does not make any difference how indirect or disguised the consideration is, because“Calling a duck a horse does not change the fact that it is still a duck”).

Definitions vary between and among retirement systems. Here, “retirement” means that an employee has66

stopped working and that retirement benefits are payable to that individual. Given the many ways in which an employeemay stop working prior to eligibility for retirement benefit payments, care must be taken in definitions when engagingactuaries or accountants, or negotiating these cases.

See Wolff v. Wolff, 112 Nev. 1355, 929 P.2d 916 (1996); Walsh v. Walsh, 103 Nev. 287, 738 P.2d 117 (1987);67

Carrell v. Carrell, 108 Nev. 670, 836 P.2d 1243 (1992). The logic of these holding is open to some question, since theCourt in other contexts has had no trouble with the proposition of awarding alimony in compensation for, among otherthings, a superior property position of the paying spouse. See Heim v. Heim, 104 Nev. 605, 763 P.2d 678 (1988)(husband, whose future earning capacity was a community asset that could have been made the subject of trialproceedings, ordered to make permanent alimony payments).

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presently payable.” Vestedness or maturity may, however, have an impact on valuation of pension68

benefits, as discussed below.

The Nevada Supreme Court has confirmed that a spouse is entitled to begin receiving the spousalshare of a pension upon the employee’s eligibility to begin receiving payments (i.e., upon itsmaturity), so that the wage-earner’s unilateral actions could not deprive the spouse of sums otherwisepayable.69

It had appeared from language in Gemma that Nevada was entirely adopting the law of Californiacommonly referenced as the “Gillmore” rule. Those cases made it clear that in California a spouse70

has to make an “irrevocable election” at the time of divorce whether to begin receiving the spousalshare of the retirement benefits upon maturity, or wait until the wage-earner actually retires, thusenjoying a “smaller piece of a larger pie” by getting a shrinking percentage of a retirement basedupon post-divorce increases in the wage-earner’s salary and years in service.

Specifically, the Nevada Court adopted and quoted the core holding of the California courts:

The employee spouse cannot by election defeat the nonemployee spouse’s interest in thecommunity property by relying on a condition within the employee spouse’s control.71

But the “irrevocable election” statement was not repeated in the Nevada cases. Fondi containslanguage indicating that our Court is mandating application of the spousal share against theretirement benefits ultimately received by the wage-earner (deemed the “wait-and-see” approach),while simultaneously requiring payments upon first eligibility for retirement.

In practice, this has required the use of a spousal share to be paid based upon a hypothetical sumpayable to the worker at the moment of eligibility, and a reservation of jurisdiction to recast thatspousal share as a percentage of the retirement benefit ultimately received upon actual retirement. The precise language necessary to accomplish this task varies depending on the type of retirementat issue.

There is also the question of what is meant by “first eligibility.” There are no known appellateholdings, but most trial courts have expressed the opinion that the phrase should be taken to meanthe date that the employee would be first eligible for retirement without an early retirement penalty.

See Forrest v. Forrest, 99 Nev. 602, 668 P.2d 275 (1983).68

See Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989); Fondi v. Fondi, 106 Nev. 856, 802 P.2d 126469

(1990).

As set out in In re Marriage of Gillmore, 629 P.2d 1 (Cal. 1981), and In re Marriage of Luciano, 164 Cal.70

Rptr. 93 (Ct. App. 1980).

Gemma, supra, 105 Nev. at 463-64, quoting Luciano, supra, 164 Cal. Rptr. at 95.71

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3. Place of Accrual; Technicality and Practicality

Nevada may be the last community property state without some type of quasi-community propertystatute. Theoretically, Nevada still follows the “pure borrowed law” approach, whereby our court72

determines the divisibility of assets according to the law of the state in which those assets accrued. 73

Theoretically, parties are burdened with apportioning retirement benefits according to the law of eachjurisdiction in which the parties lived (or were residents) while the benefits accrued, which could bedifficult undertaking.

As a practical matter, Nevada courts often resort to a quasi-community property approach withoutexplicitly acknowledging that they are doing so. In Heim, for example, the Nevada Supreme Court74

simply noted without comment the equal division of a Michigan state retirement fund in a Nevadadivorce court. The Court has also held that it will not allow the law of the State where the benefits75

accrued to be raised as an issue on appeal if not argued by a party at trial.76

This has effectively created a law of quasi-community property for division of out-of-State pensionsin Nevada divorce cases, but the essentially universal adoption of equitable division schemes in otherStates has made the distinction of little relevance except where counsel can establish that the law ofthe place of residence during accrual of the property would have provided for a different distributionthan would be accomplished under Nevada law.

C. The Time Rule

1. Defined Benefit Types of Plans

A defined benefit plan (often called a pension plan or retirement plan) is usually funded by employercontributions (although in some plans employees can contribute) and is intended to provide certainspecified benefits to the employee after retirement, usually for life. Often, the benefit is determinedby a formula taking into account the highest salary received and the total number of years workedfor the employer (such as a “high-three” or “high five” plan).

For example, a plan might pay one-tenth of an employee’s average monthly salary over the threeyears before retirement, multiplied by one-fourth the number of years that the employee worked. Atwenty-year employee earning an average of $2,000 per month during his last years would get $1,000per month (i.e., $2,000 x .1 x 20 x .25). Generally, no lump-sum distributions can be distributedfrom defined benefit plans.

Such laws provide that property acquired outside the state is deemed to be community property if it would72

have been community property if acquired within the state.

See Braddock v. Braddock, 91 Nev. 735, 542 P.2d 1060 (1975).73

Heim v. Heim, 104 Nev. 605, 763 P.2d 678 (1988).74

Id. at n.1.75

See Powers v. Powers, 105 Nev. 514, 779 P.2d 91 (1989).76

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In addition to traditional private-employer plans governed by ERISA, the primary retirement benefitsprovided by the Civil Service under CSRS and FERS, military retired pay, and Nevada PERS areall variations of defined benefit plans.

Gemma, Fondi, and Wolff, all involved PERS benefits. Sertic involved federal CSRS benefits. Allwere defined benefit plan benefits. In Gemma, the court rejected an effort to ascertain the presentvalue of the benefit and have the employee buy out the nonemployee’s interest. Instead, as detailedabove, the court adopted the “time rule,” which is further discussed here.

The standard “time rule” formula seems simple enough – the spousal share is determined by takingthe number of months of service during marriage as a numerator, and the total number of months ofservice as a denominator, and multiplying the resulting fraction by first one-half (the spousal share)and then by the retirement benefits received.

Yet there are variations around the country in terms of what is counted, and how, leading to verydifferent ultimate results. Courts in different States may not even realize that the “time rule” casesdecided elsewhere follow different sets of rules and assumptions. As authority from thosejurisdictions is cited in Nevada cases, and there are so many Nevada divorces involving multipleStates, it is worth examining the subject from a broader perspective than just the few Nevadaauthorities on the point.

2. Variations in Final Date of Accrual

Probably the most obvious variation from place to place is when to stop counting. California,Nevada, and Arizona are three community property States sitting right next to one another, and it isnot unusual for cases to involve parties with ties to any two of them. All three claim to apply thetime rule to pension divisions, but they do the math differently.

Presume that a couple live together in marriage for ten years before they separate. The partiesdiscuss reconciliation and possible divorce terms, but after six months, it becomes clear that the splitis permanent, and one of them files for divorce. The divorce turns out to be a messy, acrimoniousmatter which proceeds through motions, custody evaluations, returns, etc., for another year and ahalf, when the parties finally get to trial and are declared divorced. Also presume that the memberspouse accrues a retirement during marriage providing exactly $1,000 after 20 years.

In California, the spousal share ceases to accumulate upon “final separation.” So the math would77

be 10 (years of marriage) ÷ 20 (years of service) x .5 (spousal share) x $1,000 (pension payment) =$250.

Arizona terminates community property accruals, for the most part, on the date of filing and serviceof a petition for divorce. There, on the same facts, the math would be 10.5 (years of marriage) ÷78

20 (years of service) x .5 (spousal share) x $1,000 (pension payment) = $262.50.

See, e.g., In re Marriage of Bergman, 168 Cal. App. 3d 742, 214 Cal. Rptr. 661 (Cal. Ct. App. 1985).77

Ariz. Rev. Stat. § 25-211 (1998).78

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Here in Nevada, community property ceases to accrue on the “date of divorce.” The math would79

be 12 (years of marriage) ÷ 20 (years of service) x .5 (spousal share) x $1,000 (pension payment) =$300.

Presumably, other States could have still different rules for measuring when the community orcoverture period started or ended. Such variations could lead to significantly different sumscollected by the respective spouses over the course of a lifetime.

3. Variations in Qualitative/Quantitative Approach to Spousal Shares

As a matter of law, it is possible to value the spousal share in at least two ways. Nevada, and themajority of States applying the time rule formula, view the “community” years of effort qualitativelyrather than quantitatively, reasoning that the early and later years of total service are equallynecessary to the retirement benefits ultimately received.80

This view of the time rule essentially provides to the former spouse an ever “smaller slice of a largerpie” by getting a shrinking percentage of a retirement that is increasing in size based upon post-divorce increases in the wage-earner’s salary and years in service.

Some critics complain that such a formula gives the non-employee former spouse an interest in theemployee spouse’s post-divorce earnings, where the divorce occurs while the employee is stillworking. They argue that the spousal share should be frozen at the earnings level at divorce. Aminority of States, including Texas, have adopted this approach, sometimes in cases that do notappear to have contemplated the actual mathematical impact of the decision reached. 81

Certain other States, while rejecting the Texas approach, have nevertheless left the door open to anemployee spouse establishing that increases in retirement benefits are “attributable to post-dissolution efforts of the employee spouse, and not dependent on the prior joint efforts of the partiesduring the marriage,” and therefore are the separate property of the member. Such cases invite fact-82

intensive hair-splitting since, as the Nevada Supreme Court observed, there is an expectation ofpension increases by way of “ordinary promotions and cost of living increases, in contradistinctionto the increased income the employee spouse achieved because of post-marriage effort andaccomplishments.”83

See, e.g., Forrest v. Forrest, 99 Nev. 602, 606, 668 P.2d 275, 278 (1983). While there is scant published79

authority for the proposition, this is usually thought to mean the date of the divorce trial.

See, e.g., Marriage of Poppe, 97 Cal. App. 3d 1, 158 Cal. Rptr. 500 (1979); Bangs v. Bangs, 475 A.2d 121480

(Md. App. Ct. 1984); Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989); In re Hunt, 909 P.2d 525 (Colo. 1995);Croley v. Tiede, ___ S.W.3d ___, 2000 WL 1473854 (Tenn. Ct. App., No. M1999-00649-COA-R3-VC, Oct. 5, 2000). Such jurisdictions typically add a hedge; the trial court can reserve jurisdiction to determine, after retirement, whetherthe benefits proved to be much greater than expected because of extraordinary “effort and achievement” (as opposed to“ordinary promotions and cost of living increases”), in which case the court could recalculate the spousal interest. See,e.g., Fondi v. Fondi, 106 Nev. 856, 802 P.2d 1264 (1990).

See, e.g., Grier v. Grier, 731 S.W.2d 931 (Tex. 1987).81

Barr v. Barr, ___ A.2d ___ (N.J. Super. Ct. App. Div. No. A-1389-09T2, Jan. 19, 2011).82

Gemma v. Gemma, 105 Nev. 458, 463, 778 P.2d 429, 432 (1989).83

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The Texas minority approach undervalues the spousal interest by giving no compensation fordeferred receipt, and also contains a logic problem, at least in a community property analysis, oftreating similarly situated persons differently.

Specifically, the majority time rule approach comes closest to providing equity to successivespouses. Two consecutive spouses, during the first and last halves of a member’s career, would betreated equally under the qualitative approach, but very differently under any approach that freezesthe spousal share at the level of compensation being received by the member at the time of divorce.

An example is useful to illustrate this discussion. Presume an employee spouse employed for exactly20 years, and married to wife one for the first ten, and wife two for the next ten, retiring on the dayof divorce from wife two. Presume he had started work at $20,000 per year, and had enjoyed 5%raises every year. That would make his historical earnings look like this:

Yearly Salary Monthly Salary$20,000.00 $1,666.67$21,000.00 $1,750.00$22,050.00 $1,837.50$23,152.50 $1,929.38$24,310.13 $2,025.84$25,525.63 $2,127.14$26,801.91 $2,233.49$28,142.01 $2,345.17$29,549.11 $2,462.43$31,026.56 $2,585.55$32,577.89 $2,714.82$34,206.79 $2,850.57$35,917.13 $2,993.09$37,712.98 $3,142.75$39,598.63 $3,299.89$41,578.56 $3,464.88$43,657.49 $3,638.12$45,840.37 $3,820.03$48,132.38 $4,011.03$50,539.00 $4,211.58

If this hypothetical employee had a standard longevity retirement defined benefit plan the abovewage history would make his average monthly salary during his last three years $4,014.21, and astandard “high-three” retirement formula would make his retired pay $2,007.11.84

Under the qualitative approach to the time rule embraced by most time rule States, the employeewould receive half of this sum himself – $1,003.55. Each of his former spouses, having beenmarried to him for exactly half the time the pension accrued, would receive half of that sum –$501.78. In other words:

Years of service x 2.5% x high-three average pay.84

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Member: $1,003.55Wife one (10 years): $ 501.78Wife two (10 years): $ 501.78Total: $2,007.11

If the calculations were done in accordance with the position of the critics of the time rule set outabove, in a strictly quantitative way, the results would be quite different. Wife one’s share of theretirement would be calculated in accordance with compensation at the time of her divorce from theemployee; in this case, she would get a pension share based on the “high three” years at the ten yearpoint, which was $2,464.38. The formula postulated above would produce a hypothetical retirementof $616.10. Wife one would receive half of that sum – $308.05, but not until after the employee’sactual retirement, ten years later.

The smaller share going to wife one would leave more for wife two and the employee who, on thesefacts, would effectively split it as follows:

Employee: $1,100.41Wife one (10 years): $ 308.05Wife two (10 years): $ 598.65Total: $2,007.11

Perhaps the clearest expositions of the reasoning behind the two approaches are found in those casesin which a reviewing court splits as to which interpretation is most correct. The Iowa Supreme Courtfaced such a conflict in Benson. The trial court had used a time-rule approach, with the wife’s85

percentage to be applied to the sum the husband actually received, whenever he actually retired.

The appellate court restated the question as being the time of valuation, with the choices being thesum the husband would have been able to receive if he had retired at divorce, or the sum payable atretirement. The court acknowledged that the longer the husband worked after divorce, the smallerthe wife’s portion became. The court accepted the wife’s position that to “lock in” the value of thewife’s interest to the value at divorce, while delaying payment to actual retirement, prevented thewife from “earning a reasonable return on her interest.”

Quoting at length from a law review article analyzing the mathematics of the situation, the courtfound that acceptance of the husband’s argument would have allowed him to collect the entirety ofthe accumulating “earnings” on the marital property accumulated by both parties. Three judgesdissented.86

The point of the math is that practitioners must look beyond the mere label applied by the statutoryor decisional law of a given State to see what it would actually do for the parties before it. This isparticularly true when considering which forum would be most advantageous, in those cases inwhich a choice is possible.

In re Benson, 545 N.W.2d 252 (Iowa 1996).85

The Iowa court apparently did not even consider the possibility of having the wife’s interest begin being paid86

to her at the employee’s first eligibility for retirement, “freezing” it at that point and letting the husband enjoy allaccumulations after that time. Presumably, this is because that possibility was not litigated at the trial level. That is theresult in most or all community property States, however, and case law has made it clear that a spouse choosing to acceptretirement benefits at first eligibility has no interest in any credits accruing thereafter, having made an “irrevocableelection.” See In re Harris, 27 P.3d 656 (Wash. Ct. App. 2001), and the citations set out in the following section.

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4. Variations Regarding Payment Upon Eligibility

Several State courts have held that the interest of a former spouse in retired pay is realized atvesting, theoretically entitling the spouse to collect a portion of what the member could get at that87

time irrespective of whether the member actually retires. As phrased by the California court in88

Luciano: “The employee spouse cannot by election defeat the nonemployee spouse’s interest in thecommunity property by relying on a condition within the employee spouse’s control.”89

Most of those who advocate the “freeze at divorce” approach discussed above either oppose orignore the question of whether distribution of the spousal share should be mandated at the time ofthe participant’s first eligibility for retirement. It is not possible, however, to fully and fairly evaluatethe impact of a “freeze at divorce” proposal without examining that question as well.90

Whether States follow a “payment upon eligibility” or “payment upon retirement” rule is another oneof those doctrines which is not at all obvious from the label applied by the individual States, butagain is usually hidden in their decisional law. Which way the State goes on this question can havea huge impact on the value of the retirement benefits to each spouse.

5. Should the Time Rule Apply to Defined Contribution Plans?

A defined contribution plan is one in which a specified amount is contributed by the employer and/orthe employee into an individual account and invested on the employee’s behalf. Such plans usuallyprovide a statement of each participant’s account at least annually. Defined contribution plansgenerally pay lump sums, but they may offer other forms of benefits.

The most common examples of defined contribution plans are discretionary profit-sharing plans andformula plans (e.g., money purchase and target benefit pension plans). Other examples are employeestock ownership plans (ESOPs), simplified employee pensions (SEPs), and SIMPLE 401(k) plans.

A “vested” pension is one that, having been earned and accrued, is beyond the power of the issuing authority87

to withdraw from payment. See LeClert v. LeClert, 453 P.2d 755 (N.M. 1969) (exploring definitions of “vestedness”and “maturity” of retired pay).

See In re Marriage of Luciano, 164 Cal. Rptr. 93, 104 Cal. App. 3d 956 (Ct. App. 1980); In re Marriage of88

Gillmore, 629 P.2d 1, 174 Cal. Rptr. 493 (Cal. 1981); In re Marriage of Scott, 202 Cal. Rptr. 716, 156 Cal. App. 3d 251(Ct. App. 1984); Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989); Koelsch v. Koelsch, 713 P.2d 1234 (Ariz.1986); Ruggles v. Ruggles, 860 P.2d 182 (N.M. 1993); Balderson v. Balderson, 896 P.2d 956 (Idaho 1994); Blake v.Blake, 807 P.2d 1211 (Colo. Ct. App. 1990); Harris v. Harris, 107 Wash. App. 597, 27 P.3d 656 (Wash. Ct. App. 2001);Bailey v. Bailey, 745 P.2d 830 (Utah 1987) (time of distribution of retirement benefits is when benefits are received “orat least until the earner is eligible to retire”).

In re Marriage of Luciano, supra, 164 Cal. Rptr. at 95.89

I have independently verified the mathematical effects of the various approaches taken by courts. Unless90

payments to spouses are required at each first eligibility for retirement, regardless of the date of actual retirement, a “rankat divorce” proposal, at least in military cases, would result in a reduction in the value of the spousal share by at least13%. A second spouse married to a member for the last couple years of service could actually receive more money afterdivorce than a first spouse who assisted the member for most of the military career. There does not appear to be anyvalid public policy that could be served by causing this result.

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The key concept for such plans is that they have a specific balance of funds belonging to eachparticular employee.

Most States that have brought themselves to issuing any guidelines at all for the distribution ofpension plans have done so in defined benefit plan cases. The cases tend to espouse rules for thedivision of the case at issue without limiting language concerning whether different rules might bebetter applied if the retirement plan was some other kind of retirement plan.

Traditionally most retirement plans have been “defined benefit” plans but this is changing as manycompanies are terminating such plans, in or out of bankruptcy, and converting to “cash plans” ordefined contribution plans, at least for all new workers. This is setting up a situation in which thecontrolling decisional law in many States was developed to distribute an entirely different kind ofbenefits (defined benefit plans) than will actually be at issue in many divorce cases (definedcontribution plans).

The disconnect, and this discussion, is fully applicable in the Civil Service and military case context,as well as in private pension cases, because (as discussed below) practitioners now are required todeal not only with the standard retirement (a defined benefit plan), but also with the Thrift SavingsPlan (a defined contribution plan).

The valuation problem for defined contribution plans has not received nearly enough attention in thecase law. If the marriage was not completely coextensive with the period of contributions, and therewas any variation in the relative rate of contribution over time, a standard time-rule analysis to valuethe spousal share might not be appropriate at all. It would appear to be more precise – i.e., “fairer”– to trace the actual contributions to such an account from community and separate sources, andattribute interest and dividends over time accordingly. The scant case authority squarely addressing91

this issue has agreed with that proposition.92

See Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY § 6.10, at 523 (2d ed. Supp. 2004); Amado, The91

Ubiquitous Time Rule – A Responsa: An Argument for the Applicability of Tracing, Not the Time Rule, to DefinedContribution Plans, 13 Family Law News, Sum. 1990, at 2 (California State Bar, Family Law Section Publication)(arguing that a tracing analysis would be superior for defined contribution plans – as opposed to the “time rule” –because it is possible to discover the source of all funds in the account).

See Tanghe v. Tanghe, 115 P.3d 567 (Alaska 2005) (citing In re Marriage of Hester, 856 P.2d 1048, 104992

(Or. App. 1993) (“When the value of a particular plan is determined by the amount of employee contributions,application of [a coverture fraction] could result in a division of property that is demonstrably inequitable”); Paulonev. Paulone, 649 A.2d 691, 693-94 (Pa. Super. 1994) (rejecting the use of the coverture fraction and adopting an accruedbenefits test, deemed the “subtraction method,” for the distribution of a defined contribution plan); Smith v. Smith, 22S.W.3d 140, 148-49 (Tex. App. 2000) (finding that it was incorrect to apply a coverture fraction to a defined contributionaccount); Mann v. Mann, 470 S.E.2d 605, 607 n.6 (Va. App. 1996) (“Applying [a coverture] fraction to a definedcontribution plan could lead to incongruous results, and such an approach is not generally used”); Bettinger v. Bettinger,396 S.E.2d 709, 718 (W. Va. 1990) (rejecting the use of a discounted present value calculation for division of a definedcontribution plan “because no consideration was given to the fact that the fund was earning interest” (quotation marksomitted)).

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D. Overview of the Major Retirement Systems

1. Private Pensions

Many attorneys find the various forms of benefits available from private employers to be confusing. Generally, private plans come in the two varieties discussed above – defined benefit plans anddefined contribution plans. But since private employers are generally free to provide any (or no)retirement plans to their employees, there are huge variations in plan specifics from one employerto another, which is fully allowable so long as the plan does not violate the relevant federal law –ERISA and the REA.

The basic requisites for “qualifying” a DRO as a QDRO are discussed above. An order is not“qualified” if it requires a plan to provide a type or form of benefit not otherwise available under theplan, or requires the plan to provide a greater (actuarially computed) sum of benefits, or requirespayment of benefits to an Alternate Payee that are required to be paid to another Alternate Payeeunder a prior QDRO. QDROs need not necessarily be long or complex (although they sometimes93

are both of those things); the question is what is sought to be accomplished, and what safeguards arereasonably necessary given the parties, the background factual situation, the kind of plan involved,and the desired distributions.

Individual Retirement Accounts (“IRAs”), and “Keogh” plans are private retirement plans that donot really fit in with the above two varieties. Keoghs are essentially like the above plans but for soleproprietors, partnerships, or “S” corporations. Note that an IRA can be divided in a divorce actionwithout a QDRO, so long as the Decree or other court order explicitly calls for its distribution.

2. Civil Service Benefits

a. CSRS & FERS Benefits

Employees of the United States Government have several different kinds of retirement plans. Thelargest of these governs the Civil Service. It is a unique statutory scheme with its own rules, tests,opportunities and traps.

For those working in the U.S. Civil Service, a retirement system has been in place in some formsince 1920, which is the date from which the “old” system (“Civil Service Retirement System,” or“CSRS”) for those who began service before 1984, can be traced. The entire system was altered94

for incoming employees in a “new” system (“Federal Employees’ Retirement System,” or “FERS”),for those who began service on or after January 1, 1984.95

Under both systems, federal statutes permit the division and direct payment to the former spouse ofall or a portion of a retiree’s benefits in conformity with a State court’s decree or approved propertysettlement agreement. Voluntary allotments may also be put in place by the retiree. There is nominimum age for the former spouse, but the marriage must have lasted at least nine months. Theformer spouse’s payments of the lifetime benefits end when the retiree dies.

See 29 U.S.C. § 414(p)(3), 29 U.S.C. § 1056(d)(3)(D).93

See 5 U.S.C. § 8331.94

See 5 U.S.C. § 8401.95

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Essentially, the Civil Service retirement system is a defined benefit plan, which takes into accountyears of service and highest salary in determining a monthly sum to be paid to an employee from thedate of retirement until death. In 1984, the new system also created a defined contribution retirementaccount called the “Thrift Savings Plan” (“TSP”), but it is administered separately; so there are reallytwo different benefits to track in every divorce case.

In 1992, sweeping changes were made to the regulations governing division of Civil Serviceretirement benefits, making virtually every prior reference on the subject out of date. The newregulations addressed the employee annuity (the pension), refunds of employee contributions, andsurvivor’s benefits, but not the TSP.

How these benefits are treated upon divorce is primarily governed by State law, except where limitedby the federal regulations. Guidance is available in the form of a “Handbook for Attorneys” whoare drafting retirement orders for CSRS or FERS retirement benefits; it is available on line.96

One special peculiarity of Civil Service cases is the completely different lexicon used by the OPM,which any attorney crafting orders must know to effectively address those benefits. Essentially, theOPM re-invented many words. At the top of the terminology list is the caution to never use the term“QDRO” or “Qualified Domestic Relations Order” in any Civil Service case. The OPM word is“COAP” (“Court Order Acceptable for Processing”). For the same reason, do not use the ERISAterm “Alternate Payee.” Refer to the spouse of the wage-earner as “Former Spouse.”

The OPM even assigned new meanings to words long used elsewhere to mean something else. Forexample, in OPM-ese, the “accrue” does not refer to the accumulation of benefits; it means thecommencement of payments under the retirement plan. “Employee annuity” means recurringpayments to a retiree, not the account itself. In other words, it is a verb, not a noun. “Gross” doesnot mean “all.” “Self-only” means all. “Gross” means self-only less survivorship premium.

In other words, a practitioner’s use of words to mean what the practitioner always thought theymeant (even if that is what they mean to everyone else) could invalidate an order submitted to OPM;great care is warranted.

The original regulations would have voided any order using that term even if otherwise perfect. TheOPM reasoning is that use of the language indicates that the courts and attorneys drafting the orderdo not know that ERISA is inapplicable to federal retirement plans, and so the orders are presumeddefective. Now, the order will still be enforced if technically sufficient (so long as all the correctterminology is present), but the better practice is to not use language found objectionable by OPM.

Every nook and cranny of the regulations must be examined to prevent error. There are too manyto list, so only examples are provided here. Practitioners are urged to get the reference works andregulations, and review them carefully.

The COAP must specifically state that OPM is to pay the money directly to the former spouse. Anyreference to a “Self-only Annuity” contradicts any attempt to insert a survivor annuity. It isapparently possible to have an “interim COAP” provide for payments to a court while matters arebeing worked out, with an amended COAP submitted when the court issues its final order. The

See A Handbook for Attorneys on Court-ordered Retirement, Health Benefits, and Life Insurance Under the96

Civil Service Retirement System, Federal Employees Retirement System, Federal Employees Health Benefits Program,and Federal Employees Group Life Insurance Program (United States Office of Personnel Management, Retirementand Insurance Group, rev. ed. July, 1997); http://www.opm.gov/retire/html/library/other.html.

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COAP may not specify that payments continue for the lifetime of the former spouse (since thebenefits terminate at the death of the employee, and only survivor’s benefits would be available afterthat date). Which retirement system is at issue must appear in the COAP (but the order is probablyenforceable even if an error is made in that regard).

Three separate orders should be in every COAP, addressing: the lifetime benefits (“employeeannuity”); the potential refund of employee contributions; and death benefits (“former spousesurvivor annuity”). A proper order will contain specific provisions dealing with each of the threetypes of benefits addressed in the regulations. If an order is submitted using the words “retirementaccounts” or “retirement fund” as the thing to be divided, OPM will interpret the order as going tocontributions only and will not divide the annuity. Attempts to stipulate to modifications without97

a formal order will be ignored.

One interesting conundrum is created by the OPM rule that an order purporting to provide forpayments of a spousal share upon eligibility for retirement (“earliest retirement date” in the land ofQDROs) pursuant to Gemma and Fondi will be rejected as “non-complying.” Since such a provisionis essentially mandated by State law, and forbidden by federal law, some clever draftsmanship isrequired; probably the best thing is to mandate direct payments from the employee until retirement(of course that is where the money would really have to come from anyway), and from OPMthereafter.

A COAP may be used as a resource for payment of accrued arrearages. The COAP must specifyhow much is to be paid, so as to obtain accrued arrears, interest on the arrears, and interest on thedeclining balance of arrears until paid. An amortization schedule must be done so that the order canreference how much will be due and when it will be due (OPM will not do the calculations for you). Note that if payment of a lump sum is ordered, and there is no specific order to direct the entiremonthly retirement payment to the former spouse, OPM will only make payments against that lumpsum up to half of the gross payment, and will not allow modification for interest. Again, if such isthe situation, run the amortization schedule ahead of time, and make the lump sum in an amount thatcontemplates interest.

As with ERISA-based private plans, but unlike the military and most State plans, a spouse can beawarded up to 100% of the retirement benefits. If the order does not specify, the OPM will presumethat any percentage or fraction payable to the spouse is from what OPM defines as the “gross”annuity (i.e., after deduction for the survivorship premium).

Amendments to court orders altering the payments due to a former spouse will be honored,prospectively, but specific instructions have to be given if OPM is asked to make up for a priorunder- or over-payment.

Care should be taken in the definition of what is to be divided, with pains taken to note the subtledifferences in OPM definitions of terms. For example, under the regulations, using the phrase“creditable service” tells OPM to calculate the spousal share to include accrued, unused sick leavein addition to actual time in service. Using the phrase “total service” or “service performed,”however, tells the OPM to not include unused sick leave in the calculation.

The regulations allow the spouse to be awarded a percentage, fraction, formula, fixed dollar sumcertain, or “prorata share” of whatever benefits (self-only, gross, or net) are being divided.

See 5 C.F.R. § 838.612.97

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Apparently, unlike with military orders, it is possible to issue a “dollars plus percentage of COLAs”form of order as long as everything is clearly spelled out, but OPM will presume that an order fora percentage or fraction is supposed to include COLAs, while a dollar sum certain award is not.

Another direct contradiction to the military presumptions: an order including both a formula orpercentage and a dollar sum certain will be presumed to have included the dollar sum only as anestimate of the initial payment, so that the formula or percentage controls.

The former spouse can be awarded a portion of any refund to be made of employee contributions,or (if the former spouse is awarded a portion of the annuity itself), any such refund may be barred.

Survivor’s benefits are different for Civil Service cases. If the former spouse predeceases themember: the former spouse’s share of the retirement benefits revert automatically to the retireeunless the court order provides otherwise. Instead of that automatic reversion, the court can providethat the money is paid: (1) into court (presumably for further distribution upon further court order);(2) to “an officer of the court acting as a fiduciary”; (3) to the estate of the former spouse; or (4) toone or more of the retiree’s children. Thus, it is possible to create a heritable asset for the formerspouse.

The Civil Service rules are rather rigidly set up to expect that all the divorcing, re-marrying, andadjustments to orders will go on while an employee is still in service, or that the first order enteredafter the retirement of the worker deals with all aspects of the retirement and survivorship benefitsperfectly.

Amendments to orders are possible, but not if they are issued after the date of retirement or deathof the employee and they modify or replace the first order dividing the marital property of theemployee or retiree and the former spouse. In fact, any order that awards, increases, reduces, oreliminates a former spouse survivor annuity, or explains, interprets, or clarifies any such order, mustbe: (1) issued prior to retirement or death of an employee; or (2) the first order dividing the maritalproperty of a retiree and former spouse.

In the lingo of the OPM, if a court order awards, increases, reduces, eliminates, explains, or clarifiesan award to a former spouse, the court order must be issued before retirement or death of theemployee, or it must be the first order dividing the marital property of the retiree and the formerspouse.98

In other words, an order may be amended, and a COAP may issue after a divorce decree, altering,explaining, or specifying its terms – as long as the employee is still working and alive. If theemployee retires or dies, or is already retired or dead when the first order dividing property issubmitted, it is generally too late to alter the terms of a Civil Service case; this is an enormousmalpractice trap in all Civil Service cases.

How about if there was a first order, but it has been vacated or set aside? Well, the second order isthen OK, unless: (1) it is issued after the date of retirement or death of the retiree; (2) changes anyprovision of a former spouse survivor annuity order that was vacated, etc., and (3) either it iseffective prior to its date of issuance, or the retiree and former spouse do not compensate OPM forany uncollected costs relating to the vacated, etc., order.

See 5 C.F.R. § 838.806.98

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The short version is that any practitioner drafting a COAP for a retired Civil Service worker prettymuch has to get it right the first time, because the niceties of altering such an order are horriblycomplex, and often impossible.

b. The Thrift Savings Plan (TSP)

A “Thrift Savings Plan” (“TSP”) was created by the 1986 statute creating the “Federal EmployeesRetirement System,” or FERS, which replaced the older Civil Service Retirement System,” or CSRS. It first accepted contributions on April 1, 1987. FERS employees get matching federal contributionsup to a certain level. While the program is open to CSRS employees, there are no matchingcontributions for them. The TSP is a defined contribution type of plan for federal employees; likea private employer’s 401(k) plan, it is a mechanism for diverting pre-tax funds into retirementsavings. As of 2012, a “Roth” (pre-tax contributions) option was added to the TSP.

There are a variety of funds in which contributions may be invested, including the “GovernmentSecurities Investment” or “G” fund, the “Common Stock Index Investment” or “C” fund, the “FixedIncome Index Investment” or “F” fund, the “Small Capitalization Stock Index Investment” or “S”fund, and the “International Stock Index Investment” or “I” fund. Funds are periodically added,changed, or removed.

The TSP is expressly excluded from the regulations governing the Civil Service defined benefitplans. It is administered by a Board (the Federal Retirement Thrift Investment Board), entirely99 100

separate from the OPM, and has its own governing statutory sections and regulations. The TSP101

Board has its own finance center.102

(1) Withdrawal and Borrowing of Money from the TSPDuring Service

The practitioner must find out whether an employee is or has been a participant in the Thrift SavingsPlan, and if so whether any funds have been withdrawn or borrowed from the plan.

Withdrawal of TSP funds by a participant is normally limited to those separating from service, butin-service withdrawals may be made in two categories: “age-based” withdrawals and special103

“financial hardship” withdrawals. Notably, one of the four categories for such financial hardship

5 C.F.R. § 838.101(d).99

The Thrift Savings Plan is not addressed in the clause set provided by Office of Personnel Management. 100

Those wishing further information on the Thrift Savings Plan can call the administering agency (Federal RetirementThrift Investment Board) toll free at its Louisiana finance center: (1-877-968-3778).

5 U.S.C. § 8435(d)(1)-(2), 8467; 5 C.F.R. Part 1653, Subpart A.101

Thrift Savings Plan Service Office, National Finance Center, P.O. Box 61500, New Orleans, LA 70161-1500102

(TSP Service Office fax number: (504) 255-5199). The TSP Service Office is the primary contact for participants whohave left federal service, and it also handles questions about loans, contribution allocations, interfund transfers,designations of beneficiaries, and withdrawals for all participants.

In-service withdrawals for participants who are 59½ or older.103

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withdrawals is “legal expenses for separation or divorce.” Counter-intuitively, however, if a104

member is married, the spouse must normally consent to an in-service withdrawal, whether or notthe parties are separated.105

Spousal consent is also required for any loans borrowed against the TSP. Again, a specific categoryof “hardship” for loan purposes is “unpaid legal costs associated with a separation or divorce.” Sucha loan, if taken, accrues interest at the same rate paid on the “G” category of investments.

As to both loans and withdrawals, the Federal Retirement Thrift Investment Board will honor “most”court orders restricting distribution (such as preliminary injunctions prohibiting withdrawals) orsafeguarding funds for other purposes (such as child support or alimony awards). Thus, in divorcecases or successive spouse cases, there could be some element of a “race to the courthouse,” withthe non-employee spouse trying to get a restraining order on file and served on the TSP before theemployee can withdraw the funds.106

Obviously, if the employee manages to reduce or eliminate the value of the TSP prior to a court-ordered division, that fact should be discovered and taken into account.

(2) Withdrawal and Borrowing of Money from the TSP AfterRetirement

Upon separation from service, a tangle of other rules spring into effect. First, TSP accounts of lessthan $200 are automatically distributed at the time of separation. If between $200 and $3,500, thesums may be left in the TSP, or withdrawn in a single payment or multiple payments (cashed, orrolled over into an IRA or other retirement account). For accounts containing more than $3,500, theTSP balance can be partially or fully withdrawn in a single payment, or by way of a series of monthlypayments, or by way of a life annuity. Any combination of the full withdrawal options is called a“mixed withdrawal.”

The spousal rights provisions only apply if the TSP account contains more than $3,500. If theparticipant is married and wants to make a partial withdrawal of funds, the spouse’s notarizedwritten consent to the withdrawal is required.

If a full withdrawal is desired, the default is for the funding of a joint and survivor annuity with the“survivor” being the spouse at the time of withdrawal. The default annuity funded pays a 50 percentsurvivor benefit, has level payments, and does not include a cash refund feature. If the participantchooses any full withdrawal method other than the default (“prescribed”) annuity, the spouse must

The other three conditions that can cause a permissible “financial hardship” withdrawal are: “negative104

monthly cash flow,” “medical expenses” (including household improvements needed for medical care), or “personalcasualty losses.”

The criteria for a claim on the basis of “exceptional circumstances” under which no spousal consent is105

required are very strict. The fact that there is a separation agreement, a prenuptial agreement, a protective or restrainingorder, or a divorce petition does not in itself support a claim of exceptional circumstances. As with everything else, thereis a form (TSP-16) for making an “exceptional circumstances” application for withdrawal without a spousal consent.

This is yet another illustration of why it is almost always a good idea to get any orders concerning division106

of retirement assets on file at the same time that a decree of divorce is entered.

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make a written, notarized waiver of his or her right to the prescribed annuity. It is also possible107

in some circumstances to obtain a joint life annuity with someone other than the spouse.108

All of these withdrawals presume that the TSP Board had not previously been served with a validcourt order awarding a portion of a TSP account to a current or former spouse or one that requirespayment for enforcement of child support or alimony obligations. If such an order was served onthe TSP Board, it will comply with the court order before permitting purchase of an annuity or otherwithdrawal.

(3) Court-Ordered Divisions of the TSP

Although the agency administering the TSP has proven more flexible than either the military or theOPM, its regulations did spawn yet another acronym for a court order dividing benefits – “RBCO,”for “Retirement Benefits Court Order.”109

No QDRO is required for a TSP distribution; the TSP will honor any order that expressly relates tothe TSP account of the participant, has a clearly determinable entitlement to be paid, and providesfor payment to some person other than the TSP participant. This includes payments directly to theattorney for the former spouse. Attorneys drafting TSP orders should note that plan balances arealways calculated on the last day of the month.

A spousal share may be rolled over to an IRA or other eligible plan, in which case no taxes arewithheld. Otherwise, the spouse is taxed on the distribution, and 20% is withheld.

If the money is paid to a third party, however, such as a child (or, presumably, either party’sattorney), the participant is stuck with the amount of the distribution as part of gross income for thatyear, and 10% is withheld. These rules provide a way of shifting the tax burden of funds to bewithdrawn and used to pay attorney’s fees, just by changing the payee of the withdrawal.

The attorney for a spouse seeking a portion of a TSP account should specify that the award is to bepaid along with interest and earnings on that award. If such language is in the order, the spouse willreceive the same accumulations attributable to the spousal share that the participant receives as tothe account; if such language is not included in the order, the spouse will receive no accumulations,interest, or earnings on the defined share through the date of distribution. A court order may alsospecify an interest rate to be applied to a distribution from a given date.

The TSP will also honor post-decree orders, which it refers to as “amendatory court orders,” andwhich presumably include nunc pro tunc amendments to decrees and partition judgments relatingto omitted assets.

As with in-service withdrawals, a participant who is not able to locate his or her spouse, or claims107

“exceptional circumstances” making it inappropriate for the spouse to sign a waiver, can seek an exception by submittinga Form TSP-U-16 (“Exception to Spousal Requirements”), and providing the requisite supporting documentation.

Generally, with a former spouse or other person with an insurable interest in the life of the participant; not108

all options are available with each form of annuity.

See 5 C.F.R. § 1653.1; 5 C.F.R. § 1653.12 (defining qualifying legal process).109

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(4) Survivorship Benefits for the TSP

There are no “survivorship” benefits, per se, for a TSP account, as it is a cash plan like a 401(k). However, plan participants can and should designate beneficiaries to receive the account balance inthe event of the participant’s death. In the absence of the form, regular intestate succession rules110

determine the distribution of the TSP account.

c. Medical Benefits: FEHB/CHCBP

Health Benefits are provided under the Federal Civil Service Retirement System, for both employeesand their spouses. Post-divorce spousal coverage requires prompt application. Within 60 days ofthe divorce, the spouse must apply for continuation of “FEHB” (“Federal Employees HealthBenefits”) and to be eligible to receive those benefits, must receive a portion of the retiree’s annuityunder a valid COAP.

FEHB coverage is in effect if the spouse is awarded either a portion of the annuity upon retirementor a survivorship interest. The spouse loses eligibility to continue with the insurance if the spouse111

remarries prior to age 55.

If a spouse is ineligible for any of the benefits, there is a COBRA-like program of carry-overcoverage available for 3 years.

3. Military Benefits112

a. Retirement Benefits

The USFSPA is both jurisdictional and procedural; it both permits the State courts to distributemilitary retirement to former spouses, and provides a method for enforcement of these orders throughthe military pay center. The USFSPA itself does not give former spouses an automatic entitlementto any portion of members’ pay. Only State laws can provide for division of military retirement payin a divorce, or provide that alimony or child support are to be paid from military retired pay. 113

By means of Form TSP-U-3 (“Designation of Beneficiary”).110

5 C.F.R. § 890.803(3)(i).111

These materials contain the barest possible sketch of the information necessary to appropriately address these112

benefits. For much more detail, see Marshal Willick, MILITARY RETIREMENT BENEFITS IN DIVORCE (ABA 1998);Marshal Willick, Divorcing the Military: How to Attack; How to Defend, posted athttp://www.willicklawgroup.com/military_retirement_benefits.

Military retired pay is simply one additional asset to be distributed in the overall resolution of the property113

and debts accrued during the marriage. See, e.g., In re Marriage of Konzen, 693 P.2d 97 (Wash. Ct. App. 1985) (spouseawarded percentage of military retired pay, even though the entire retirement was separate property, because the overalldistribution of community property was equal, and the retired pay was a “liquid asset” used as part of that overalldistribution).

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Rights granted by State law are limited by federal law, even if State law does not so provide, andeven if the courts of the States do not see any such limitations.114

The USFSPA set up a federal mechanism for recognizing State-court divisions of military retiredpay, including definitions that were prospectively applicable, and rules for interpretation to befollowed by the military pay centers in interpreting the law; later, regulations were adopted, and115

the pay centers were consolidated. There are at least three different possible ways to calculate116

military retirement benefits; which is applicable depends on the date the member first enteredservice.

Since 1948, reservists have had a retirement system of their own. The big difference for reservistsis that both service and age elements must be satisfied; the reservist must accumulate 20 years ofcreditable service, and must reach the age of 60.

To be entitled to a “year” of creditable service, the reservist must obtain at least 50 “retirementpoints.” A point is awarded for each day of active service, or for full-time service while performingannual active duty for training or attending required training. A point is awarded for each drillperformed adequately, or for each three hours of military correspondence or extension courses thatare successfully completed. There are various other ways of acquiring points. A maximum of 365points may be earned each year (366 in a leap year). Any year in which the 50-point minimum is notreached does not count toward retirement, although the points earned in such years eventually factorinto the retired pay paid.

It is possible to mix and match. A member of the regular services may complete the 20 yearsnecessary for retirement by entering the reserves, as long as the last eight years are reserve service. Reserve service can also be rolled into a regular retirement.

In a “mixed” service case, the age of retirement may not be 60. Effective January 27, 2008,eligibility to receive retired pay is advanced by three months for each 90 days of qualifying activeduty service performed after that date in any fiscal year, to a maximum advancement of eligibilityof ten years (at age 50). That include training, operational support duties and even attendance at117

See Mansell v. Mansell, 490 U.S. 581, 109 S. Ct. 2023 (1989), criticizing conclusions reached in Casas v.114

Thompson, 720 P.2d 921 (Cal. 1986), cert. denied, 479 U.S. 1012 (1987).

The regulations, which also were amended several times, were found at 32 C.F.R. § 63 until they were115

(apparently accidentally) deleted by Congress in the post-9/11 legislative rush. See 66 Fed. Reg. 53957-01 p. 635(2001). Confusion reigned for years, during which DFAS apparently relied primarily on the 1995 proposed regulations. DFAS finally issued comprehensive replacement regulations, at Department of Defense Financial ManagementRegulation (DoDFMR) 7000.14-R, Vol. 7B, Ch. 29 (“Former Spouse Payments From Retired Pay”) (Feb. 2009). ForDoDFMR 7000.14-R, see the DFAS website at http://www.dod.mil/comptroller/fmr. For the first time, DFAS includeda model retirement division order, but like most model orders, it does not anticipate all the choices counsel are requiredto consider (such as survivorship benefits), and should not be relied upon.

The eventual consolidated center was the Defense Finance and Accounting Service, located in Cleveland,116

but the re-assignment process has never ended. DFAS has continued dabbling with out-sourcing, privatization, etc. Asof 2006, Army and Air Force military-pay related calls (except for TSP matters) were all routed to an office atIndianapolis.

See Pub. L. No. 110-181, 122 Stat. 160, § 647 (Jan. 28, 2008).117

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military schools, but not weekend drills, the regular two weeks of annual training, or time spentreceiving medical care or being medically evaluated for disability.

Figuring reserve retirement pay is complex; the details are beyond the scope of these materials.

A former spouse’s right to a portion of retired pay as property terminates upon the death of themember or the former spouse; the court order can also provide for an earlier termination. Any118

right to receive payments under the USFSPA is non-transferable; the former spouse may not sell,assign, or transfer his or her rights, or dispose of them by inheritance. To obtain benefits119

extending beyond a member’s death, the former spouse must obtain designation as the beneficiaryof the Survivor’s Benefit Plan (discussed below), which has its own technical requirements.

Military retirement benefits can be treated as property to be divided between the parties, or as asource of payment of child or spousal support, or both. All that is necessary to use militaryretirement benefits as a source for child support or spousal support payments is proper service onthe military pay center of a certified court order, issued by a court having personal jurisdiction overboth parties under the law of that State, requiring payments to a former spouse for such support.

The statute is more limiting regarding division of retired pay as property, however. The formerspouse can apply for direct payment from the military to the former spouse, but the USFSPA limits120

direct payment to a former spouse to 50% of disposable retired pay for all payments of propertydivision. More than fifty percent of disposable pay may be paid if there is a garnishment for121 122

arrears in child or spousal support, or in payments of money as property other than for a divisionof retired pay. In other words (and counter-intuitively), about the only part of arrearages arising froma divorce judgment that cannot be satisfied by garnishment From Retired Pay is arrearages in retiredpay.

Some courts have ruled that the 50% limitation is a payment limitation only, so that trial courts mayaward more than that amount – up to 100% of the retired pay – to the former spouse, but the paycenter can only pay 50%, leaving the spouse to collect the remainder from the military member by

10 U.S.C. § 1408(d)(4).118

10 U.S.C. § 1408(c)(2).119

Application for Former Spouse Payments From Retired Pay, DD Form 2293 (DD-2293). NOTE: This form120

can be fi l led out and then pr inted as an inte rac t ive pdf fo rm by going to:http://www.dtic.mil/whs/directives/infomgt/forms/eforms/dd2293.pdf.

10 U.S.C. § 1408(e)(1).121

Up to 65% of “remuneration for employment” under the Social Security law, 42 U.S.C. § 659.122

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other means (such as normal State court contempt proceedings if not paid). The Department of123

Defense has concurred in this interpretation.124

The USFSPA has included a savings clause since its original passage, intended to preventmisapplication of the law to subvert existing divorce court orders:

Nothing in this section shall be construed to relieve a member of liability for the paymentof alimony, child support, or other payments required by a court order on the grounds thatpayments made out of disposable retired pay under this section have been made in themaximum amount permitted under paragraph (1) or subparagraph (B) of paragraph (4). Anysuch unsatisfied obligation of a member may be enforced by any means available under lawother than the means provided under this section in any case in which the maximum amountpermitted under paragraph (1) has been paid and under section 459 of the Social SecurityAct (42 U.S.C. 659) in any case in which the maximum amount permitted undersubparagraph (B) of paragraph (4) has been paid.125

The USFSPA has been modified many times since 1983. Generally, survivorship rights for formerspouses have been expanded, definitions have generally been changed so that court orders are morelikely to result in the intended divisions of benefits, some opportunities for fraud have been limited,and it has been made very difficult to alter pre-1982 divorce decrees in order to treat people divorcedbefore then the same as people divorced after the USFSPA went into effect.

The enforcing regulations were also repeatedly modified. Originally, they required the sum of retiredpay to be defined as an exact percentage or sum of dollars without reference to a formula, even ifsome component (for example, the total number of years of service for a member still in service) wasnot known at the time of divorce. A post-divorce “clarifying order” was needed to set out apercentage that could have easily been calculated using figures completely available to the paycenter.

See, e.g., Gonzalez v. Gonzalez, ___ S.W.3d ___ (No. M2008-01743-COA-R3-CV, 2011 WL 221888, Tenn.123

Ct. App., Jan. 24, 2011) (while the amended USFSPA “presents a frustrating tangle of mixed messages and conflictingintentions,” the savings clause of 10 U.S.C. § 1408(e)(6) offers “the only clear expression of Congress’ intent as to statecourt orders . . . not . . . totally satisfied by the federal government’s payments made directly”); In re Madsen, No. 00-4811-WH, 2002 WL 34552506 (Bankr. S. D. Iowa, Oct. 15, 2002); MacMeeken v. MacMeeken, 117 B.R. 642 (1990)(Bankr. D. Kan. 1990); Maxwell v. Maxwell, 796 P.2d 403 (Utah App. 1990); Ex parte Smallwood, 811 So. 2d 537 (Ala.2001), cert. denied, 534 U.S. 1066 (2001); In re Marriage of Bacanegra, 792 P.2d 1263 (Wash. Ct. App. 1990); Grierv. Grier, 731 S.W.2d 931 (Tex. 1987) (USFSPA did not limit the amount of retirement benefits that could be apportionedunder Texas community property law, but only the percentage subject to direct payment); Deliduka v. Deliduka, 347N.W.2d 52 (Minn. Ct. App. 1984); see also Coon v. Coon, 614 S.E.2d 616 (S.C. 2005) (USFSPA neither confers norremoves subject matter jurisdiction; lower court can address all disposable retired pay); but see Cline v. Cline, 90 P.3d147 (Alaska 2004) (50% limit is jurisdictional); In re Marriage of Bowman, 972 S.W.2d 635 (Mo. Ct. App. 1998);Knoop v. Knoop, 542 N.W.2d 114 (N.D. 1996) (indicating in dicta that awards are limited to 50%); Beesley v. Beesley,758 P.2d 695 (Idaho 1988).

See Department of Defense, A Report to Congress Concerning Federal Former Spouse Protection Laws at124

76 (2001); Pub. L. 101–510, § 555(e), 104 Stat. 1485, 1569.

10 U.S.C. § 1408(e)(6).125

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Effective April 1, 1995, revised regulations allowed use of formulas under certain circumstances,126

most commonly so a pre-retirement divorce decree could specify that the denominator in a time-rulecalculation was to be the total service time.

Comparing the range of possible benefits for spouses, the military system is the most restrictive andlimited of all federal and private retirement systems. For example, it is not possible to (in ERISAterms) create a “separate interest” retirement for the spouse (only the benefit stream can be divided),and direct payments to the spouse are limited to 50% of “disposable pay.”

Military retirement benefits are absolutely critical in any divorce case involving a military member;in a long-term marriage involving years of active duty service, the pension is typically the sole ormajor asset of the marriage. Senior enlisted personnel frequently retire after 20 years active servicein their early forties and receive a lifetime pension of one-half their basic pay – a minimum of about$2,000 per month, every month for life. And there are cost of living adjustments. In present valueterms, a typical military retirement is worth some half million to million dollars.

There are lots of peculiarities to the military retirement system. One that frequently ismisunderstood, stemming from a Congressional compromise when the USFSPA was first passed,is the so-called “ten year rule.”

A court order that divides military retired pay as property may only be enforced by direct paymentto the former spouse if the parties were married for at least ten years during which the memberperformed at least ten years of creditable military service. This is often called the “20/10/10” rule,127

for “years of service needed to reach retirement/years of marriage of the parties/years of overlapbetween service and marriage.”

The restriction is upon direct payment only, and not upon the substantive right of the former spouseunder state law to a portion of the retired pay as property. If the marriage lasted less than ten yearsduring active duty, the retired pay could still be treated as marital property by the court in balancingthe property awards to each spouse, but no award to the former spouse of a portion of that retired paycould be enforced by obtaining direct payment from the military pay center.

In other words, the 20/10/10 rule is not a limitation upon the subject matter jurisdiction of the statecourts. Its practical effect can be the same as a legal bar, however. A former spouse in possessionof an order that does not satisfy the rule must rely on whatever enforcement mechanisms areavailable under state law. The only work-around for this trap is to provide for alimony, eitherentirely as a replacement for a property interest in the retirement, or as a reserved possibility if theretirement cannot be divided as provided in the decree or the member fails to make requiredpayments.

Military cases are more complex when the divorce occurs while the member is still on active duty. First, the member could retire early. Over the years Congress has periodically re-authorized various“early out” programs, including the SSB, VSI, and 15-year retirement program called TERA.

Technically, they were never approved, but they have been followed since April, 1995, anyway. Newer126

“proposed regulations” after 1995 did not all include the revisions, but the deletions were apparently inadvertent, andformula orders continued to be honored, and are specifically contemplated in the 2009 regulations in DoDFMR7000.14-R, Vol. 7B, Ch. 29 (“Former Spouse Payments From Retired Pay”).

10 U.S.C. § 1408(d)(2); 32 C.F.R.§ 63.6(a)(1)-(2).127

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Second, the member could retire late. A military career may now extend for 40 years. Therefore,any Nevada divorce of a still-serving military member should include conscious consideration of theGillmore/Gemma/Fondi division at eligibility provisions.

Third, the retirement could be entirely swapped for something else. Even many years after thedivorce, a member may request a disability rating, obtain it, be awarded (non-divisible) disabilityretired pay, and waive (divisible) retired pay equal to the sum of disability pay, thus effectivelyreducing or eliminating the spousal share.

Where V.A. disability exists at the time of divorce, the court cannot divide those benefits as property,but the cash flow “may be considered as a resource for purposes of determining [one’s] ability to payalimony.”128

The situation is more difficult for disability claims made after a divorce in which a spouse is awardeda portion of the retirement benefits as that spouse’s separate property. Many courts have held thatreimbursement to a spouse when the member recharacterizes retirement as disability, whether or notthere was any kind of indemnification or safeguard clause in the underlying decree. But the cases129

are not uniform around the country, and a cautious practitioner should not take that result for granted,and insist on fallback indemnification clauses.

There is way more to the disability picture, including multiple programs through which disabilitybenefits may be awarded, having different effects on the retired pay. Two currently in operation are CRDP and CRSC, but the entire disability compensation legal framework has been and apparentlywill be in flux for some time.

Another way that military retirement benefits could be swapped is by being rolled into Civil Serviceretirement, which as detailed above is a completely different retirement program, administered bya different federal agency (OPM), but is also essentially a non-contributory defined benefit pensionplan. A military member with subsequent Civil Service work history can either get militaryretirement benefits, then qualify for and receive Civil Service benefits, or roll the military time intothe Civil Service. Which is better depends on amount of military retired pay versus the value of thatmany years of service in expanding the available Civil Service retirement.130

Perhaps more critically in military cases than in any others involving retirement benefit division,counsel for the spouse should ensure that the court orders contain both a reservation of jurisdiction

See Riley v. Riley, 571 A.2d 1261 (Md. Ct. Spec. App. 1990); In re Marriage of Howell, 434 N.W.2d 629,128

633 (Iowa 1989).

See McLellan v. McLellan, 533 S.E.2d 635, 637 & 638 n.1 (Va. Ct. App. 2000); Longanecker v.129

Longanecker, 782 So. 2d 406, 408 (Fla. Ct. App. 2001); Blann v. Blann, 971 So. 2d 135 (Fla. Ct. App. 2007); Bienvenuev. Bienvenue, 72 P.3d 531 (Haw. Ct. App. 2003); In re Marriage of Nielsen and Magrini, 792 N.E.2d 844 (Ill. App. Ct.2003) (indemnification inferred from percentage award to former spouse); Black v. Black, 842 A.2d 1280 (Maine 2004);In re Marriage of Warkocz, 141 P.3d 926 (Colo. Ct. App. 2006).

In 1997, Congress required tracing spousal interest in military retirement benefits to Civil Service benefits130

when they were combined; see Handbook for Attorneys, supra, at ¶ 111.

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to enter an alimony award if the retired pay is ever reduced, and a direct explicit indemnificationclause.131

b. Survivor’s Benefits (SBP)

In a system like that of the military – in which the payments (but not the retirement itself) can bedivided – the payment of all retirement benefits, per se, ends with the life of the person in whosename the benefits were earned. The structure of the plan determines what happens to the spousalportion of the payment stream if the spouse dies first – they automatically revert to the member.

What may happen if the member dies first is much more potentially variable, and complex. For aspouse – or former spouse – to continue receiving money after death of the member or participant,there must be specific provision made for payments after the death of the member, by way of aseparate, survivorship interest payable to the former spouse upon the death of the member.132

The Survivor’s Benefit Plan (SBP) pays a percentage of the member’s retirement to the survivingspouse or former spouse. In 1986, Congress amended the USFSPA so that State courts could orderthat former spouses be members’ beneficiaries. If a member elects, or is “deemed” by a court to133

have elected, to provide the SBP to a former spouse, the member’s current spouse and children ofthat spouse cannot be beneficiaries. Generally, an election to make a former spouse an SBP134

beneficiary is not revocable; if the election was pursuant to court order, a superseding court orderis necessary to change it. A survivor annuity payable to a widow, widower, or former spouse is135

“suspended” if the beneficiary remarries before age 55.136

To initiate a “deemed election,” the former spouse must file a written request with the appropriateService Secretary requesting that the election be deemed to have been made. The written request

See In re Strassner, 895 S.W.2d 614 (Mo. Ct. App. 1995); see also Owen v. Owen, 419 S.E.2d 267 (Va. Ct.131

App. 1992); Dexter v. Dexter, 661 A.2d 171 (Md. Ct. App. 1995); McHugh v. McHugh, 861 P.2d 113 (Idaho Ct. App.1993); Scheidel v. Scheidel, 4 P.3d 670 (N.M. Ct. App. 2000); Morgan v. Morgan, 249 S.W.3d 226 (Mo. Ct. App. 2008)(if the spouse wanted to be spared divestment by post-divorce recharacterization, she should have put an indemnificationclause in the divorce decree);

See, e.g., Smith v. Smith, 438 S.E.2d 582, 584 (1993) (“The survivor benefit plan is designed to provide132

financial security to a designated beneficiary of a military member, payable only upon the member’s death in the formof an annuity. Upon the death of the member, all pension rights are extinguished, and the only means of support availableto survivors is in the form of the survivor benefit plan”).

Pub. Law No. 99-661 (Nov. 15, 1986).133

10 U.S.C. § 1448(b)(2). The Finance Center will notify the member’s spouse of the election to make the134

member’s former spouse the SBP beneficiary, but the current spouse’s consent is not required. 10 U.S.C. §1448(b)(3)(D).

10 U.S.C. § 1450(f)(1)-(2).135

10 U.S.C. § 1450(b). Before November 14, 1986, benefits were suspended if the former spouse was not yet136

age 60.

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must be filed within one year of the date of the court order. There are various technical137

requirements.

It should be noted that the amount of the survivorship interest is variable, and provides planningopportunities for counsel. The maximum SBP is selected if the entire retired pay is selected as the“base amount.” The smaller the base amount selected, the smaller the survivor annuity – and thesmaller the lifetime premium paid to supply it. Whatever the base amount selected, cost of livingadjustments increase a base amount so as to keep it proportionally the same as the amount initiallyselected.

No matter what any court orders, the military pay center can only take the premium “off the top” ofthe monthly payments of the regular retirement. Unfortunately, and counter-intuitively, that results138

in the parties each bearing a portion of the survivorship premium in exact proportion to their sharesof the retirement itself. In other words, if the retirement is being split 50/50, then the parties sharethe cost of the SBP premium equally, but if the spouse is entitled to only 25% of the monthly retiredpay, then the member effectively pays 75% of the SBP premium.

It is possible to effectively cause the member, or the spouse, to bear the full financial burden of theSBP premium, but doing so requires indirectly adjusting the percentage of the monthly lifetimebenefits each party receives.

If the designation of a former spouse as beneficiary is made by a member, it technically is to bewritten, signed by the member, and received by the Defense Finance and Accounting Service withinone year after the date of the decree of divorce, dissolution, or annulment. But, as a practical139

matter, this has not been nearly so much a bright line test as might be thought.

At the time of the election, the member must submit a written statement to the appropriate ServiceSecretary. The statement must be signed by both the former spouse and the member, and statewhether the election is being made pursuant to the requirements of a court order or a writtenvoluntary agreement previously entered into by the member as a part of or incident to a divorce,dissolution, or annulment proceeding. If pursuant to a written agreement, the statement must statewhether such a voluntary agreement was incorporated in, ratified or approved by a court order.140

Anecdotal accounts, however, suggest that, informally, DFAS has adopted the position that amember divorced prior to retiring actually is to be provided the opportunity to name a former spouseas the SBP beneficiary until the last day of military service within which to name his former spouseas the beneficiary, even if that last date of service is years after the date of divorce.

The Services, additionally, have been quite liberal in granting “administrative corrections” at therequests of members, even years after a divorce, when spouse coverage was in effect rather than“former spouse” coverage, but premiums were paid and the members claimed that they “mistakenly

10 U.S.C. § 1450(f)(3)(B).137

The Department of Defense also asked Congress to change this aspect of the SBP program in the Report to138

Congress, supra, requesting that court orders, or stipulations, could specify who was to pay the premium. Congress hasnot acted.

10 U.S.C. § 1448(b)(3)(A).139

10 U.S.C. § 1448(b)(5).140

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assumed that [the former spouse] remained the covered beneficiary following the divorce since SBPcosts continued to be withheld.”141

The situation is quite different when the former spouse sends in a “deemed election” after a courtorders the beneficiary designation, but without the active cooperation of the member. In fact, thematter of “deemed elections” and former spouse eligibility for SBP payments presents the singlebiggest malpractice trap in this area, at least when it is attempted without the member’s cooperation.

For many years, it was widely believed that the one-year period in which a former spouse mustrequest a deemed election ran concurrently with the one-year period in which a member must makethe election after the divorce. It was therefore thought that the former spouse simply lost the SBPdesignation entirely if he or she waited until the member’s one-year election period ended.

Because the rules for members’ designation of beneficiaries, and former spouse deemed electionsare provided by different sections of law enacted at different times, however, the prior “common142

knowledge” is not correct; the actual rules are slightly more flexible, much more complicated, anda bit illogical in application.

If the original divorce decree is silent as to the SBP (or perhaps just so unclear as to make theoriginal order unworkable), the spouse might be able to extend the period within which he or she canrequest a deemed election by returning to court after the divorce and obtaining an order stating thatthe spouse is to be deemed the SBP beneficiary. This is because the member is obliged to make theelection “within one year after the date of the decree of divorce, dissolution, or annulment,”143

whereas the former spouse must make the request “within one year of the date of the court order orfiling involved.”144

Thus, if there was no previous order giving a right to the former spouse to be the SBP beneficiary,the one-year deemed election period runs from the date of a post-divorce order concerning theSBP. This is true for orders that issued prior to the effective date of the SBP deemed beneficiary145

See, e.g., Memorandum dated February 20, 1997, from Gary F. Smith, Chief, Army Retirement Services,141

on behalf of the Secretary of the Army, to Director, DFAS, re: “Administrative Correction of SBP Election – Johnson,Alfred H. III” (on file with author) noting a 1994 divorce decree requiring him to maintain coverage for his formerspouse and the member’s 1997 request for a change in the SBP election from “spouse” to “former spouse,” and directingcollection of the cost refund that was paid to the member be collected, and that the records be corrected to show formerspouse coverage.

Cf. 10 U.S.C. § 1448 with 10 U.S.C. § 1450.142

10 U.S.C. § 1448(b)(3)(A).143

10 U.S.C. § 1450(f)(3)(B); Claims Case No. 99102801 (July 21, 2000, aff’d, Dept. of Defense Deputy Gen’l144

Counsel, March 8, 2002, http://www.dod.mil/dodgc/doha/claims/military/99102801.html. Apparently, decisionspreviously made by the Comptroller General’s Office were deferred to the Department of Defense, Defense Office ofHearings and Appeals (“DOHA”).

See, e.g., Comp. Gen. B-232319 (In re Minier, Mar. 23, 1990), 1990 U.S. Comp. Gen. Lexis 319; Comp.145

Gen. B-226563 (In re Early, Mar. 2, 1990), 1990 U.S. Comp. Gen. Lexis 449; Comp. Gen. B-247508 (Sept. 2, 1992).

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http://www.dod.mil/dodgc/doha/claims/military/99102801.html.

law, as well as orders that inadequately attempted to provide for the SBP, or omitted all mention ofthe benefit.146

However, once a valid court order is issued requiring coverage, the one year period begins to run,and any subsequent court order that merely reiterates, restates, or confirms the right of coverage asSBP beneficiary cannot be used to start a new one-year election period.147

The SBP is an extremely important benefit, which practitioners ignore at their considerable peril inmalpractice. While there are malpractice dangers in all retirement-related cases, they are most severerelating to survivorship matters. The potential losses to the client are catastrophic, and the resultingrisks to counsel are enormous.148

Federal law and regulations have very stringent service requirements for electing an SBP beneficiarywhich, if not precisely followed, cause the benefit to be lost regardless of the court order. Perhapsmost unsettling, from a malpractice perspective, is the length of time such a claim can lay dormant. Several courts have adopted a “discovery rule” for attorney malpractice cases. In other words,149

divorces involving pensions, but in which no provision was made for survivorship interests, aremalpractice land mines, lying dormant for perhaps many years until the right combination of eventssets them off.

c. Medical Benefits

Another thing to watch closely in military cases is the time restrictions for former spousequalification for ancillary benefits (medical, commissary, theater, etc.) For full benefits, the membermust have served twenty years, the marriage must have lasted twenty years, and the service andmarriage must have overlapped by twenty years (the “20/20/20” rule). “20/20/15” former spouses150

divorced before April 1, 1985, are also eligible for lifetime medical benefits. Lesser benefits areavailable for “20/20/15” spouses divorced after that date.

As an aside, this is true even when the divorce court is unsure how to characterize the benefit. In one case,146

the court made a point of saying that it could not tell if the SBP was a property right, an alimony allocation, or some kindof insurance, but in any event it was valuable, and the benefit was to be secured to the former spouse, even though shedid not qualify to receive a portion of the military retirement benefits themselves because the marriage at issue did notoverlap the military service. See Matthews v. Matthews, 647 A.2d 812 (Md. Ct. App. 1994).

Comp. Gen. B-244101 (In re: Driggers, Aug. 3, 1992); 71 Comp. Gen. 475, 478 (1992). The current147

regulations say that a “modification” order must actually change something before the one-year period will start overfrom the date of the modification order. FMR Vol. 7B., Chap 43, § 430503C.

While there is not much appellate authority in this area, and virtually no statutory authority anywhere, I have148

been hired as an expert witness in several such cases in the past several years, in which liability was sought againstpractitioners who were alleged to have not properly seen to securing survivorship benefits for a spouse. Edwin Schilling,Esq., of Aurora, Colorado, estimated that 90% of his malpractice consultations involved failure to address survivorbeneficiary issues. Lawyer’s Weekly USA, Oct. 18, 1999, at 22 (99 LWUSA 956).

See Petersen v. Bruen, 106 Nev. 271, 792 P.2d 18 (1990); Semenza v. Nevada Med. Liability Ins. Co., 104149

Nev. 666, 765 P.2d 184 (1988).

See 10 U.S.C. § 1072(2)(F) and (G).150

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A special insurance program is available for former military spouses married at least one year, butthe terms and restrictions vary according to the same three factors. In an appropriate case,151

deferring the divorce could prove to be in the parties’ mutual best interest (for example, where thespouse has to have a major medical procedure, covered under military insurance, but not otherwise,and there is no other insurance available post-divorce).

The medical benefits available to qualified spouses are for treatment at uniformed services medicalfacilities, and benefits under programs that have undergone a variety of name changes.

It is irrelevant whether the divorce decree specifies any such benefit, or whether the partiescontemplated the benefit. Like Social Security, medical benefits for former spouses who fulfill thelegislative criteria have a statutory entitlement separate from the rights and obligations accruing tothe member. They cost the member nothing and never should be the subject of negotiations in adivorce action.

There are restrictions to the right of former spouses who are eligible for medical benefits as“20/20/20” or “20/20/15” former spouses:

! The former spouse must not remarry. Eligibility for health benefits ceases uponremarriage and is not regained even if the subsequent marriage terminates.

! The former spouse must not be covered by an employer-sponsored health care plan. If there is such a plan, however, and coverage thereunder is terminated (voluntarilyor otherwise), eligibility for benefits is restored.

! The former spouse must not yet be age 65. Upon eligibility for Medicare (Part A),CHAMPUS eligibility ends. Some continuing benefits for former spouses may beavailable under the “TRICARE-for-life” program effective October 1, 2001.152

Additionally, it now appears that it is possible to extend the “temporary health benefits” for a formerspouse indefinitely under 10 U.S.C. § 1078a, which states that “the purpose of the CHCBP is toprovide to military personnel and their dependents ‘temporary’ health benefits comparable to whatis provided to federal civilian employees.’”

Under 10 U.S.C. § 1078a(g)(4), the “temporary” health benefits coverage becomes “unlimited” forformer spouses who were enrolled in TRICARE at the time they divorced – if they meet certaincriteria:153

! The former spouse must not be covered under any other health insurance plan.

The Continuation of Health Care Benefits Plan (“CHCBP”; see 10 U.S.C. § 1078a) has always provided151

some relief, allowing any former spouse to get up to 36 months of CHCBP coverage, and a former spouse who satisfiesthe 20/20/15 rule up to 48 months of post-divorce coverage (12 months free + 36 months of CHCBP coverage). Seehttp://www.humana-military.com/chcbp/main.htm. There is a premium cost and certainly is not as desirable asTRICARE, but certainly beats not having any other option available.

See 32 C.F.R. § 728.31. A summary of TRICARE information designed for the public, which includes a link152

to basic eligibility information (see TRICARE Beneficiaries, Using TRICARE) can be found athttp://www.tricare.osd.mil/.

Implementing regulations are at 32 C.F.R. § 199.20, but they are not very clear.153

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! The former spouse must not be remarried prior to the age of 55.

! The former spouse must either receive a portion of the military retirement benefits,or be the beneficiary of the SBP as a former spouse.

The statute (10 U.S.C. § 1078a(g)(4)) provides that the continued coverage can continue beyond the“temporary” periods set out at the beginning of the statute, upon the request of a former spouse whomakes a request for such coverage. Apparently, the same premium cost as for temporary coverage154

continues to be assessed for as long as coverage is provided, and a full quarter of premium isrequired to be paid with the enrollment application. Application must also be made promptly –enrollment in CHCBP must be completed within 60 days of losing “normal” eligibility as either anactive duty spouse or a retiree spouse – the date of entry of the divorce decree.

d. TSP

Most of the above discussion of the TSP for Civil Service employees is equally applicable here.

As of October 8, 2001, military members were authorized to begin participating in the TSP,155

permitting members to invest in a variety of funds. Military members therefore now have both156

a defined benefit and a defined contribution type of retirement program, both of which should beaddressed upon divorce. As of 2012, a “Roth” (pre-tax contributions) option was added to the157

TSP.

At the outset, the military chose to call its plan “UNISERV” accounts, but it is increasingly referredto simply as “TSP” like its Civil Service equivalent. If the same person has simultaneous orconsecutive military and Civil Service employment, the interplay between the two plans can becomplex. It is usually possible to combine the accounts, but it takes a specific application to do so,158

and tax-exempt military contributions (i.e., those made as a result of a combat zone tax exclusion)in a military TSP account may not be transferred to a civilian TSP account.

The military plan was phased in by allowing ever greater percentages of basic pay to be contributedthrough 2005, where it reached 10%, after which only IRS regulations would govern contributionlimits. If contributions are made to the TSP from basic pay, they may also be made from anyincentive pay or special pay (including bonus pay) received, again subject to IRS limits.

As of 2011, individual coverage cost $1,065 per quarter, and family coverage cost $2,390 per quarter.154

Per Pub. L. No. 106-398 (Oct. 30, 2000); the regulations are found at 5 C.F.R. § 1600-1690.155

See 5 C.F.R. §§ 1600.1-1690.14. 156

For military members, some forms of tax-exempt special compensation can be contributed, which then accrue157

investment returns that are also tax-exempt.

Once a participant separates from either the uniformed services or federal Civil Service, the accounts can158

be combined (by completing Form TSP-65 and sending it to the TSP Service Office). By default, military and CivilService accounts are not combined, but must be separately addressed.

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The military service secretaries are permitted, but not required, to designate “critical specialties.” Members within those specialties serving on active duty for a minimum of six years would receivecontributions by the government, matching some of the sums contributed from basic pay.159

e. Special (Jurisdiction) Caution for Military Cases

When a Court intends to divide military retired pay as the community property of a member and aspouse, another requirement besides traditional subject matter and personal jurisdiction is in play.

In enacting the Uniformed Services Former Spouses Protection Act, Congress was concerned that160

a forum-shopping spouse might go to a State with which the member had a very tenuous connectionand force defense of a claim to the benefits at such a location.

Accordingly, the USFSPA included special jurisdictional rules that must be satisfied in military casesto get an enforceable order for division of the benefits as property. In other public and private plans,any State court judgment valid under the laws of the State where it was entered is generallyenforceable to divide retirement benefits; this is not true for orders dividing military retirementbenefits as property. The rules do not restrict alimony or child support orders, which will be honoredif the State court had personal and subject matter jurisdiction under its own law.

In a military case, an order dividing retired pay as the property of the member and the former spousewill only be honored by the military if the issuing court exercised personal jurisdiction over themember by reason of: (1) residence in the territorial jurisdiction of the court (other than by militaryassignment); (2) domicile in the territorial jurisdiction of the court; or (3) consent to the jurisdictionof the court. This requirement is sometimes called the necessity of having “federal jurisdiction.”161

These limitations override State long-arm rules, and must be satisfied in addition to any State lawjurisdictional requirements. Cases lacking such jurisdiction can go forward, but they will not resultin enforceable orders as to the retirement benefits. The statute effectively creates an additionaljurisdictional requirement, which for lack of a better title can be called “federal jurisdiction.”162

The essential lesson of this jurisdictional point (for the spouse) is to never take a default divorceagainst an out-of-State military member if seeking to divide the retirement benefits. The resultingjudgment will not be enforceable; if valid jurisdiction under both State and federal law cannot beachieved, then the action may have to be dismissed and re-filed in the State in which the militarymember resides.

Matching contributions are designed to apply to the first five percent of pay contributed, dollar-for-dollar159

on the first three percent of pay, and 50 cents on the dollar for the next two percent of pay.

10 U.S.C. § 1408 et seq.160

10 U.S.C. § 1408(c)(4). The new regulations (DoDFMR 7000.14-R, Vol. 7B, Ch. 29 (“Former Spouse161

Payments From Retired Pay”) (Feb. 2009);see the DFAS website at http://www.dod.mil/comptroller/fmr) for the firsttime, at Sec. 290604(A)(3) (Feb. 2009) provides: “The member indicates his or her consent to the jurisdiction of thecourt by participating in some way in the legal proceeding.”

A full explanation of “federal jurisdiction,” what it is and how to get it, is set out in detail in the article162

“Divorcing the Military: How to Attack, How to Defend,” posted at: http://willicklawgroup.com/published_works.

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4. Nevada Government Plan (PERS)

a. Retirement Benefits

Nevada, like most states, has its own pension program for State employees. PERS has origins goingback to 1947 and is now codified at NRS 286.010, et seq. Essentially, the system is a defined benefitpension program.

The system has been amended several times, creating classes of PERS retirees depending upon whenthey began service, and when service credits accrued. Members are credited with 2.5% of theirhighest average compensation during any three years (usually, their last three years) for each yearof service earned before July 1, 2001; that credit increases to 2.67% for all years thereafter. Those163

that began service before July 1, 1985, can earn a maximum of 90% of their average compensation,and can accrue service credit for up to 36 years; those that began service after that date can earn upto 75% of their average compensation and can accrue service credit for up to 30 years.164

Until 1989, benefits vested after ten years. Thereafter, benefits vested after five years of service;survivor’s benefits vest upon the member’s eligibility for retirement, completion of ten years ofservice, or the member’s death, whichever occurs first.165

PERS is mainly a “non-contributory” system. Certain workers have paid in to “member’scontribution” accounts from the days when PERS had employee as well as employer-paid funding. That amount is refundable in certain circumstances, and may be applied to the (divisible) retirementin others.

The legislative history of NRS 125.155 exhibits much confusion as to when, precisely, PERSparticipants are “eligible to retire.” Most PERS participants are eligible for retirement at 65 with fiveyears of service, or 60 with ten years of service, or any age with 30 years of service. Certain166

employees operate under separate rules, however. Police and fire-fighters also can retire at age 65with five years of service, but they become eligible to retire at age 55 with ten years of service, orage 50 with 20 years of service, or at any age with 25 years of service.167

Like many other retirement systems, PERS includes provisions for cost of living adjustments overtime. Unlike most other systems, however, the COLA provisions can be (and usually are) fixed,unrelated to inflation, actual cost of living, or any other economic information. PERS provides forpost-retirement cost of living adjustments, based upon the lesser of the CPI average or at 2% per yearafter three full years, 3% per year after six years, 3.5% per year after nine years, 4% per year after12 years, and 5% per year after 14 years.168

NRS 286.551(1).163

NRS 286.551(1)(a)-(b).164

NRS 286.6793. This use of “survivor” is not construed by PERS as including a former spouse.165

NRS 286.510(1).166

NRS 286.510(2).167

See NRS 286.575; 286.5756.168

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There are several options under PERS for the form of monthly benefits, securing various levels ofsurvivorship payments for beneficiaries.

In 1993, the Nevada Legislature approved AB 555, which basically emulated language in theERISA/REA rules governing Qualified Domestic Relations Orders for private retirement plans. Thenew provisions required court orders dividing PERS benefits to be signed by a district court judgeor supreme court justice, and explicitly provided for enforcement on behalf of an “alternate payee,”who may be a spouse, former spouse, child, or other dependent of a member or retired employee.169

As discussed above, the ERISA statutory scheme is very large and complex, and the adoption ofindividual phrases and pieces of ERISA terminology carried with it a large potential of confusingthe field and leading to unintended consequences. The five requirements in the statutory170

amendment for an order to be enforced by PERS were:171

1. It must clearly specify the names, Social Security numbers, and last knownmailing addresses, if any, of the member and the alternate payee.172

2. It must clearly specify the amount, percentage, or manner of determining theamount of the allowance or benefit of the member or retired employee that must bepaid by the system to each alternate payee.

3. It must specifically direct the system to pay an allowance or benefit to thealternate payee.

4. It must not require the system to provide an allowance or benefit or option nototherwise provided under the statutes governing PERS.

5. It must not “require payment of an allowance or benefit to an alternate payeebefore the retirement of a member or the distribution to or withdrawal ofcontributions by a member.”

There was extremely little debate or examination of the detail of the PERS amendments; what littlethere was shows that the PERS representatives were quite hostile to “the courts legislating divorcelaw on the pension plans.” The legislative history indicates that the sole objective of the173

terminology used was to shield PERS from any court direction or demand to distribute benefits otherthan as set out by the Plan’s terms, not to render them invalid as a matter of law.

NRS 286.6703(4).169

ERISA, the federal law that created “QDROs,” is by its own terms inapplicable to any governmental plans,170

including civil service, military, or State retirement plans. 29 U.S.C. §§ 1003(b)(1) & 1051. By using QDRO-likelanguage in State statutes governing PERS, the law invites practitioners to confuse the two statutory schemes.

Enacted as NRS 286.6703(3)(a)-(e).171

By later amendment, the Social Security number requirement was eliminated.172

See colloquy between Assemblyman McGaughey and Mr. Pyne from PERS, in Minutes of Assembly173

Committee on Government Affairs, May 11, 1993, considering AB 555.

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b. Survivor’s Benefits

PERS provides multiple “options” under which a retiring member can give up a bit of the lifetimebenefit payment stream in exchange for varying death benefits to be paid to an eligible survivorbeneficiary.

Options 1 is the “Unreduced” benefit, paying the largest possible lifetime sum, but providingno survivorship.174

Option 2 provides an actuarially reduced lifetime sum, with the same amount paid to thesurvivor for life. This is akin to a “100% joint and survivor annuity” in the world of privatepensions.

Option 3 provides an actuarially reduced lifetime sum, with 50% of the lifetime sum paid tothe survivor for life. This is akin to a “50% joint and survivor annuity” in the world ofprivate pensions.

Option 4 is the same as Option 2, except no benefits are payable to the survivor until thatperson reaches age 60.


Option 6 allows the creation of a customized survivor interest, which actuarially reduces thelifetime benefit.


While it is apparently not published, the life table used by PERS is reported to be gender-blind.

There are several troubling aspects of PERS’ survivorship provisions. First, PERS does not requirespousal consent to deprive the spouse of all survivorship interests; the member may unilaterallychoose an Option providing little or no survivorship protection for the spouse.

Since 1987, PERS has had a rule appearing to require spousal consent to the form of retirementchosen. Under that provision, however, the absence of spousal consent only prevents the member175

from choosing any desired retirement option for 90 days. Apparently, the burden is on the spouse176

to get a court order prohibiting the member from choosing a different retirement option within the90 day period. Essentially, a spouse for whom no survivor designation is made who is unhappy withthat fact has 90 days to choose to divorce his or her spouse and get a court order mandating a

This is for all PERS participants except police/fire, who can select Option 1, get the maximum lifetime174

benefit, and also get a 50% survivor annuity without cost for a spouse; the benefit vests in the spouse married to themember at the moment of retirement, even if the marriage subsequently ends.

See NRS 286.541.175

See NRS 286.545.176

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different option. Further, PERS is statutorily immune from suit for benefits paid because of amember’s falsification of marital status on a retirement option selection form.177

Second, PERS does not provide a pre-retirement survivorship interest for the spouse.

Specifically, in every system like PERS – in which the payments (but not the retirement itself) canbe divided – the structure of the plan determines what happens to the former spouse’s portion of thepayment stream if the spouse dies first: the payments revert to the employee.

Where the employee dies first, however, various results are possible. For a former spouse tocontinue receiving money after death of the employee, there must be specific provision made by wayof a separate, survivorship interest payable to the former spouse upon the death of the member. Otherwise, payments being made to the former spouse simply stop; this is just one of the ways inwhich the employee’s rights are superior to those of the non-employee, even when benefits are“equally” divided. The only known way to cope with this imbalance is through private insurance178

on the life of the employee, payable to the former spouse, and therefore provide the parties withcomparable security for their respective insurable interest in the other party’s life.179

Third is the necessarily unequal distribution of benefits, despite the mandate in NRS 125.150 thatcourts equally divide property upon divorce. Any plan with an automatic reversion of the spousalshare to the member, should the spouse die first, creates a problem in States, like Nevada, in whichthe marriage and divorce laws provide that the parties have present, existing, and equal interests inproperty acquired during marriage, and that property is to be divided equally upon divorce.

Specifically, the member essentially has an automatic, cost-free, survivorship benefit built into thelaw that automatically restores to him the full amount of the spouse’s share of the lifetime benefitif she should die before him. If the former spouse dies first, the member not only continues to gethis share of the benefits, but he will also get her share, for as long as he lives. If the member diesfirst, however, the spouse gets nothing, unless an option is selected with a survivorship provision.

The only person for whom a survivorship interest has any cost is the former spouse. If both partiesare to share benefits, and burdens, of the assets and liabilities distributed, they must equally (or asequally as possible) bear this cost as well, just as they share the zero cost of the member’ssurvivorship interest in the spouse’s life. Otherwise one of them gets a survivorship benefit for free,

NRS 286.541.177

For example, PERS provides that the option selection will be “automatically adjusted” to option one (the178

unmodified allowance) if a spouse or former spouse with a survivorship option predeceases the member. NRS286.592(1). The system has no corresponding benefit to protect a former spouse – it has no “pre-retirement survivorshipprovision.” In other words, if a former spouse is awarded a portion of the retirement benefits, but the member dies priorto retirement, the spouse will receive nothing. Prior to the member’s retirement, PERS leaves the former spouseabsolutely unprotected from being divested in the event of the member’s death. The only apparent means of securingthis risk is through private insurance.

Any former spouse who will be the recipient of retirement benefit payments if her former spouse lives, but179

will not get such money if he dies, definitionally has an “insurable interest” in the life of the member (this is true forPERS or non-PERS cases). The matter is one of fact, not a matter of discretion, award, or debate. “Insurable interest”survivorship provisions are found throughout various federal regulations, and refer to any person who has a validfinancial interest in the continued life of the member. See, e.g., 10 U.S.C. §§ 1448(b) & 1450(a)(1); 10 U.S.C. §1450(a)(4).

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and the other gets a survivorship benefit at significant cost – which would appear to violate the lawrequiring the presumptively equal division of property.

Unless one believes that upon divorce one party is entitled to a greater share of the benefits, and alesser share of the burdens, accrued during marriage, then it is necessary to deal with the structureof any retirement system so that the parties benefit, and are burdened, as nearly equally as may bemade true. In a PERS case, that would seem to require dividing the burden of the only survivorshipbenefit that has a cost – the one for the benefit of the spouse – between the parties.

Fortunately, PERS contains multiple survivorship options making it relatively easy for counsel toconstruct an order that divides the premium cost between the employee and the non-employee, sothat both pay a share of the only survivorship option carrying a premium, and both leave the marriagewith a secured interest from the date of divorce forward. That comes as close as is possible, giventhe structure of such retirement systems, for a court to actually treat both parties “equally” when oneparty works for PERS, or any other employer with a retirement program structured that way.

Fourth, PERS survivorship interests are non-divisible between successive former spouses, orbetween a former spouse and a current spouse. Some creative counsel have accomplished this resultanyway, by having the relevant court order call for such a division, and having PERS pay thesurvivorship interest (in one of the beneficiary’s names) to a trustee who then divides the benefit.

Finally, PERS simply refuses to abide by a specific holding of the Nevada Supreme Court as towhether the spouse’s lifetime benefit stream may be left to spouse’s heirs. In Wolff, the Court180

affirmed the order that the wife’s share would not revert to the husband if she predeceased him, butwould instead continue being paid to her estate, on the basis that the community interest was dividedupon divorce to two sole and separate interests, so that even if her estate was not listed as analternate payee as defined in NRS 286.6703(4), the estate was entitled to the payments that shewould have received if alive.181

To date, in every known instance, PERS not only has refused to directly make payments to aspouse’s estate in accordance with that holding, it has reportedly refused to even accept orderssubmitted stating that an individual member is required to make those payments if the spouse dies

Wolff v. Wolff, 112 Nev. 1355, 929 P.2d 916 (1996).180

In the decree, the district court provided that “[Roberta’s] vested181

Community Interest in [Gerhard’s] Retirement does not terminate upon [Roberta’s]death and continues to her estate until [Gerhard’s] death.” Gerhard argues that thisprovision violates “public policy, and, more specifically, [is] in direct conflict withthe Public Employees Retirement System of Nevada.”

Although a former spouse’s estate is not encompassed by the definition ofalternate payee in NRS 286.6703(4), we conclude that Roberta’s estate should beentitled to her share of Gerhard’s retirement benefits upon his death. Upon divorce,the community interest that Gerhard and Roberta had in Gerhard’s retirementbecame the separate property of each former spouse. See 15A Am. Jur.2dCommunity Property § 101 (1976). Consequently, Roberta’s estate is entitled toher portion of Gerhard’s retirement in the event that Roberta predeceases Gerhard. Accordingly, the district court did not abuse its discretion by requiring Gerhard topay Roberta’s estate her share of the retirement benefits if Roberta predeceasesGerhard.

112 Nev. 1362 (emphasis added).

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first. It is apparently PERS policy to reject any proposed order reciting the Nevada Supreme Court’sholding in Wolff on that point.182

That policy creates a terrible dilemma for counsel, since the Nevada Supreme Court has requiredcounsel to do what PERS says cannot be done. The danger for drafting counsel is obvious – ifcounsel complies with the directive of PERS to remove the language that the Court has held shouldbe in such a QDRO, the attorney runs the risk of being sued by the alternate payee’s survivors, orestate, should the alternate payee predecease the member and the flow of benefits not go to thosesurvivors. PERS’ refusal to obey the Court’s mandate in Wolff is a recurrent problem that hasevaded review since 1996.

When it proposed the scheme of QDRO-like regulations in 1993, PERS submitted and the NevadaLegislature approved a mechanism for the payment to alternate payees of sums found to be due tothose persons by order of “a district court or the supreme court of the State of Nevada relating tochild support, alimony or the disposition of community property.”183

It is inappropriate for PERS to refuse to honor the opinion of the Nevada Supreme Court, exceptwhere a statute specifically makes it impossible for the system to comply with such an order. Sinceno statute prohibits payments to the estate of a former spouse, or prohibits court orders directing amember to make such payments, PERS should be ordered to alter its policy.184

5. Other Government Pension Plans & Social Security

Foreign Service and CIA pensions are not often involved in Nevada divorces, but practitionersshould be aware that several “other” agencies and organizations have their own retirement rules andregulations; as always, it is necessary to obtain the plan documents/rules/regulations for the specificplan at issue, and govern the decision and drafting work in accordance with the plan requirements.

Railroad retirement has its own specialized rules, which provides statutory benefits for divorcedspouses. Tier I benefits are similar to Social Security, and different from military or Civil Service185

One such rejection received by this office flatly stated: “In the event the Alternate Payee predeceases the182

Participant Retired Employee, the entire benefit is then paid to the retired employee. The Alternate Payee cannotdesignate a beneficiary or the estate to receive his portion of the benefit.”

NRS 286.6703.183

In a prior case, my office was curtly informed that the “Official Policies” of PERS prohibit honoring the184

Nevada Supreme Court’s holding in Wolff. Apparently, that is what all attorneys are informed. No such “OfficialPolicies” have apparently ever been published, by way of any legislatively-mandated regulation or public process. WhilePERS is permitted to adopt internal rules pursuant to NRS 286.200, such “official policies” do not have the force of lawor are binding on any Court. If the “policies” conflict with Wolff, it would seem appropriate that the “policies,” and notthe decisional law that must give way. See Clark Co. Social Service Dep’t v. Newkirk, 106 Nev. 177, 789 P.2d 227(1990) (administrative regulation in conflict with state law invalidated, and district court is empowered to grantpermanent injunction ordering agency to follow law rather than its internal regulations).

See 45 U.S.C. § 231(a); 20 C.F.R. § 295.1.185

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plans, in that payments to the spouse do not reduce the benefit being received by the retiree. TierII benefits, however, are like other pension benefits and divisible as community property.186

Railroad retirement sometimes has both government and private pension benefits involved. For thepublic portion, some information and help is available from the Railroad Retirement Board. If the187

participant worked for a private rail company, there could be one or more private pensions on topof the government plan benefits.

While they are largely outside the scope of these materials, there are also Social Security benefitsto at least know about when contemplating alimony. If the marriage lasted at least ten years, theformer spouse is eligible for certain benefits under Social Security, based upon the spouse’s ownearnings, or those of the wage-earner, whichever are greater. Such Social Security payments arestatutory entitlements that do not reduce benefits paid to retirees. More recent opinions haverepeatedly stressed that State courts are prohibited from ordering any assignment, transfer, execution,levy, attachment, or garnishment of amounts paid by Social Security, directly or indirectly. Oddly,188

the Nevada Supreme Court has not expressly overruled an earlier case indicating that the amountsreceived in Social Security may be taken into consideration both in dividing property and inawarding alimony.189

III. VALUATION OF PLANS IN DIVORCE ACTIONS

In the overwhelming majority of divorce cases, no “valuation” of retirement benefits is necessary,because the Nevada Supreme Court has directed that in the absence of special considerations, thosebenefits are to be divided in kind, and not offset against other assets.190

“Valuation” should therefore be distinguished from a dispute as to how much of the retirementbenefits are at issue in the divorce. Generally, practitioners going to trial should seek an accountvaluation or total as close in time to the divorce trial as possible. The amount or value of any191

retirement at an earlier time (e.g., separation or filing of the complaint) is irrelevant under the law

See Belt v. Belt, 398 N.W.2d 737 (N.D. 1987).186

Railroad Retirement Board (RRB) help line: 800-808-0772; RRB Web site: https://secure.rrb.gov/. Some187

forms and information that might be helpful:Form T-25f (statement of benefits of the RR employee, including the Tier I and Tier II benefits)Form G-177c (explanation of divorced spouse benefit available)Form G-177d (summary of QDRO requirements for dividing the Tier II benefits)Form RB-30 (spouse/divorced spouse annuity information booklet)“Attorney’s Guide to the Partition of Railroad Retirement Annuities” booklet.“Railroad Retirement and Survivors Benefits” pamphlet.

Boulter v. Boulter, 113 Nev. 74, 930 P.2d 112 (1997).188

See Anderson v. Anderson, 107 Nev. 570, 816 P.2d 463 (1991).189

See Gemma v. Gemma, 105 Nev. 458, 778 P.2d 429 (1989); Fondi v. Fondi, 106 Nev. 856, 802 P.2d 1264190

(1990).

See Forrest v. Forrest, 99 Nev. 602, 668 P.2d 275 (1983).191

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as it now stands, sparing Nevada practitioners the “value now of benefits then” problems that occupycourts elsewhere.

A. Vestedness and Maturity Revisited

The Gemma approach (division “if, as, and when” received or receivable, pursuant to the “timerule”) eliminates the need to perform actuarial computations, since the parties end up sharing the riskof non-payment (by premature death, plan failure, etc.) proportionately to their ultimately payablepercentages in the benefits to be received.

Where the nonemployee spouse has a small interest, however, or where there are other significantassets in a case which could be exchanged for the pension, it might be necessary or advisable to placea value on a pension plan. Valuation for “cashing out” is particularly attractive for pensions that areneither vested nor matured, because the spousal share of such pensions are necessarily smaller anddeferred.

While Gemma and Fondi appear to block the employee spouse from requiring such a cash out, theredoes not appear to be any legal bar to the parties stipulating to such an arrangement, under someconditions.

In Sertic, among several other holdings, the Nevada Supreme Court held that “distribution” of a192

party’s pension at the time of trial was not error if the following conditions were met: (1) presentvalue could be determined with reasonable certainty; (2) there was sufficient existing funds todistribute the retiree’s interest; and (3) both parties agreed that the distribution would be the finaldistribution regardless of what might occur in the future. The Court noted that “actual division”under the “wait and see” approach (which may be done at trial) is not the same as presentdistribution of the pension asset itself.

In Sertic itself, the Court ruled that the district court erred in determining present value, and it couldnot be determined from record whether parties agreed that trial distribution would be final, so thecase was reversed.

If trial seems likely, and for some reason valuation is a relevant issue, it is probably necessary to193

retain an expert in such cases. Valuations in unvested/unmatured pension cases are inherentlysubjective due to the uncertainty of the events that could cause the pension not to vest or mature.

At the very least, the expert will need to have a copy of the plan in question or the statutory schemecreating and regulating the benefits, the specifics of the participant’s interest in the plan, and know194

the ages of the parties, the date the employee began work for the employer, the dates and amountsof all contributions (if any) made to the plan, prospects for early or late retirement, and the healthof the parties.

Sertic v. Sertic, 111 Nev. 1192, 901 P.2d 148 (1995).192

It typically is not, since the parties simply get their time rule share of the benefits, whatever they are worth,193

but it is not difficult to project circumstances where the value of present or future benefits would be helpful to the Court,such as in trying to project a standard of living for purposes of setting a required sum of alimony.

The questionnaires attached as exhibits to these materials provide a list of the questions that any expert194

should have about a participant’s interest.

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There is always more room for negotiation when benefits are not vested or matured, since theemployee spouse has the option of taking unilateral action that could prevent benefits from everbeing payable to either party, such as changing careers. Of course, if a party did take such a “cut offyour nose to spite your face” approach, it is possible that the other party could argue “waste” andconvince the court to enter an alimony award for the sum to compensate the party who wouldotherwise have received a sizeable property distribution.195

B. Valuation Variations Among Types of Plans

Because the value of a participant’s interest in a defined benefit plan depends upon numeroussubjective factors, it is difficult to measure precisely until after retirement. If the employee spouseis still working, assumptions must be made as to how many more years will be worked, whether (andhow much) salary will increase, whether the employee might be fired or die before retirement, howlong the employee will live after retirement, whether the plan benefits will change (say by creationof an early retirement subsidy, or by a firm bankruptcy, merger, acquisition), and other value-alteringpossibilities.

Expert assistance is almost always required for these plans, since life tables, discount rates, actuarialaccounting, etc., are required in arriving at a valuation. There are several approaches to suchvaluations, and a startling number of those professing to be able to do such valuation work turn outto be uninformed about the actual mechanics of how various retirement plans work, which (ofcourse) greatly impacts the values they assign to interests in those plans. Caveat emptor.

It is considerably easier to place a value on a participant’s interest in a defined contribution plan,since it is a sum certain in a segregated account. Still, valuation in a divorce action may not be assimple as dividing up the balance according to the marital percentages.

A common error of courts and counsel dividing defined contribution plans is the failure to take intoaccount the time that will pass between the agreement or court proceeding and the physical divisionof the account. This can be done, easily, by a few words either providing for sharing of theinvestment gains and losses until actual distribution (our typical default approach), or by freezingthe spousal share at a specific sum for transfer.

Obviously, either approach could be better – or worse – for either party, depending on how muchtime passes, and whether the account balance increases or decreases during that time, which couldbe due to market forces having nothing to do with the parties. But in either case, it should be dealtwith one way or the other in the decree (preferably) and in any QDRO or other ancillary orderdividing the plan benefits (definitely) to avoid what could be considerable litigation as to whichpossible way to divide benefits was impliedly intended to be done.

The lessons relating to defined contribution plans thus include considering whether the “usual way”of dividing benefits in a given jurisdiction (e.g., the time rule) is the right way to divide thoseparticular benefits, and in any event, to be sure to specify with precision what is being divided as ofwhen.

CSRS and FERS benefits are somewhat complex. Proper valuation of those plans should includeconsultation with or retention of an expert.

See Putterman v. Putterman, 113 Nev. 606, 939 P.2d 1047 (1997).195

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Each year, the Department of Defense compiles a chart of non-disability retirement benefit valuesaccording to rank and years of service upon retirement, published by the Department of DefenseOffice of the Actuary as “lump sum equivalency” charts for military retirements, using military-specific mortality tables. That office also includes as a footnote to the chart a much-ignoreddisclaimer that its figures should not be used for property settlements. The Actuary also producesdisability and non-disability retirement life expectancy tables, from which a good estimate of presentvalue for a military retirement can be independently calculated.

C. Valuation of Ancillary Benefits

Counsel must be careful to know what benefits are accorded by virtue of the retirement programsat issue, or as a matter of federal entitlement. For example, under no circumstances should a spouseconcede anything “in exchange” for COBRA medical coverage or Social Security; federal law196

confers such coverage and benefits as a matter of right.

But there are “ancillary” benefits available through some retirement plans, such as early retirementsubsidies in private pensions, or medical benefits that may (or may not) be available to spousesthrough governmental plans depending on facts and circumstances that are subject to alteration, ornegotiation, between the parties. These can be included in orders, or excluded, or arranged to existor not exist, as the circumstances of the cases indicate – and with ramifications for both parties.

In most retirement plans, survivor’s benefits may be divided proportionately among successivespouses. In military cases, Nevada PERS, and some private plans, however, only one person maybe named as recipient of the survivor’s benefits. Where the member wishes to nominate anotherperson as recipient of those benefits, they may have a litigation value greater than their actuarialvalue.

Similar considerations apply to timing questions. For example, if the parties to a military marriagehave been married for eighteen years during service, so that two additional years of marriage arerequired for full medical benefits, a member could probably exact some price for simply enteringinto a property settlement agreement and deferring the divorce itself. On the other hand, thenegotiations could cut the other way: such deferral could be the only event preventing a spouse frommaking a claim for support sufficient to cover anticipated medical costs.

Sometimes, valuable ancillary benefits are not obvious. Many (especially public) employmentsystems permit employees to accrue either vacation or sick leave time, and to cash it in under someor any circumstances when they leave employment.

States vary on whether or not unused vacation or sick pay constitutes “property” for equitable orcommunity property division. Various citations are extremely supportive of the idea ; others are197

Consolidated Omnibus Budget Reconciliation Act. Congress mandated that certain employers must provide196

transitional health coverage, at controlled premiums, to individuals whose right to participate in group health plansterminated for various causes, including divorce. State “mini-Cobra” laws cover even more employees.

See, e.g., Mark Sullivan, “Hidden money in Military Divorce Cases,” 20 Nev. Fam. L. Rep. 4 (Fall, 2007)197

at 4; 2 Gary N. Skoloff, et al., Valuation and Distribution of Marital Property § 23.04A (2002); Kenneth W. Weber,19 Washington Practice, Family and Community Property Law, § 11.19 (1997); Arnold v. Arnold, 77 P.3d 285 (N.M.Ct. App. 2003) (husband’s accumulated vacation leave and sick leave hours were community property because they werefruits of labor during marriage, had value, and were not separate property as that is defined; “the essence of leave is that

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just as vehement that vacation or sick pay is not any kind of marital property. Nevada appears to198

have no authority on the subject at all.

D. Age Gaps and Discount Rates

Any large gaps between the ages of the parties can cause a skewing of the normal actuarial valuationsfor a defined benefit pension plan, since the survivor’s component will be so much larger. Variousof the public and private plans take this into account in various ways. To make matters murkier,some plans use gender- and race-reflected tables, and some do not. The difference in lifeexpectancies can lead to significant differences in valuation, and thus change strategy.

For example, Exhibit 9 is from the United States “Life Tables.” If the client was a black male199

married to a white female, and both were 30 years old, the difference in valuation would besignificant. In a “blind” chart, both parties would be considered to have life expectancies of 47.3years. If age and race were part of the evaluation, the husband would have a life expectancy of 38.3years and the wife would have a life expectancy of 50.6 years. The “instant” 12-year gap in lifeexpectancy has a significant impact on valuation.

Practitioners should be aware that there is room for substantial disagreement on many of theassumptions and factors that accountants and actuaries use for valuations. For example, the discount

it is a benefit of employment and, whether considered a benefit in addition to salary, or somehow an aspect of salary,it has independent value”); Grund v. Grund, 151 Misc. 2d 852, 573 N.Y.S. 2d 840 (N.Y. Sup. Ct. 1991); Schober v.Schober, 692 P.2d 267 (Alaska 1984) (unused cashable leave valued and distributed at the number of hours multipliedby the employee’s hourly rate at the time of divorce); MEA/AFSCME Local 519 v. City of Sioux Falls, 423 N.W.2d 164(S.D. 1988); In the Matter of the Marriage of Susan M. Hurd, 848 P.2d 185 (Wash App. 1993) (while no specificrationale provided for finding that vacation leave was ruled a divisible asset, record included finding that the husbandwas already eligible for retirement, so an additional payment was likely to be made to him); Lesko v. Lesko, 457 N.W.2d 695 (Mich. App. 1993) (over vigorous dissent, majority concluded in an equitable division state, accrued vacationand sick time could be divided); Saustez v. Plastic Dress-Up Co., 647 P.2d 122 (Cal. 1982); In re Marriage of Williams,927 P.2d 679 (Wash. App. 1996); In re Marriage of Hurd, 848 P.2d 185 (Wash. App. 1993); In re Marriage of Nuss,828 P.2d 627 (Wash. App. 1992); In re Marriage of Sheffer, 802 P.2d 817 (Wash. App. 1990) see also In re Marriageof Fithian, 517 P.2d 449 (Cal. 1974) (“vacation pay is similar to pension or retirement benefits, another form of deferredcompensation. Those benefits, too, ‘do not derive from the beneficence of the employer, but are properly part of theconsideration earned by the employee’”).

See In re Marriage of Abrell, 923 N.E.2d 791 (Ill. 2010), affirming 898 N.E.2d 1163 (2008) (accrued198

vacation and sick days are not marital property subject to distribution, but if a party has actually received payment forvacation and/or sick days accrued during marriage prior to a judgment for dissolution, the payment is marital property);Bratcher v. Bratcher, 26 S.W.3d 797 (Ky. App. 2000) (where wife had accumulated vacation and sick leave, would loseany sick leave if she terminated but would be paid for any accrued vacation, court concluded that neither constituted“property” divisible upon divorce); Akers v. Akers, 729 N.E.2d 1029 (Ind. Ct. App. 2000); Thomasian v. Thomasian,556 A.2d 675 (Md. App. 1989) (husband’s accrued holiday and vacation leave were not marital property, because theywere not entitlements like pension or retirement benefits, only replaced wages on days the employee did not work, anddid not need to be, and often were not, liquidated by a payment of cash, but instead frequently dissipated, and thereforetoo speculative to constitute property); Smith v. Smith, 733 S.W.2d 915 (Tex. Ct. App. 1987) (accrued vacation and sickpay are not marital assets, as the husband owned no physical control or power of immediate enjoyment over them).

Vital Statistics of the United States, 1993 Life Tables (U.S. Dept. of Health & Human Services, Public Health199

Service, Centers for Disease Control and Prevention, National Center for Health Statistics 1997) at 12.

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rate to be applied when reducing future benefits to present value can enormously alter the finalnumber, and the values assigned vary widely, from some 2.2% on the Department of DefenseActuary chart, to several times that number in many private estimates. The difference is significant,since the lower the presumed interest rate, the higher any “present value” calculation based on thatrate.200

IV. DIVISION/DISTRIBUTION OF BENEFITS

Identifying and valuing benefits are matters that counsel must know and competently handle, buttheir clients are going to generally have a much simpler perspective – they are going to judge theefficacy of counsel’s work on whether and when and how much money actually arrives.

A. Public versus Private Plans

A very common misperception is that division of retirement benefits always requires a QualifiedDomestic Relations Order, or “QDRO.” In actuality, a QDRO is only required for plans establishedby private employers which seek to take advantage of certain tax deductions for contributions to theplans (i.e., “qualified” plans). State and federal governmental plans (including PERS) are201

explicitly exempt from the legislative scheme constructed by ERISA (the “Employee RetirementIncome Security Act of 1974”) and REA (the “Retirement Equity Act of 1984”), which togetherestablish the QDRO requirements. The history of those statutory schemes are detailed above in theintroduction sections.

For private plans, practice varies widely, but the modern consensus appears to be that a QDRO isbest made a separate document from the Decree itself, although referenced in the Decree. In thisway, any problems with getting the Plan Administrator to recognize and enforce the QDRO can beaccomplished with amendments to only that order, rather than amendments to the Decree of Divorceitself. The Decree should anticipate the possibility of amendments to the QDRO being necessary,and reserve jurisdiction to do so.

For governmental plans (including military and Civil Service), the safest practice may be to includeall critical terms in the Decree itself (this would safeguard against unanticipated application of theOPM’s “first order” rule in Civil Service cases), although federal law generally allows the divisionof benefits to be pursuant to a document “incident to” such a Decree, such as a property settlementagreement. If a separate order is drafted, it should be expressly incorporated and referenced in theDecree.

B. Timing: Prepare Retirement Orders Before the Divorce

Obviously, if the retirement division order is to be “incorporated and referenced in the Decree,” itactually has to be drafted before the divorce is completed. This single step can reduce malpractice

The reason for this is obvious, once analyzed. A present value calculation essentially asks the question of200

how much money would have to be invested on a given date, at a given interest rate, to yield a stream of payments in thefuture which over some anticipated period would consume all of the accrued interest and principal. The lower the rateof investment, the more money needs to be invested to yield the later payment stream.

See 29 U.S.C. § 401(a).201

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exposure at least by half, and it remains incredible that so many divorce practitioners still do notmake this a regular part of their practice.

The reasons are obvious and simple. In addition to some parts of the applicable regulations requiringsome benefits be provided for in the “first order dividing property” or forever lost, there is the realitythat if someone should retire, or die, before the relevant order is entered, it may be impossible tosecure them for the intended beneficiary, no matter what the Decree says.

The solution is simple. If a retirement is in issue, obtain expert assistance to draft the orders beforenegotiating or litigating the rest of the case. The non-employee loses all leverage to negotiate termsonce the MSA or decree is completed, and discovery is only available under the local rules prior tothe completion of the divorce. The risk of completely losing retirement or survivorship interestsarises at the moment of divorce, and continue escalating with each day that goes by thereafter.

C. The Requirement of Service

It is not enough to just draft the retirement order, either – it must actually get to the planadministrator and be in place, or the same risk (divestment of the intended beneficiary) remains. Amazingly, some practitioners continue to close their files upon entry of the Divorce Decree, withoutever notifying the holder of funds of the existence of the order for allocation of a part thereof to aformer spouse.

For private pension plans, the Plan Administrator must be notified, and must approve the Ordersubmitted. All administrators will provide information as to how to do so upon request. CivilService pension division orders go to the Office of Personnel Management (“OPM”). Ordersrelating to military retirement benefits go to the pay center (DFAS). PERS QDROs go to the PERSoffice in Carson City.

In January, 2009, the United States Supreme Court decided Kennedy – a decision that should202

cause every divorce lawyer to feel some discomfort.

In 1974, Bill designated his then-spouse Liv as beneficiary of his ERISA-based account balance(savings) plan. In 1994, the parties divorced, and the Decree included a provision stating that Livwaived all interests in that plan (and others).

In 2001, Bill died, having never sent the “beneficiary change” form to the pension plan. His heirmade a claim, but the plan paid the ex-wife, Liv, anyway, notwithstanding her explicit waiver of thebenefits in the Decree. And after eight years of litigation, the United States Supreme Court said theplan was right in doing so, because plan administrators should be able to rely on the documents intheir files, without having to look at “extraneous” documents like divorce decrees.

In other words, the highest court in the U.S. has said that the administrative convenience of planadministrators is more important than obeying divorce court orders, or following the intent of parties.

That left the divorce lawyer, who probably thought he had finished his job when he got the waiverput in the Decree, facing a possible malpractice suit from the intended beneficiary for not ensuringthat the right form was sent to the plan at the conclusion of the divorce.

Kennedy v. Plan Adm’r for DuPont Sav. and Inv., 555 U.S. 285, 129 S. Ct. 865, 172 L. Ed.2d 662 (2009).202

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A certain degree of paranoia, or at least a healthy degree of obsessive-compulsiveness, is a goodthing regarding retirement benefits. If a retirement-division order is drafted, and signed by the court,but not served on the plan, it is useless in preventing the employee from choosing another form ofbenefit than required by the order, and it may not be fixable when the facts are discovered.

If the worker chooses, for example, a form of benefit that provides no survivorship benefits for theformer spouse, the retirement plan will almost certainly refuse to alter the order. When the workerdies, her benefits will simply stop. A malpractice action against the divorce lawyer is highly likely.

PERS follows the same rules – regardless of the terms in the divorce decree, if their office is not onnotice of a court order requiring a specific option selection at the time of retirement, they will takewhatever election the employee makes, and leave the parties to fight about the ramifications(between the parties, or between parties and counsel).

The lesson is that it is necessary to not only draft and file the order, but to serve it on the plan, andget verification that it was served on the plan. Anecdotal reports continue to appear of pension plansthat pay benefits out contrary to court orders, and when challenged, simply deny having received theorders in the first place. One way to leave a findable paper trail of having completed all steps is tofile the proof of service with the court entering the Decree and QDRO.

As to both drafting retirement division orders and having them served on plans, it is RussianRoulette for divorce lawyers to not deal with retirement benefits during the course of a divorce. Sooner or later, something will go wrong (for example, if survivorship interests are not secured, ittends to be discovered when people happen to die in an inconvenient order), and the lawyer will looklike a target of opportunity. As detailed above, the case law indicates that the scope of damages iswhatever funds the client did not receive because of the error.

It is possible, of course, that with adequate CYA letters, etc., lawyers could make it their clients’problems (from a malpractice liability perspective) to figure out what to do after the divorce and tryto get it done. But it is far better lawyering – in the client’s interest and that of the attorney seekingto avoid potential liability – to deal with the retirement benefits at the time of divorce. Doing someans making sure the proper orders are in place at the time of entry of the Decree – and makingsure the relevant retirement plans acknowledge getting them.

D. Reservations of Jurisdiction; Indemnification

The lawyer’s two best tools for ensuring that orders are enforced, and that exposure to liability isreduced, are reservations of jurisdiction to correct problems, and express “indemnification,” meaningthat if benefits are paid for any reason at variance from what is specified in the court order, therecipient holds those funds as constructive trustee for the intended beneficiary.

The precise dangers to be addressed, and language to be used to avoid it, varies from one type ofretirement plan to another. Experience in dealing with the specific type of retirement plan at issueis critical to knowing what to insert in the relevant order.

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E. Disability Benefits

Generally, divorce practitioners tend to try to make their property distributions “permanent”; the caselaw contemplates that once a final distribution is made, it is to be enforced, but not modified.203

The question is what to do when a party substitutes a non-divisible income stream for anotherdivisible income stream after the date that a court decides to distribute the original asset as theseparate property of the employee and the spouse.

Probably the most common instance of such substitution difficulty involves a disability rating on thepart of the employee spouse which alters the “normal” retirement otherwise payable. Retirementbenefits are essentially a form of deferred reward for service, and so are generally divisible upondivorce, while disability benefits are conceptualized as compensation for future lost wages andopportunities because of disabilities suffered, and are thus typically not divisible or attachable.

Usually, the change is replacement of a portion of (taxable) retirement benefits with (generallynontaxable) disability benefits in an equal amount, but sometimes a disability award supplementsthe retirement benefits with a separate payment relating to the disability, either temporarily (untilnormal retirement age) or permanently. When accepting a disability award requires relinquishinga retirement benefit, the interests of the parties as to the proper characterization of the benefitsbecome instantly polarized.204

The ways in which possible disability benefits interact with retirement benefits varies enormouslyfrom one kind of retirement plan to another. In the military context, for example, there are multiplekinds of possible disability benefits, distinguishable by whether they are granted at or afterretirement, by whether they supplement or replace regular retired pay, and the basis for their award. To receive tax-free disability pay, a member must usually waive an equivalent portion of retired pay. Such waived pay is deducted from the definition of “disposable” pay that may be split with a formerspouse in accordance with a court order. Ultimately, any disability claim increases the moneyflowing to the retiree at the expense of the former spouse, even to the point of eliminating thespousal share entirely.205

Kramer v. Kramer, 96 Nev. 759, 616 P.2d 395 (1980) (property distribution in decree is final after six203

months, absent reservation of jurisdiction over property rights); Shelton v. Shelton, 119 Nev. 492, 78 P.3d 507, 511 (Nev.2003).

See, e.g., In re Marriage of Knies, 979 P.2d 482 (Wash. Ct. App. 1999) (only disability award in excess of204

amount of retirement benefits otherwise payable are the separate property of the retiree); Powers v. Powers, 779 P.2d91 (Nev. 1989) (disability benefits were divisible property to the extent they included divisible retirement benefits); Inre Marriage of Higinbotham, 203 Cal. App. 3d 322 (Ct. App. 1988), citing In re Marrriage of Stenquist, 21 Cal. 3d 779(Cal. 1978) (same); In re Marriage of Saslow, 710 P.2d 346 (Cal. 1985) (disability benefits may be part replacementof earnings and part retirement); In re Marriage of Anglin, 759 P.2d 1224 (Wash. Ct. App. 1988) (disability benefits maybe part replacement of earnings and part retirement); In re Marriage of Kosko, 611 P.2d 104 (Ariz. Ct. App. 1980)(disability benefits may be part retirement and part replacement of earnings).

See Mansell v. Mansell, 490 U.S. 581, 109 S. Ct. 2023 (1989).205

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This area of law is enormously complicated, and the federal programs involved continue to change. Some guidance is set out in posted CLE materials.206

For all retirement systems, knowing what would happen to the anticipated benefit stream in the eventof a disability claim is – or certainly could become – critical. Fallback indemnification clauses arethe best means currently known to deal with this possibility. There is no obvious reason not toreserve jurisdiction in the event of any interruption in the payment stream, including one caused bya disability conversion of the retirement.

F. Bankruptcy

Potential bankruptcy is an obvious example of an action by the wage-earner that could alter thedistribution of the benefits at issue. If the underlying divorce documents are correctly structured,207

it is often possible to ensure that even if the benefits themselves are out of reach, the court would beempowered to award alimony sufficient to deflect the impact of divesting of the spousal interest.

Historically, there was a split in the federal circuits as to the dischargeability in bankruptcy of onespouse’s obligations to another for future pension payments (or accrued arrears).208

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the209

balancing of hardships under the prior law between the debtor and creditor spouse was eliminated,and “domestic support obligations” were made nondischargeable in Chapter 7 bankruptcies, but210

apparently not under Chapter 13 plans that are successfully concluded. Such obligations were givena high priority, requiring their payment before satisfaction of virtually any other obligations of thedebtor.

In light of the continuing evolution of bankruptcy law, it has generally become easier for spouses toprevent discharge of arrearages in retirement benefits, as well as saving future payments, even if theproperty division is treated as a property division. But the intersection of pension division and

See Marshal Willick, Divorcing the Military: How to Attack; How to Defend, posted at206

http://www.willicklawgroup.com/military_retirement_benefits.

See Siragusa v. Siragusa, 108 Nev. 987, 843 P.2d 807 (1992); Martin v. Martin, 108 Nev. 384, 832 P.2d207

390 (1992) (“hold harmless” provision qualified as maintenance or support, since court found that without it “spousewould be inadequately supported”; alimony ordered).

The Fifth Circuit simply held that an award to a former spouse of a portion of the retired pay as property208

made it her separate property from that day forward, leaving no “debt” to be discharged or otherwise addressed by thebankruptcy court. See In re Chandler, 805 F.2d 555 (5th Cir. 1986), cert. denied, 481 U.S. 1049 (1987). The rule inthe Ninth Circuit was that prospective payments are not dischargeable, but accrued arrearages may be. See In reTeichman, 744 F.2d 1395 (9th Cir. 1985). The Tenth circuit did not allow discharge of either. See Bush v. Taylor, 912F.2d 989, vacating 912 F.2d 962 (8th Cir. 1990).

Apparently referred to in certain circles as the Bankruptcy Abuse Reform Fiasco (BARF).209

The term domestic support obligation is defined very broadly to include all debts to a spouse, former spouse210

or child incurred during a divorce or separation regardless of whether the debt is designated as a “support” obligationor not.

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bankruptcy remains problematic, and counsel should always be wary of any bankruptcy filing, orpotential filing.

G. Transmutation versus Severance Pay

The powers and procedures of courts to interpret divorce court orders, when expectations embeddedin the orders prove inaccurate, varies from one jurisdiction to another. As with the disability casesreferenced above, payments to an employee can be altered by altering or terminating the servicebeing performed or job held. The problem is often seen in court orders issued during active duty thatprojected a date certain for payments to start to the former spouse, or made reference to “twentyyears of service,” etc.

One example of how such problems arise and can be addressed was seen in the military casesinvolving the Variable Separation Incentive (VSI) and Special Separation Benefit (SSB)211 212

programs, which were early-retirement programs offered at times by the military by means of whichmembers could terminate service before completing 20 years, receiving lump-sum or time paymentsinstead of a regular military pension. The military also developed an early (15-19 year) retirement213

program known as the “Temporary Early Retirement Authority” (TERA) in 1993.214

The first two programs were offered to members in “selected job specialties” who had accruedbetween six and twenty years of service. Some were required to serve in Reserve units, as well,215

after leaving active duty. The TERA early retirement option was similar to “regular” military216

retirement, except that the sum paid contained an actuarial penalty of one percent per year for eachyear short of 20 years of service.217

All three of these programs were repeatedly re-authorized by Congress until 2001, and remainavailable to be used if perceived to be necessary. Most recently, Congress extended voluntaryseparation pay and benefits authority, formerly set to expire at the end of 2012, to the end of 2018.218

TERA retirements are divisible in precisely the same way as regular longevity retirements taken after20 or more years of service. The primary complications for TERA cases concern sub-issues as tomedical benefits for spouses, and what adjustments might be necessary for decrees issued under theassumption that the member would be completing 20 years of service, but where the memberseparated under TERA with less than 20 years.

10 U.S.C. §§ 1175-1175a.211

10 U.S.C. § 1174a.212

10 U.S.C. §§ 1174a(b), 1175a(h).213

Pub. L. 102-484, 106 Stat. 2315; former 10 U.S.C. § 1293.214

10 U.S.C. §§ 1174a(c), 1175(b).215

10 U.S.C. § 1175a(d).216

Former 10 U.S.C. § 1293(e).217

Section 526 of the 2012 Defense Authorization bill.218

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Especially when they were new, there was some question as to whether VSI and SSB benefits were,or should be, divisible as marital or community property. In Crawford, the court specifically219

quoted and analogized to Strassner, which addressed disability benefits. The Arizona court held220

that in both situations the spousal interest had been “finally determined” on the date of the decree,and enforcing that order in the face of a post-decree recharacterization by the member did not violateMansell.

Courts throughout the country are in fair consensus that a spouse can receive a share of any earlyretirement taken by a member, under the theory that the “early out” benefits are as divisible as theretirements that were given up to receive those benefits, despite the lack (for SSB and VSI) of anyfederal mechanism for direct payment to the former spouse. Other courts throughout the country221

have used similar language or reasoning to reach the same results regarding both programs.222

Very few courts have reached the opposite result. Others have reached that opposite result, just223

to be reversed on appeal or affirmed upon narrow findings of special circumstances. But the result224

may hinge on who frames the debate, since some courts still perceive benefits characterized as“severance” as non-divisible separate property.225

Care should be taken to ensure that any “residuary” benefits surviving a conversion to severance pay,etc., is also divided by the court. In the military context, for example, members carry with them thepotential to significantly increase the time credited for second retirement programs by countingmilitary service. Many state governmental programs, including Nevada PERS, and many private

In re Crawford, 884 P.2d 210 (Ariz. Ct. App. 1994).219

In re Marriage of Strassner, 895 S.W.2d 614 (Mo. Ct. App. 1995).220

See In re McElroy, 905 P.2d 1016 (Colo. Ct. App. 1995) (SSB); In re Shevlin, 903 P.2d 1227 (Colo. Ct. App.221

1995) (VSI); In re Heupel, 936 P.2d 561 (Colo. 1997).

See Kulscar v. Kulscar, 896 P.2d 1206 (Okla. Ct. App. 1995) (SSB divisible in place of military retirement222

divided in divorce, refusing to “allow[] one party to retain all the compensation for unilaterally altering a retirement planasset in which the other party has a court-decreed interest”); Marsh v. Wallace, 924 S.W.2d 423 (Tex. Ct. App. 1996)(SSB); Pavatt v. Pavatt, 920 P.2d 1074 (Okla. Civ. App. 1996) (SSB); Abernathy v. Fishkin, 638 So. 2d 160 (Fla. Ct.App. 1994) (VSI); Blair v. Blair, 894 P.2d 958 (Mont. 1995); Fisher v. Fisher, 462 S.E.2d 303 (S.C. Ct. App. 1995)(VSI); In re Babauta, 66 Cal. App. 4 784, 78 Cal. Rptr. 2d 281 (1998); Marsh v. Marsh, 973 P.2d 988 (Utah Ct. App.th

1999) (SSB); Lykins v. Lykins, 34 S.W.3d 816 (Ky. Ct. App. 2000).

See McClure v. McClure, 647 N.E.2d 832 (Ohio Ct. App. 1994).223

See Kelson v. Kelson, 647 So. 2d 959 (Fla. Ct. App. 1994) (VSI held not divisible in split opinion);224

overruled, 675 So. 2d 1370 (Fla. 1996); Baer v. Baer, 657 So. 2d 899 (Fla. Ct. App. 1995) (where service member givenultimatum to accept VSI or be immediately involuntarily terminated, VSI payments were severance pay rather thanretirement pay, and not divisible); In re Kuzmiak, 222 Cal. Rptr. 644 (Ct. App. 1986) (pre-SSB/VSI case; separation payreceived upon involuntary discharge pre-empted State court division).

See In re Holmes, 841 P.2d 388 (Colo. Ct. App. 1992) (severance pay is payment for expected loss of future225

income, not deferred compensation for services rendered, despite being based upon years of service); Lawson v. Lawson,208 Cal. App. 3d 406, 256 Cal. Rep. 283 (1989) (listing factors for evaluating severance pay to see if they are maritalor non-marital property).

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retirement programs, grant credit in their retirement systems for military service, especially whenno separate pension resulted from that service.226

Failure to make the resulting increase in benefits allocable to the former spouse is probably amistake. A spouse seeking to share in a transmuted benefit or severance pay should also ask thecourt for a reservation of jurisdiction, at least, to enter such further order as is necessary to trace thespousal share of any later increase in benefits in another retirement system that is attributable toservice during marriage.

It could be concluded that the above cases generally stand for the proposition that it makes nodifference how or why the member reduces a divorce court’s award to a former spouse – the fact thathe does so mandates that compensation be provided. The cautious practitioner, however, cannotpresume that a reviewing court will reach the same result, and so will ensure that the propertysettlement agreement or divorce decree is crafted with sufficient demonstrations of intent (andreservations of jurisdiction, if necessary) that a later reviewing court would be able to transcendrecharacterization of the benefits addressed.

H. Stock Options

A number of companies offer stock options as either a benefit or as a retirement option for theiremployees – sometimes referring to the benefit as deferred compensation. The diligent family lawpractitioner will ensure that discovery is done as to all possible benefits accrued during the marriage.

Stock options are contingent rights given to employees of a company to purchase stock of thecompany at a price set at the time the option is created. If the stock increases in value by a specifiedfuture time, the option can be “exercised” to buy it at the price set, and sell it at the then-current price(or keep it into the future). If the stock has not increased in value, an employee is not required toexercise the option so the right has no element of downside risk. The employee does not have to putup any money for an option until the time that it is exercised.

Typically the employee does not have a vested interest in the stock until some set time period orperiods have run. If an employee with options leaves the company prior to a stated time period, theright to exercise some or all of the options is lost in most option contracts. The conceptual approachis that employees will have incentive to work hard for the company to increase the value of the stockand will stay employed with the company in order to be able to purchase the stock. The latterconcept is often referred to as “golden handcuffs.”

In startup companies in particular, options are a way of having key employees work for less than amarket salary in the hope of bigger rewards from the increase in value of the stock.

Stock options can be granted with either immediate vesting or vesting over time. In the firstinstance, the participant is awarded the right to purchase stock at a certain price – usually discountedoff the market price at the time of the award – for any period into the future. It then becomes theparticipant’s decision on whether and when to “exercise” that option. Obviously, if stock options

See NRS 286.301, 286.303, 286.365, 286.479, 286.510(2).226

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are granted to a participant during the marriage for work performed during the marriage, the optionswould be considered community property.227

In the second instance, the stock options may be granted during the marriage, but not vest until sometime in the future – and often only if the employee is still employed with the company. Thissituation raises the question whether an option granted during marriage, but not vested until afterdivorce, is separate or community property.

The legal question has not been directly litigated in Nevada, but has been extensively litigatedelsewhere, specifically in California. In the leading case, Marriage of Hug, Justice King set forth228

basic principles for division of stock options that have been cited and followed in most subsequentcases:

1) Section 5118 of the Civil Code (now Family Code 772) applies to stock options. Postseparation earnings of a spouse are the separate property of that spouse and options areearnings.

2) Trial courts have broad discretion to select an equitable method of allocating communityand separate property interests in stock options granted prior to separation and not fullyexercisable until after separation. The purpose of any method of division is to achievesubstantial justice between the parties considering all of the facts and circumstances of thecase.

3) Time rules for division of options are appropriate. No single formula is required orapproved. A single formula would be promotive of settlement but “to do so would be tofollow the recent tendency of appellate courts and the Legislature, which we decry, to adoptrules which on the surface are easy to apply and foster consistency yet, as applied, too oftenachieve inequitable results.”

4) It is appropriate to award each spouse a portion of benefits as they are paid.

In other words and simply, if the grant occurs during the marriage, it does not matter if the vestingoccurs after the divorce, the options are generally community property to be divided between theparties, but the specific terms and conditions of the options in question can alter what division of thebenefit is most fair.

Options may be qualified or non-qualified under federal tax law. Qualified options receive favorabletax treatment and do not result in any tax consequence to the grantee of the option until and unlessthe option is exercised. The difference does not affect ownership of the options but can affectvaluation if the options are not divided in kind. More on qualified and unqualified benefits followsin the next section.

Of Course, if there are any restrictions created by a premarital agreement or other contract between the227

parties that characterize the benefit as sole and separate property, that would apply over and above the presumption ofit being a community asset.

54 C.A.3d 780, 201 Cal. Rptr. 676(1984).228

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I. Non-Qualified Plans

ERISA requires most retirement plans to be funded, with the assets held in trust. Such plans, andthe related trusts, are subject to the fiduciary responsibility rules of Title I of ERISA, which includenumerous rules designed to ensure the fairness of plans and the safety of the promised retirementbenefits. Exceptions to these rules are made for some plans, most notably “Top Hat” plans(unfunded plans of deferred compensation for a select group of management or highly compensatedemployees), unfunded “excess benefit” plans, and government plans. Top Hat plans are subject229

only to ERISA reporting and disclosure obligations, and claims regulation. Government andunfunded excess benefit plans are exempted from ERISA coverage entirely.

Plans are not required to honor “QDROs” for distribution of such plan benefits because the plans arenot tax-qualified; the orders can therefore never be “qualified,” either. Nevertheless, many non-qualified plans will honor court orders dividing plan benefits; others will not. It is critical forcounsel to figure out what benefits are actually involved in a case, and what is required to dividethem. Where the plan benefits are not directly divisible, counsel may be required to find morecreative solutions such as offsets, constructive trusts, or other means of achieving equitabledistribution under community property rules.

J. Taxes

Books could be written on the subject of proper tax treatment of pension and retirement interests. In fact, several books exist that spend considerable time and attention on this subject, and no effortwill be made here to recapitulate that information.230

One particular tax distinction, however, should be stressed. Most, but not all, retirement assets arepre-tax assets, which should not be directly offset on a balance sheet against post-tax assets such asmoney in a savings account or equity in a home. Doing so is possible, but requires assumptionsabout tax rates and actual values, which may or may not pan out.

For example, if money in a pre-tax IRA account was discounted by 18% to account for future taxes,but Congress raised the effective tax rate on such withdrawals for the party involved to 25%, theassumed and actual values of the benefits would be quite different. Depending on the facts, therecould be penalties for withdrawal of the funds as well.

The Nevada Supreme Court, for its part, has held that divorce courts must consider tax consequenceswhen dividing community property if there is proof of immediate and specific tax liability. It is231

probably a good idea to remember the existence of eventual tax liability, however, on any accountbeing traded for another asset with no such burden.

Transfers of a portion of a retirement plan to a former spouse by means of a QDRO is not a taxableevent to the wage-earner. Similarly, an employee realizes no gain for tax purposes by withdrawing

See, e.g., 29 U.S.C. §1101(a)(1).229

See, e.g., Retirement Equity Act: Divorce and Pensions (Divorce Taxation Education, Inc. 1985 & Supp.230

1988); H. Wren, L. Gabinet, & D. Carrad, Tax Aspects of Marital Dissolution (1991).

Ford v. Ford, 105 Nev. 672, 782 P.2d 1304 (1989).231

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Keogh or IRA funds pursuant to court order and dividing them with a former spouse. Benefit232

payments to a former spouse under a QDRO, however, are generally taxable income.233

The REA does not govern the division of IRAs, but the Internal Revenue Code provides that theymay be divided tax free between divorcing spouses by agreement or court order. A QDRO is not234

required to divide IRA accounts, as long as the decree (or an order incident to the decree) specifiesthe division.235

Rollovers must be handled very carefully, usually by direct transfer of the money from one accountto the other without being withdrawn and re-deposited, which action could trigger imposition ofwithholding and taxes on the sums involved. Doing this incorrectly could lead to very seriouseconomic effects.236

Similarly, if a participant takes the money outside of a QDRO, even to give it to the former spouseunder a court order, full tax consequences and the 10% penalty are triggered as to the participant. If a QDRO is used to send the money to the Alternate Payee (or to the Alternate Payee’s qualifiedtax-deferred plan), the “taxable event” is attributed to the Alternate Payee, and there is no 10%penalty.

Similar situations exist in most retirement systems. The difference in the definition of “disposableretired pay” for pre-1991 and post-1991 divorces is huge – amounting to a 10% or greater lifetimedifference in actual payments to a former spouse.

The point is that the question of what is taxable, to who, and when, is one more thing that counselmust consider and address in dividing retirement benefits in divorce.

K. Practicalities and Cautions

The mechanics of dividing private pension plans are largely beyond the scope of this seminar. 237

See Private Letter Ruling 9016077 (April 20, 1990).232

See 29 U.S.C. §§ 402(a)(9), 72(m)(10).233

See 29 U.S.C. § 408(d)(6).234

See 29 U.S.C. § 408(d)(6).235

The entire amount withheld would itself considered a taxable distribution, on which regular income taxes,236

plus early withdrawal penalties, are assessed. If a 31% bracket taxpayer tried to roll over $100,000 by having a checkissued to his spouse’s IRA the next day, he would actually receive only $80,000. Taxes of $6,200 would be owed thatyear on the $20,000 withheld, plus a $2,000 penalty for early withdrawal. The net cost for holding the funds for a daywould therefore be $8,200, and the $20,000 withheld would earn nothing during the entire tax year. There could be arefund of the remainder at the end of the tax year.

Courses by experienced QDRO experts on order-drafting typically take one to two days to cover the237

intricacies of QDRO-drafting and private pension rules. No such effort is attempted here. The intent of these materialsis more to flag the practitioner on what needs to be known to do this correctly than to actually provide the instructionrequired to do so.

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Many practitioners do not understand why they cannot simply obtain a form order from the PlanAdministrator of a pension plan, fill in the blanks, and submit it for signature by the Judge. Theanswer lies in the difference between what is required to get an order qualified, and what is requiredfor counsel to satisfy his duty to his client.

The form orders distributed by Plan Administrators are largely sufficient to pass the test ofqualification to be QDROs, but that is a Plan Administrator’s only concern; he or she neither knows,nor cares, about what steps may be taken to protect a client from the vagaries of life (or the maliceof the other party).

In other words, there is a huge difference between the terms necessary to creating an enforceableQDRO and those adequate to protect the client’s actual interests. Counsel must seek to have theQDRO address many items that are not strictly necessary for the draft just to be accepted. Theabsence of such provisions will not affect the validity of the order, but may well determine whetherthe order actually does a client any good in the real world (or leaves an attorney liable for malpracticefor not doing so).

For example, counsel should expressly deal with potential changes in status, the ultimate exampleof which is death. But a Plan Administrator may not care a bit if the former spouse is left with nosurvivorship benefits; protecting parties is not the Plan Administrator’s job.

The absence of such a provision will not affect the validity of a QDRO, but if the facts are that theparticipant dies, has a new spouse, and the former spouse’s attorney did not put such a clause in theQDRO, malpractice liability looms. On the flip side, failure to restrict the former spouse’s“surviving spouse” benefit to the portion of the retirement benefits earned during marriage couldleave the participant’s attorney vulnerable to a claim by the participant’s later spouse and intendedbeneficiary of the remainder of those benefits.

Similarly, the QDRO should provide for distribution from successor plans, for early retirementsubsidies or other bonuses that might accrue, and should allocate the risk that, for whatever reason,the benefits are not paid. Plan Administrators do not care about such things – but divorce counselhad better do so.

For the moment, it should suffice to say that hiring an appropriate expert draftsman for such ordersis often the best way of obtaining a proper order and avoiding liability for the divorce practitioner.

Divorce counsel should beware, however, of paralegal form-peddlers, discount mail-order firms, andothers who talk the talk, but actually have no idea what they are doing. Under the Captain of theShip doctrine, counsel using such services or individuals to create retirement division orders willprobably be held responsible – directly or indirectly – for the errors and omissions of the order-preparers.

L. Offsets: How to Do (and Not Do) Them

In many divorces, both parties may have retirement accounts and/or Individual Retirement Accounts(IRAs) to be divided. To limit the number of domestic relations orders required to “balance” theaccounts between the parties, offsetting is employed. However, great caution must be used as notall retirement accounts are the same and mixing dissimilar accounts can cause problems.

It used to be simple to balance IRAs belonging to two parties: subtract the smaller figure from thelarger, divide by two, and have that sum transferred from the larger to the smaller account. A term

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within the decree of divorce was all that is needed to grant the authority for the rollover transferwithout incurring tax or penalty liability.

However, with the advent of the ROTH IRA, it is now also necessary to ensure that all accounts arethe same (ROTH or Traditional) before balancing, as the tax treatment of these accounts issubstantially different.

This applies to pension plans as well. Unless both parties began work on the exact same day, workedfor the exact same period, and qualified for retirement at the exact same time, balancing two definedbenefit plans is extremely difficult to do without some unfairness. Two separate orders are requiredto achieve equity in such a case. Additionally, a defined benefit plan cannot be offset against adefined contribution plan (e.g., 401(k)) or an IRA (whether ROTH or Traditional). A definedcontribution plan can be balanced against another like plan or a traditional IRA, however.

It is almost never a good idea to try to offset non-retirement property with a retirement account. Doing so requires estimating or guesstimating the tax consequences of the offset to the partyreceiving the retirement accounts to ensure neither party is being short-changed, and the very act238

of the distribution can alter one or both parties’ tax positions.

Understanding the character of the client’s retirement assets is critical to ensuring that an offset cantake place. A practitioner not entirely sure of the character of the assets and potential taxramifications should seek the assistance of an expert before writing any decree or other order thatattempts to balance assets using offsets as a matter of defensive practice.

M. Security Interest QDROs

A QDRO may be employed for uses beyond just division of a pension. It can be used to recoverchild support and alimony payments that are due or overdue, or to secure those or other paymentsor obligations into the future.

Granting a security interest (also known as a Indemnity QDRO) in favor of one spouse who is owedsums upon divorce, using the benefits in a retirement plan as the security, has been approved by theIRS in Private Letter Ruling 9234014 (August 21, 1992), where each of the parties was granted asecurity interest in the benefits allocated to the other to secure contingent tax obligations.239

Various obligations that could be secured by a Security Interest QDRO include: (1) satisfaction oftax liabilities (e.g. when one party owes another an amount or is responsible for discharging a taxliability affecting the other); (2) payment of marital debts or ongoing expenses; (3) payment ofattorneys’ and experts’ fees (if one party is to pay amounts to the other for such fees, it is necessaryto make sure the payee is eligible under the plan rules); (4) transfer of assets; (5) release of securityinterests or mortgages; (6) purchase or transfer of life insurance, and (7) designations ofbeneficiaries.

If husband is to receive a house with an equity value of $100,000, and wife gets a 401(k) plan with the same238

dollar value, equity has not been achieved. Husband can sell the house and he will have $100,000. If wife cashes outof the 401(k), she will have to pay taxes on the money and will receive substantially less.

Also see IRS Private Letter Ruling 2002-52093, which reaches the same conclusion on almost identical facts,239

but is more complete in its explanation.

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At present, Security Interest QDROs are underutilized, but they can be valuable tools.

V. GUIDE FOR JUDGES

A. During the Litigation

As early in the litigation process as possible (no later than the Case Management Conference), everyjudge in every case should ask whether there are any retirement plans that need to be considered andaddressed in the divorce. A pension is most likely the most valuable asset of the community, andensuring it is adequately dealt with is important for a number of reasons:

1. So all parties know what assets should be distributed.2. So the assets can be preserved for adjudication, avoiding issues of fraud,

waste, and post-divorce litigation for partition or otherwise.3. So any possible settlement takes those assets into account, for division or

balancing against other assets.4. So parties can hire valuation/pension experts early in the process if needed

to assist in the division of the assets.5. To prevent delay in the proceedings when one party or the other starts, late,

to do the discovery and other work necessary to adequately address pensionassets.

Of course, each party has a duty of disclosure under the current NRCP 16.2 rules; however, not everyattorney is diligent or fully forthcoming, and pro per litigants typically do not understand theirresponsibilities. In either event, it may fall to the judge to avoid substantial injustice (by loss of theprimary marital assets, loss of survivorship eligibility, or otherwise).

Additionally, some lawyers do not understand the complexities of pension division in divorce, anda little judicial nudge to get them to deal with the matter as early in the process as possible (by eitherlearning what is needed to be known, or obtaining competent assistance) will ultimately saveconsiderable time and aggravation for the parties and for the Court.

B. At Trial or Prove-Up

A judge can’t ignore the division of the pensions at the time of trial or prove-up without facilitatingthe mischief that will virtually always follow. Just asking the same questions asked earlier on in thelitigation:

1. What will be available (and the form – whether a monthly annuity, or with a lumpsum option), and whether there might be more than one plan associated with aparticular wage-earner;

2. The amount of the benefit that is divisible community property, under the time rule,direct tracing, or some other analysis;

3. When that sum is to be first available for distribution, and what steps might be takenby either party to accelerate or delay that availability;

4. What, if any, survivor benefits might be accorded to a former spouse in addition toor in place of the retirement benefits, and who will pay for them;

5. Whether any ancillary benefits are available (most importantly, medical benefits);

will force the parties to place on the record what is to become of the pension assets.

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It certainly is not the judge’s duty to advise litigants – especially if they are represented – as to allof their rights and responsibilities. That said, since the plans’ existence will already be part of thecourt record at that point, the Court can inquire – sua sponte – what decisions have been maderegarding the disposition of the assets, as a matter of efficient court administration, if for no otherreason.

Prove-up or trial is also the appropriate time to ask who will be responsible for preparing therequired additional orders – such as QDROs or COAPs – and when, precisely, they will be submittedto the Court for signature. This simple reminder could avoid malpractice claims stemming from theOPM’s “first order” rule, or other inadvertent loss of retirement or survivorship benefits, and thusprevent considerable unnecessary misery for a number of people involved.

C. Upon Submission of a Decree, QDRO, or Pension-Division Order

The judge should ensure that any post trial or prove-up order or decree recites the intent of the Courtand/or the intent of the parties on the division of the pension assets. The Court should inquire as towho drafted the pension language, whether the order has been pre-approved (if applicable), whetherthe division is to be effective on first eligibility to retire, at actual retirement, or at some other time,240

and should ensure that there is a reservation of jurisdiction for the Court to correct any errors and toallow enforcement of the Court’s intentions.

The list of possible problems that may be encountered in each pension division order or QDRO istoo lengthy and varied to include here. A judge should become familiar enough with the process toensure that any order that is presented for signature and entry does not violate either the terms ofNevada or federal law, or the intent of the Court and parties.

VI. CONCLUSIONS

Pension plans are ubiquitous, and are typically the most important single asset at issue in a divorcecase. It has become increasingly important for domestic relations practitioners to seek out theexistence of such assets in each case, to learn all aspects of the relevant plans, to develop appropriatevaluations for those assets where necessary, and to properly provide for the distribution of allretirement and survivorship benefits available. Only then can counsel intelligently negotiate – orlitigate – their clients’ interests in such retirement benefits.

Practitioners are cautioned that the drafting of QDROs and other retirement benefit division orderscan be a complex venture, replete with traps by omission and commission. Slavish copying of anyform is an invitation to disaster. Unless counsel is fully comfortable with all plan rules,requirements, attributes, and limitations, it might be most economical to enlist expert assistance.

Such a deferred division might well not comply with the mandate of equal division of assets required by NRS240

125.150, and thus may require explicit written findings on the record to withstand appellate scrutiny.

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TABLE OF EXHIBITS

1. Checklist: Private (ERISA-based) retirement

2. Questionnaire: QDRO for Private Pension

3. Checklist: FERS/CSRS (Civil Service) retirement

4. Questionnaire: COAP for FERS/CSRS (Civil Service)

5. Checklist: Military retirement

6. Questionnaire: MBDO for military retirement & SBP

7. Checklist: Nevada PERS retirement

8. Questionnaire: PERS QDRO

9. Life Table 6-3: expectation of life at single years of age, by race and sex

10. Military retirement benefits lump sum equivalency table

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David M.Grant, Esq., MACCGrant Morris Dodds, Las Vegas - www.gmdlegal.com

Katherine L. Provost, Esq.Dickerson Law Group, Las Vegas – www.dickersonlawoffice.com

Honorable Chuck WellerSecond Judicial District Court, Reno

Trust Issues in Divorce

Issues To Be Covered

Trust 101 – Identification of Various Types of Trusts and Key Terms of Trusts

Complications of NRS Chapter 166 and Piercing a Trust

How Trusts Can Impact Your Divorce Case

What Happens to Existing Estate Planning Upon Divorce

Child Support Trusts

Can Trust Assets Be Looked to When Determining Support Obligations?

Contract between grantor/donor/settlor and trustee to hold property for beneficiary subject

to fiduciary duties

TRUST 101 -What is a Trust?

Purposes of TrustsSave Taxes

Examples – AB trust, GRAT, insurance trust, GST dynasty trust

Protect a Vulnerable BeneficiaryExamples – Minor’s trust, asset protection trust, special needs trust

Control the Disposition of AssetsMarital Trust

Creditor ProtectionSelf Settled Spendthrift Trust – NRS Ch. 166

Protection Upon DivorceSelf Settled Spendthrift Trust – NRS Ch. 166

Features of Trusts –

Inter vivos vs. TestamentaryRevocable vs. IrrevocableDiscretionary vs. Non-discretionaryGrantor vs. Non-grantor (for tax purposes)Powers Included in TrustsTermination Provisions

Common Types of Trusts In Nevada Living Revocable Trust Age 21 Gifting TrustIrrevocable Life Insurance Trust (ILIT) / Crummey TrustDynasty Trust / Generation-Skipping Transfer (GST) TrustGrantor Retained Annuity Trust (GRAT)Charitable Lead Trust (CLT) and Charitable Remainder Trust (CRT)Qualified Personal Residence Trust (QPRT)Spousal Lifetime Access Trust (SLAT)Special Needs TrustsSelf-settled Spendthrift Trust / Asset Protection Trust (APT) –More on this in a moment

Key Terms To Look For In Revocable Trusts

How does trust define character of property:“Schedule A” property: Community, separate, or mixedPersonal property lists & asset inventories (to provide insight into character of property)Look at deeds conveying real property to trusts—many trusts say that the character of property (community vs. separate) willremain the same as is indicated on document of conveyance

Trust requirements for amendment and/or revocation

Date of trust & identity of grantor(s)

Key Terms To Look For In Irrevocable Trusts

Look at spendthrift provisionsPowers of appointment (whether exercised or not)Who is the grantor/what is the source of funding of trust?

Gift or inheritanceOne/both of the spouses

Identify trustees, beneficiaries, trust protectorsHow is trust income tax paid? Was community income used to pay the taxes?Were distributions made? And to whom?Were formalities of trust followed? Any commingling?Was there a separate property agreement (post nuptial) signed inconjunction with formation of an ILIT?Does one spouse control income from trust assets?

Self Settled Spendthrift Trusts –NRS Chapter 166

Statutory requirements:Limitations on distributions to settlor(s)Statute of limitations Restriction of actions against trusteesSpendthrift provisions – No exception for alimony & child support

Piercing the trust Alter ego (used as personal piggy bank?)Lawrimore v. Lawrimore, Nevada Supreme Court unpublished decision filed September 13, 2012Look at rational for establishing trust (asset protection vs. creating a separate property agreement)Separate property agreements

Comparison of Nevada vs. other states (see Oshin’s chart)

Can Trust Assets Be Accessed for Support?

(Piercing a Trust)

Key Question – What Control Does Beneficiary Have Over Trust?

Look at Trust documentsHas the right to compel distributions – Likely YES

Receives Income at Sole Discretion of a Non-Party – Possibly NO

Courts Must Balance the Competing and often Irreconcilable Intentions of the Trust Settlor and the Needs of Spouse/Child for Financial Support

How Trusts Impact Your Divorce Case

Strategize Your CaseJoinder Impact of Financial Restraining Orders/Joint Preliminary Injunction on Trust

Strategize Your CaseDetermine at initial meeting if a Trust existsReview the Terms of the Trust Involved in Your CaseConsider consulting with a Trust expert

Attorney Who Drafted the TrustExperienced Trust Litigator

Gather Your Evidence EarlyTrust documentTransfer documentsMinutes of any meetings conducted by Trustees3rd Party WitnessesBank Records

JoinderGladys Baker Olsen Family Trust v. Eighth Judicial District Court, 110 Nev. 548, 874 P.2d 778 (1994)Guerin v. Guerin, 114 Nev. 127, 953 P.2d 716 (1998) Motion to Amend Complaint for Divorce

Impact of Financial Restraining Orders/JPI on Trust

NRS 111.781(5) – Revocable TrustsUnless a court in an action commenced pursuant to Chapter 125 of NRS specifically orders otherwise, a restraining order entered pursuant to NRS 125.050 does not preclude a party to such an action from making or changing beneficiary designations that specify who will receive the party’s assets upon the party’s death.

Can JPI/NRS 125.050 Orders be enforced against an Irrevocable Trust/Self Settled Spendthrift Trust?

Look at Trust documentsDoes beneficiary have the right to compel distributions – Likely YESDoes beneficiary receive income at sole discretion of a non-party –Possibly NO

What Happens to Existing Estate

Planning Upon Divorce?

Statutory revocation of estate planning provisions and fiduciary designations.

The Law Since 1999

Revocation of Will and Trust Provisions

Revokes every devise, beneficial interest or designation to serve as personal representative given to the testator’s spouse in a will. (NRS 133.115)

Similar statute for revocable living trusts. (NRS 163.565)

Operates upon divorce or annulment.

Added to the Law in 2009

Revocation of Authority Under a Power of Attorney for Financial Matters (NRS 162A.270)

Terminates authority of agent spouse.

Operates upon the filing of an action for:Divorce,Annulment,Legal Separation.

Revocation of Authority Under a Power of Attorney for Health Care Decisions (NRS 162A.820)

Terminates authority of agent spouse.

Operates upon the filing of an action for:Divorce, Annulment, NOT Legal Separation.

Added to the Law in 2011

Revocation of Dispositions of Property and Appointments of Fiduciaries (NRS 111.781)

Revokes revocable transfers to spouse or spouse’s relatives by joint tenancy with right of survivorship, community property with right of survivorship, or beneficiary designation.

Terminates authority of spouse or spouse’s relatives to act as executor, trustee, guardian, or agent.

Applies to transfers of property made by will. (NRS 136.225)

Applies to transfers to property made by trust. (NRS 164.960)

Operates upon divorce or annulment

“Plan Document Rule”

ERISA – Federal requirements for private pension plans.

Requires “that plans be administered, and benefits paid, in accordance with plan documents.”

Conflicting state statutes are pre-empted.

Egelhoff v. Egelhoff, 532 U.S. 141 (2001)

What About Unfunded or Improperly Funded Trusts?

Real Property Deeds

Accounts Signature Cards

Corporate Ownership Stock Certificates

Water Rights State Engineer

Vehicles Department of Motor Vehicles

Insurance Beneficiary Designations

Child Support Trusts (NRS 125B.200 et seq.)

Legislative History Citation

This statute is intended to be used in “situations when an individual was self-employed, retired, independently wealthy, or otherwise did not have a salary check to garnish.”Minutes of the Nevada State Legislature, Assembly Committee on Judiciary, January 30, 1989, Page 2.

Requirements

A child support order.Insufficient income subject to a garnishment or a history of employment that makes wage withholding difficult to enforce.30 days of arrears.Notice and an opportunity to be heard.A finding of good cause.

Possible Results

The court may require a deposit of property with a value of all arrears plus one year of ongoing award.Ex parte financial restraining orders are available.Award of attorney’s fees and administrative costs are mandatory.

2013 ANNUAL FAMILY LAW CONFERENCECASE LAW UPDATE

Katherine L. ProvostDickerson Law Group, Las Vegas – www.dickersonlawoffice.com

Termination of Parental Rights

In re Parental Rights as to C.C.A., 128 Nev. Adv. Op. No. 15 (April 05, 2012)

The Court reversed the district court’s order terminating parental rights when the record failed to identify—in writing or on the record—the factual bases that support its termination order and simply recited the statutory grounds required to terminate a parent’s parental rights.

It is insufficient to fail to explain why the statutory grounds for termination existed. If the district court fails to make any findings concerning the standard of proof in its order or on the record, the reviewing Court will be unable to determine on appeal whether substantial evidence supports the district court's ruling. Therefore, the Court will reverse the order and remand the matter to the district court to enter its findings.

In re Parental Rights as to J.D.N., 128 Nev. Adv. Op. 44 (August 30, 2012)

In this case the Court considered two questions: (1) whether an objection to the admission of an entire set of documents as hearsay preserved the issue for appeal and (2) which burden of proof should be used to rebut the parental-fault and child’s-best-interest presumptions found in NRS 128.109.

HearsayDuring termination proceedings counsel for one of the parents objected to the introduction of the entire juvenile court record as part of the termination case proceedings. The juvenile court record was admitted in its entirety despite an objection that it contained hearsay. The objection did not specify which portions of the record were hearsay.

Hearsay objections must be made to the specific portion of the record which is objectionable rather than to an entire file. Objections to the entire juvenile file in this case were improper and effectively waived.

Burden of ProofThe burden of proof to rebut the parental-fault and child’s-best-interest presumptions found in NRS 128.109 is a preponderance of the evidence.

MARITAL AGREEMENTS/PROPERTY SETTLEMENT AGREEMENTS

Grisham v. Grisham, 128 Nev. Adv. Op. 60 (December 6, 2012)

The court considered whether a written, but unsigned property settlement agreement draft, which had been entered into evidence, can be considered binding.

SO WHAT HAPPENED?-Robert Lueck, Las Vegas for Appellant-Radford Smith, Las Vegas for Respondent

During the divorce proceeding the attorneys for the parties advised the court that they had negotiated a property settlement agreement (PSA). The draft PSA was presented in court and included interlineations and handwritten changes. The attorneys asked the court to put the settlement on record as part of an uncontested divorce prove-up hearing, with a clean copy to be prepared and signed later. The court accepted the PSA as an exhibit and the lawyers read the handwritten changes on the draft into the record, stipulating that it would be binding. Both parties were questioned and stated that they had understood and agreed to the PSA. The court orally accepted the settlement.

When the clean copy was generated, wife signed it but husband first requested revisions and then later refused contact with his own lawyer. Husband’s lawyer withdrew and asserted an attorney’s lien, which the court placed into judgment. After several months, wife moved for a divorce decree based on the PSA. Although husband opposed her motion, the district court entered a final decree based on the PSA.

Pursuant to EDCR 7.50 and DCR 16, “An agreement to settle pending litigation can be enforced . . . if the agreement is . . . entered in the court minutes following a stipulation.”

One Last Comment on Grisham

Husband in Grisham challenged the attorney’s lien asserted by trial counselConcerning the lien, the Court found that implied consent, which can be garnered from the record, is a basis for a court to have jurisdiction over an attorney’s lien. Citing to Argentena Consolidated Mining Co. v. Jolley Urga, 125 Nev. 527, 539, 216 P.3d 779, 787 (2009).

Attorney’s LienImplied consent, which can be garnered from the record, is a basis for a court to have jurisdiction over an attorney’s lien. Citing to Argentena Consolidated Mining Co. v. Jolley Urga, 125 Nev.527, 539, 216 P.3d 779, 787 (2009).

DIVISION OF PROPERTY AND SPOUSAL SUPPORT

Devries v. Gallio, 128 Nev. Adv. Op. 63 (December 13, 2012)

SO WHAT HAPPENED?Roderick A. Carucci, Reno for AppellantJack T. Bullock, II, Winnemucca for Respondent

Husband sought an interest in wife’s separate property (cattle business) due to husband’s work efforts on the cattle ranch, for which he never received a wage.Husband also sought review of a denial of spousal support after the district court refused to hear evidence on the support issue.

Property DivisionThe Supreme Court upheld the district court decision denying allocation to husband of any portion of wife's share in business she obtained with separate property when the record confirmed that all of wife's contributions to business derived from her separate property, and that there was no evidence in record that husband's labor contributed to increase in business' value.

It is not an abuse of discretion for a district court to deny a party an interest in the separate property of the other without making an explicit finding as to the Van Camp or Pereira tests.

Alimony It is an abuse of discretion for a district court to deny a party spousal support where the district court does not make specific findings as to the Sprenger factors.

An order which concludes only that support was unwarranted under the “statutory factors,” is an abuse of discretion and the case was remanded to the district court to reconsider the case with specific findings as to the factors.

REVIEW OF DEPENDENCY MASTER’S FINDINGS OF FACT

In the Matter of A.B., 28 Nev. Adv. Op. 70 (December 27, 2012)

The Court considered how a dependency master’s finding of facts and recommendations should be reviewed by the juvenile dependency judge.

Although a juvenile court should give serious consideration to a dependency master’s finding of facts and recommendations, the master’s findings are not binding. The court may rely on the master’s findings if they are supported by evidence and thus not clearly erroneous.

Juvenile CasesIn the Matter of George J.128 Nev. Adv. Op. 32 (June 28, 2012)

◦ Addresses juvenile court jurisdiction over certain acts

◦ NRS 62B.335 only applies to acts that are “deemed not to be a delinquent act” under NRS 62B.330(3). If a case is excluded from the juvenile court’s jurisdiction under NRS 62B.330(3), the juvenile court does not obtain jurisdiction by virtue of NRS 62B.335.

In the Matter of Javier C.128 Nev. Adv. Op. 50 (October 4, 2012)

Is a juvenile detained for delinquency in a state facility a “prisoner” for purposes of NRS 200.481(2)(f) – Nevada’s felony battery-by-a-prisoner statute?No. Custodial confinement in juvenile matters is civil confinement. This statute is inapplicable to juvenile detainees.

ALIMONY IN NEVADA-A JUDICIAL PERSPECTIVE PART 1

Rather than offering a typical outline which includes the Nevada alimony statute, and the relatively few Nevada reported opinions on alimony, it appears more practical and useful to simply offer a discussion from a judicial perspective as to a few areas of concern, and some suggestions, in the preparation and presentation of alimony cases. Nevada family practitioners are generally well-aware of the statutory alimony factors, and the few reported opinions. Therefore, it is seldom of use to present seminar attendees with the statutes and cases, and merely reiterate the contents. Practitioners know the black letter law. What they want to know, in the area of alimony, are some important matters which are seldom really addressed at seminars. These matters concern the fact that there may be a fairly wide divergence between how different judicial departments handle similar cases and fact patterns. This factor is contributed to by the fact that the mathematical calculation of alimony is not enumerated by statute, unlike child support. Another concern is how to prepare and present the alimony case. This too varies depending on the judicial department. Some departments may be more persuaded by convincing testimony, while other departments may insist on reliable documentation to support each major assertion. The first thing to keep in mind that cases involving potential substantial alimony claims, are case which are, generally, going to be more protracted, expensive, require a lot of discovery and preparation, may be more emotionally charged, and may have greater pitfalls for the unwary practitioner. So make certain that you will have the time and resources to pursue such matter, and that the press of other work will not preclude you from doing a completely thorough job. This observation appears obvious, but when we think about it, it really isn't so obvious. For example, it is understood that the average practitioner will understand that a long-term marriage case involving at least one spouse with significant income, will require a lot more time and money than a case involving a short-term marriage without much money involved.. Obviously, practitioners do not have difficulty assessing, under that example, that the one case will involve a great deal more time, attorney fees, and devoted preparation. However, the difficulty arises in failing to distinquish between two asset-intensive long-term marriages--where one case involves a substantial alimony claim and the other does not. If an attorney is confronted with two cases, both involving a 20 year marriage with a lot of assets, but one case involves two good wage earners, while the other case only involves one major wage earner, there is sometimes a tendency to initially assess each case in a similar fashion--as to the time involved, and the retainer to charge, etc. But such cases should never be viewed the same, even though they are both asset intensive cases and involve a long -term marriage. The case with only one really viable wage earner(the alimony case) will require a great deal more preparation, time, money, aggravation, and potential professional pitfalls. Alimony clients may, quite understandably, be much more agitated, demanding, and will require a great deal of time and reassurance--which is how it should be since their whole future well-being is in your hands. Unlike the long-term, high-asset marriage cases which do not involve a substantive alimony issue, the alimony case involves an additional element of increased case preparation. We need to forecast the person's future. How much will they need to live? How much will it cost to get re-educated or re-trained, etc. Too often, these issues are not fully explored through discovery and case preparation, and the attorney tries to prove the alimony case purely through conclusory, purely self-serving testimony at trial, unconnected to any viable research, proof, or documentation. In that example, part of the problem might be that the attorney treated the alimony case like any other long-term marriage or high-asset case. But it cannot be presented that way. We can't simply proceed to trial, present as to the value and proposed division of assets, and then put the client on the stand to state conclusions about her limited education, work history, training, education, age and health, while also offering the conclusion that the opposing side, the six figure

wage earner, primarily supported the family. Of course such factors do need to be addressed, but judges are, generally, of the view, "show me", "don't tell me." You can't just state the conclusions. You need to dramatize your ideas. This is usually accomplished, as will be discussed, by collateral documentation to support the testimony. So if we know from the start that alimony cannot be treated like other long-term marriages not involving a major alimony claim, and we budget our time and commitment accordingly, and realize that we will have the time and legal resources to properly develop the case, we must also determine that we will have the financial funds to support the litigation. This is never as simple as it sounds. For example if we have two long-term, fairly high-asset cases, and one case has two major wage-earners while the other case only has one such wage-earner, in both cases we may not have much difficulty collecting a decent initial retainer. It is not uncommon that even in the example of the case with only one major wage earner, that the inferior wage earner may be able to initially access sufficient funds to pay an initial decent retainer. The problem may arise later on. In the case involving only the one major wage-earner, the lesser wage-earner may be unable to make the required monthly payments on the attorney fees--and it is always open to question as to how much of those attorney fees are ordered to be advanced by the other side(although you should always try to have the judge award the lesser wage-earner as much initial fees as is possible). But, ultimately, if you are not sufficiently compensated, and as a result the case is not properly and fully prepared, there are often unpleasant professional consequences, which practitioners hope to avoid at all costs. So budget accordingly and make certain that there is a viable plan in place(realistic payment schedules, liens on property if appropriate, etc.) for you to be sufficiently compensated for the full preparation and attention that you will devote to the case.

ALIMONY IN NEVADA-A JUDICIAL PERSPECTIVE

PART 2 Assuming you have now addressed all important issues concerning having sufficient time and money for adequate preparation, it is, as referenced earlier, important to consider the issue of which judge is assigned to the case. The hard fact is that there can be significant divergence between how two different judges would view, and ultimately rule on, the same alimony fact pattern. One of the explanations for this is that alimony, unlike child support, is not guided by a mathematical formula. Child support calculations involve, of course, percentages of an obligor's income based on the number of children. Once that figure is arrived at, some limited discretionary factors, as enumerated by statute, can be applied to somewhat deviate from the support obligation mandated by the calculation. In alimony case in Nevada, we have no such mathematical calculations, and thus this area is a lot more driven by judicial discretion than the area of child support. The judges are of course guided by the statutory factors to consider, but when those factors are synthesized in the ultimate judicial analysis, and the judge determines how much weight to place on each factor, there can be wide-ranging differences in how the judges exercise their discretion. For example, if you submit the same child support fact pattern to three different judges, you will often receive fairly similar results from all three. This is not necessarily the case with alimony. You can submit the same alimony fact pattern to three different judges, and receive fairly divergent results as to amount and duration of alimony. So it is important to know your judges. That is not, of course, meant to suggest that it is reasonable to label certain judges as being more pro-alimony than others. It is presumed that all competent Nevada jurists will award alimony when appropriate. But it is likewise true that judges come from wildly differing backgrounds, perspectives, etc. Fairly or unfairly, some judges may be perceived as being more generous with alimony awards under certain fact patterns, while other judges may be perceived as being less generous and may expect the lesser wage-earner to be more proactive in making efforts to get re-trained, re-enter the work force, etc. So, it is important to know your judge and any tendencies or philosophies they may have, and prepare accordingly. Again, there is no doubt that some judges are more inclined than others, to not only look at the history of the case, but will also look prospectively forward, and expect the lesser wage-earner to re-train, re-enter the work force, etc. In addition to being aware of such philosophies or tendencies as to the views of individual judges, it is, of course, far more important to know how such judge expects the proceedings to be conducted at the time of trial. Some judges may be significantly persuaded by testimony--if it is compelling, and fact-specific enough. However, again, many judges are more of the "show me, don't tell me" view and they will insist on hard evidence to support any substantive allegation. This type of challenge is best demonstrated in the area of rehabilitative alimony. After all, not all substantive alimony cases are of the sort where once you establish your client's age, health, lack of training and education, length of marriage, and gross disparity of earning capacity, that you are home free and need not demonstrate anything as to the future. Some alimony cases are like that, but many are not. Yes, you will have the occasional case with the 63 year-old homeowner who has been married nearly 40 years, was not substantively employed for most of the marriage, and the husband is working as a engineer with a six figure income, and will retire in two years with a fat pension, impressive investments, etc. In such case, who cares whether or not your client will ever work again? Nobody, because she is clearly entitled to permanent alimony. But most alimony case are not so simple. How about a case where the marriage is 18 years in length, the wife is 42, she has some level of employment during the marriage, although there is a still somewhat significant gap between her income and her greater wage-earning husband. This type of situation is more common than the earlier example, and of course in the current example we need to look toward the future. Your client may need to enhance her training , education, and earning capacity.Demonstrate to the judge that she has the commitment to do so, and

demonstrate to the judge what it will cost, so that you will hopefully receive an augmented alimony award. But, as will be discussed at the seminar, don't primarily rely on her testimony. She can't simply testify as to the conclusion that she needs greater alimony in order to pursue a nursing or a teaching degree. She must demonstrate that she has a clear game plan--e.g. number of credits per term, cost of schooling, how long will it take, how much is needed for living expenses while this is occurring, the job market in that field of discipline, to what extent it will enhance her earning capacity, etc.And it is critical that each such representations be supported by evidence and documentation. And at the seminar such matter will be discussed at length--not only as to how to present the evidence for such a claim, but also how to effectively challenge such representations if you are representing the side opposing the alimony request.

A Provocation: Why there is only one approach to alimony...

Why should a legislature pass an alimony statute at all? If we answer that question, we solve the problem of who receives it, how much, and how long. If we know why alimony exists, what problems the Legislature was trying to solve, we know what to do with the statutory claim to it.

Why did the Legislature permit judges to give post-divorce earnings, a spouse's separate property or part of a spouse's half of the community to the other spouse? The Supreme Court has never told us. I have not researched the legislative history so do not know what the original Legislature had in mind...if anything. But an order for payment under our statute cannot deliver real justice unless we know what problem the Legislature sought to solve or what injustice it sought to remedy when it allowed a court to order it.

So, putting yourself in the place of the judge (much harder than being an advocate), why in the first place do you make an award at all? Besides keeping a spouse off the welfare rolls, can anyone even guess why the Legislature said alimony is available? (And, if "no welfare" were the only the reason for the claim then one supposes the Legislature would have also said to only award funds in such amount to prevent welfare eligibility.)

If there is no single, overriding reason for an award, how can a Court make an award? And, how can that award be reviewed? What facts determine the predicate question: should the court make an award at all?

The law of alimony came from divorce law in England. (1) Ecclesiastical "divorce". It had the purpose of supporting

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the wife in case of separation since there was no divorce--all "divorces" from the church courts were only "separations." But if the wife were at "fault" in such a case she could not collect alimony.

(2) Parliamentary divorce. The rare Parliamentary divorce permitted alimony even with fault.

In either case, the rule of law at the time alimony was first awarded was that the Husband controlled Wife's property and had received a dowry from her. Women, especially married women, were almost totally vulnerable economically--no separate money and no job prospects. Was it the collective sense they simply could not be thrown away?

The economic/legal situation of women through to the 20th Century in America was much the same as that in England. Alimony made the same sense here as there.

The economic situation of women has changed--it is imperfect and sometimes wholly unfair today, but it is categorically different for most women. Half of all married women work (as of 1987); there are more women in college than men. No woman is a barred by society from supporting herself. The justification for "support", if not gone, has diminished. New justifications are necessary; the support justification must be rethought.

1. Judge Hardy's excellent article on the theoretical basis of each element of alimony discussed in NRS 125.150(8) and Clark, Law of Domestic Relations, Cha. 17 (West), explain the theories of why alimony exists at all and how they are inconsistent and perhaps contradictory: reliance theory v. need theory v. career

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subordination theory (which may be reliance theory or need theory restated).

One can conclude under Heim, 116 Nev. 993, (2000) and Rodriguez v. Rodriguez, that "need" or, at least, non-impoverishment is the bottom line. What is "need?" It may follow in logic and economics that "need" would be "lifestyle" as set forth in 114 Nev. 192 (1998) Shydler v. Shydler. And, when we read those cases with Rutar, 108 Nev. 203, (1992) ("the respective circumstances in which the parties have been left by the divorce"), we can say the law seems to call for an approximation of lifestyle. Can the rule of law be that the payee spouse will not be impoverished as "poverty" is defined by the lifestyle the parties led?

The statute is of little help to any serious court:

"[A]ny other factors the court considers relevant in determining whether to award alimony" Essentially, the statute says that the facts on which to base the legal conclusion an alimony award may be made are "any" plus those enumerated.

"[A]ny other factors the court considers relevant in determining whether to award alimony and the amount of such an award," The statute then says once having decided to make an award, "any" facts plus the enumerated facts calculate the amount of the award. How does an appellate court review "any"?

No part of the statute addresses what to consider in the duration of the award--unless one thinks the Legislature meant the "amount" of the award includes its total and hence its

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duration. (What is the duration of a "lifetime" award for determining its amount?)

Drafting and proof alert: When drafting findings of fact and conclusions of law for the court, is it required the Court set forth the facts which lead to the conclusion an award is merited then set out the facts on which the amount/duration is based? The first question in the alimony part of your trial statement might be: "Is Mrs. Jones worthy of an award of alimony in the first place?" By inserting those facts you get a "buildup" effect for not only the award but the amount you are usually overreachingly trying to obtain. On the payor's side, why concede the award? Your argument no award is merited may be weak, but again there is the "builddown" for the ultimate award--if you can convince the Court the award is barely merited perhaps the award will be lower.

It is hard to be kind to the Legislature when one reads the statute (and, the Court when one reads the cases--Rodriguez seems a bit petulant). Ingredients for the alimony cake are set out in the statute (and Buchanan), but we are not given their measurements (one cup of respective circumstances or two?), nor the temperature at which to bake them, nor how long it stays in the oven. However, without a statute there is no alimony so we must do the best we can. Alimony does not exist at common law...nor in Texas.

We lawyers must play the hand the Legislature dealt us--that is, deal with the elements in NRS 125.150(8). We lawyers are also required to give the court evidence to support our claims. It is submitted, proof (also known as evidence) required by the statute largely demands using vocational rehabilitation experts

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because the ability to earn by the payee spouse is an element in the equation equal to that of the ability of the payor spouse to pay. It is submitted that one cannot ask a court of equity it order a party to pay his or her separate property money to an ex-spouse without a co-equal demand from the payee spouse that she or he being willing to supply one's own money to his or her support.

Here now is perhaps the most difficult part of the alimony equation: (1) alimony is, historically, a product of equity; (2) equity requires the payee pay whatever part of her lifestyle or anti-impoverishment support she can (so does the law--mitigation of damages); (3) proof of earning power usually lies in the hands of a vocational rehabilitation expert. Whether we are a pure lifestyle state or need state or anti-impoverishment state, it is submitted the person asking for money must first earn all he or she can. Loss-of-career theory, reliance theory and need theory all require proof of what the payee can earn now and could have earned then (that is the very basis of each claim); certainly lifestyle theory demands it unless once can make the claim the lifestyle itself was of wholesale leisure and indolence, e.g., former Cravath associate told never have to work again and only "be available" to travel, mingle and be a companion. At bottom, it is arguable that simple equity requires mitigation of damages.

So the questions are: (1) What possible career path does the payee spouse have (education, training, opportunity in light of young children or physical issue), (2) can it be exploited (are there any jobs available if the spouse has a path at all), and (3) how much will it pay? Only a vocational rehabilitation expert can offer that proof. If one wants to use a career loss, reliance or damage claim, a vocational rehab specialist or economist can rebuild

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Wife's career and calculate her "loss." I have seen it done. It can work--certainly as an anchor. All the theories require proof of the (in)ability to provide a level of self-support at the most basic (no welfare) or greater (lifestyle) level.

There follows some views on alimony theory:

Theory #1. Career loss. This claim can only usually be based in pure speculation, e.g., female editor of Harv. Law Review quits as top rated associate at Cravath to marry and have children. Thirteen years and three children later she divorces her hedge fund-owning husband who leaves her for another man. Claim: I gave up my career--recompense me for it. The speculation: I would have made partner; I would have earned the average; I would have not burned out; etc.

Q: How much more do you value the children and half the marital estate than a partnership at a firm that required about 1900 hours per year from the partners? If you value them/it more, you are owed nothing.

Q: If less, how much do you value them/it so we can offset that amount against the $25M gross you would have earned?

Q: When you married were you aware (1) the legislature had passed a law permitting divorce and (2) the marriage might not last your lifetime?

Q: Had you ever heard of a prenuptial agreement?

Theory #2. Recompense homemaking contributions. Instead of marrying me, what if my spouse had hired a cleaner/nanny/cook/sex worker/surrogate mother/personal

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bookkeeper/etc. instead of marrying, what would that have cost? Pay me.

What is the fair market value of the private jet trips to St. Barts for a month at an exclusive resort, dinner at expensive restaurants, private seamstress, use of a Mercedes, her own sex worker and sperm donor?

Theory #3. No welfare/need. Keep the person who cannot otherwise support herself off the welfare rolls since you made that person unable to support herself by diverting her career/job prospects. Pay minimum wage? How long? Until rehabilitation finished? Rehabilitation to become a surgeon or an waitress?

Almost anyone can find a job and support themselves well enough to stay off welfare. If the children need a better environment/neighborhood, then pay for that under the rubric of child support, e.g., the cocktail waitress from a slum married to the basketball star for two years.

Need as a basis for an award is entirely subjective. Arguably one only needs a sleeping bag, refrigerator box, grocery cart and a warm grate. Exaggerated? Yes, but more than that amount and we begin the talk about lifestyle.

Theory #4. We had a deal--lifestyle. Classically the "deal" is this:

"You do manly things and I'll do girly things and we will live as we might agree--you get shotguns and I get cashmere. Or, neither gets either because we are going to bank it all because we like having a lot of money even if it means we shop

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at thrift stores. We have tacitly (or expressly) agreed this is how we will live in our partnership."

The "terms": "Though you do not have a job in the sense of a paycheck, you do "earn" trips to Aspen to ski, a Mercedes to drive, suits from Neimans, etc., because that is what I spend on you. Your value and services have been "priced." The price is an objective fact ascertainable by review of credit card statements, car payments, fair rental value of the home, etc., over the three years prior to the separation. In return for all the things you do and do not do to support our partnership, I am paying you. The specie is the bank+thrift shop or a Mercedes."

"We both recognize that if the partnership dissolves you must have some support, priced at or near the value I have paid to keep you in cars, shotguns, etc., for a period of time which will relate in part to the duration of the partnership and in part to your ability to earn enough come within say 75% of the lifestyle I gave you.

"We cannot speak of my adultery, your adultery or your inability to fix the plumbing, nor your inability to raise a child without a nanny."

Here is where the approach becomes arbitrary. Assuming a marriage of up to five years, when the payee spouse can reasonably come to within 25% of the earnings necessary to equal the marital pricing, and subject to payor's ability to pay it, the payor's duty to pay the "dissolution" price is over, but no longer than five years. After ten, 75%. (If the earner is a female and the payee a man, 25% and 50% might do because of wage disparity.)

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Whether you call it employment compensation or damages or whatever, it is submitted this is the objective criteria from which the Court must depart. Is it a formula? Any more than any other calculation we make today, e.g., "half the length of the marriage...?"

Given the population of women in college and professional schools, men will become recipients more and more often as the example above reflects.

I submit there are few objective criteria in divorce: lifestyle; earning power post-divorce; ability to pay. The calculus is fairly simple: what did it cost for the payee spouse to carry on her or his lifestyle; how much of that cost can the payee spouse contribute by gainful employment post-divorce and not the reduction in her or his property award. This subsumes all the elements of NRS 125.150 (8). Name one it does not--duration of marriage seems the most arcane, abstract and economically irrelevant but it is still relevant to skill loss and ability to earn.

How can the Court adopt some kind of "formula" or base element under NRS 125.150? Our Court has confronted a laundry list of factors in other areas and then agreed there is primus inter pares, a first among equals, e.g., "more likely to allow" under Figliuzzi. It can do so in the alimony area where the statute is as unworkable as the child support or custody statutes it cannot be applied without some judicial gloss. We can roll the factors in Sec. 8 into a rule, then, because the Legislature so badly drafted the statute, create a "rule of thumb" in divorce--lifestyle. Determine the lifestyle then pay 50% or 75% of it (less actual or imputed income of the payee) until the payee has enough training, fewer kids to raise, or whatever else plays into

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her/his earning power to maintain an income equal to 50% or 75% of the marital lifestyle.

This rule of law means much imputation of income and lots of work for vocational experts, but that is a better, more objective criteria than "lost careers" and "damages" (for an endeavor the "out" spouse knew had a 50% of failure when she went into it).

If you can find a more objective and less speculative criteria than actual cost of a lifestyle on which the parties agreed, show me.

Theory #5: Pure statutory elements of alimony awards:

NRS 125.150(8): 8. In addition to any other factors the court considers relevant in determining whether to award alimony and the amount of such an award, the court shall consider:

(a) The financial condition of each spouse; [same as (b)--ok, objective]

(b) The nature and value of the respective property of each spouse; [same as (a)]

(c) The contribution of each spouse to any property held by the spouses pursuant to NRS 123.030; [real property characterization recapture: Mrs. Jones quitclaims a valuable separate property home into joint tenancy--does this give the Court the right to permit her to live there rent-free and Husband pay her rent as a form of support, i.e., give it back to her? What does this section mean?]

(d) The duration of the marriage; [this has to have some economic relevance or else how can time in grade be converted

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into money? it brings us back to need, etc.; yes, it is an objective fact]

(e) The income, earning capacity, age and health of each spouse; [does earning capacity include the willingness to work? today, what "age" is relevant to what?]

(f) The standard of living during the marriage; [here is an objective fact...finally!]

(g) The career before the marriage of the spouse who would receive the alimony; ["I used to be young enough to be a flight attendant...or a welder." Formerly a banker at Goldman Sachs and now a waiter?]

(h) The existence of specialized education or training or the level of marketable skills attained by each spouse during the marriage; [also an objective fact going to ability to earn]

(i) The contribution of either spouse as homemaker; [Huh? What is a homemaker? How many female doctors and lawyers are also homemakers? If I fix the plumbing, electrical system, etc. and keep up the yard, am I a homemaker?]

(j) The award of property granted by the court in the divorce, other than child support and alimony, to the spouse who would receive the alimony; [cannot spend one's share of the community to support oneself while the other spouse continues to earn; earnings imputable to the property reconfigured into a broad-based investment portfolio?] and

(k) The physical and mental condition of each party as it relates to the financial condition, health and ability to work of that

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spouse. [Objective...via a vocational expert, but relevant to what except ability to mitigate the "damages" of the payor?]

The existence of the rehabilitative alimony provisions is the strongest argument the alimony statute is about support and need since it strongly infers the payee must contribute to her or his support and be energetic about it and hence his/her support is what is intended by the general alimony statue. One might ask: "Why is a person on the private dole more worthy of staying there than a person on the public dole?" Remember, in every divorce case: the court shall consider the need to grant alimony to a spouse for the purpose of obtaining training... NRS 125.150(9). Does this mean that in every decree there must be a finding?

CONCLUSION

We will present a myriad of facts to the Court and weave them as we might. If our client comes across well, there will be a higher award; if he or she does not...

None of this seems fair. The Legislature has not helped, but hindered. Same, the Court. There really is no predictability. It makes for great trial work, but whether that is in the public's better interests I do not know.

Suggestion: party with greater gross monthly income pays 75% of other's lifestyle cost after deduction for actual or imputed earnings:

if married thirty years or longer, the life of the lesser earner;

if married twenty years but less than thirty, the term of the marriage;

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if married between ten and twenty years, three-quarters of the term of the marriage;

if married between five and ten years, one half the term of the marriage;

if married less than five years, no greater than five years.

The Court may deviate from the above schedule in the following cases:

(a) The cost of health insurance;

(b) The cost of nursing or medical care; ;

(c) Any special educational needs of the payee spouse;

(d) The age of the payee spouse;

(e) The legal responsibility of the payee for the support of others;

(f) The value of services contributed by the other spouse;

(g) Any public assistance paid to support the other spouse;

(h) Any expenses reasonably related to the mother's pregnancy and confinement;

and

(i) The relative income of both parties.

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PREPARING FOR A CHILD CUSTODYEVIDENTIARY HEARING/TRIAL

# HELPING ACQUIRE THE FACTS IN A CHILD CUSTODY CASE

< Be Involved in the Case from the Beginning% Meet with the client and witnesses to get the history/background facts% Don't be afraid to ask clients questions or to clarify something that they've

said% If you do drafting of pleadings, have an outline of common facts you need

(e.g., dates of birth for parties/minor children, place of marriage, etc.)% Give the client documents/information you know will be needed in the case

ahead of time (e.g., COPE information, Financial Disclosure Form, etc.)

< Be Available to the Client% Client will feel more comfortable relaying information to you (and not just

your attorney)% Respond to e-mails and telephone calls as soon as possible

< Have Good Communication with Your Attorney% Ask your attorney questions

• E-mails/telephone calls to which you may not have been privy• Hearings you did not attend• "Hallway discussions" with opposing counsel

# SPOTTING ISSUES AND GETTING THE CASE PREPARED FOR TRIAL

< Use Common Sense to Spot Potential Issues That Can Be Used in Your Client'sFavor% History of domestic violence% History of drug use% History of alcohol abuse% History of mental health issues% History of abuse/neglect/CPS issues% Issues regarding family members/other individuals the child(ren) may come

in contact with when in the other parent's care

< Ask "Boiler Plate" Questions of All of Your Clients% History of client/adverse party using drugs? If so, will your client pass drug

test?% Is there a history of domestic violence? % Who has been primarily responsible for taking care of the child(ren)?

• What is their schedule• Favorite toys/activities

% What is the work schedule for each of the parties? % Can your client name the child(ren)'s teachers, doctors, etc.?% Are there any special needs of the child(ren)?

< Know the Good AND the Bad About Your Client and the Adverse Party% DO NOT let your attorney be blind-sided during trial by an unknown

issue/fact% Ask your client if there are any potential negative factors/downfalls about

him/her that might come up% The more you know, the more you're prepared

< Start Early on Direct/Cross Examination Outlines

< Know Your Discovery & Related Deadlines% Exhibits% Delivery/exchange of exhibit books (5 total - Plaintiff, Defendant, Witness,

Clerk and Judge)% Collect/gather/save exhibits throughout the case (or at the very least, keep a

list to refer back to when you start working on your exhibits)

# HELPING WITH WITNESSES AND WITNESS PREPARATION

< Start Early in Identifying Witnesses/Expert Witnesses% Look for client clues

< Know Your Discovery Deadlines% Depositions% Delivery/exchange of witness lists and expert witness reports

< Work on Deposition and Testimony Outlines Throughout the Case% Clients will call with information% Your attorney will pass on information to you% "Events" (e.g., problems with visitation, etc.) will take place% Expert witness(es) may provide useful information

2

< Meet with Your Witness(es) Before Trial to Go over Testimony% Cover procedure/what to expect at trial% Body language/delivery of testimony% Stage a "dress rehearsal" of the testimony they will be giving. Note: Be sure

not to coach your witness or influence their testimony.

# ELEMENTS THE COURT MUST ANALYZE IN MAKING A CHILD CUSTODYDECISION AND HELPING ENSURE ALL SUCH ELEMENTS ARE PREPAREDTO BE PRESENTED TO THE COURT

< Best Interests of the Child Is the Primary Factor the Court Will Consider in Makinga Child Custody Decision % Review NRS 125.480 and see what can be emphasized during trial

• Wishes of the child (of sufficient age and capacity) • Any nomination by a parent or a guardian for the child(ren)• Frequent association and continuing relationship• Level of conflict between the parents• Ability of parents to cooperate to meet the needs of the child(ren)• The mental and physical health of the parents• Physical, developmental and emotional needs of the child(ren)• Nature of the relationship of the child(ren) with each parent• Ability of the child(ren) to maintain a sibling relationship• History of parental abuse or neglect of the child(ren) or sibling• Domestic violence of child(ren), parent of the child(ren) or anyone

residing with the child(ren)* NRS 125.480(5) - rebuttable presumption that sole or joint

custody is not in the best interest of the child(ren)• Parent or any other person seeking custody has abducted any

child(ren). * NRS 125.480(7) rebuttable presumption that sole or joint

custody or unsupervised visitation is not in the best interest ofthe child(ren)

< Evidence/Exhibits Are Crucial! % Identify exhibits in relation to factors in NRS 125.480% Keep in mind that the Court can only make a decision on the evidence

presented.% Collect/gather/save exhibits throughout the case (or at the very least, keep a

list to refer back to when you start working on your exhibits)% Prior to discovery deadline, make sure you have identified/provided all of

your exhibits in discovery

< Testimony of Expert Witnesses (Counselors, Psychologists, Psychiatrists, Etc.)% Well known experts vs. not so well known experts

3

# INVESTIGATORY TOOLS AVAILABLE TO THE PARALEGAL TO MAKE SURETHE CASE IS READY TO PROCEED TO TRIAL

< Discovery% Standard child custody interrogatories% Standard child custody requests for production% Depositions% Subpoenas for records/information

< Internet/social Media% Facebook/Instagram/Twitter% Google/Bing/Other Search Engines

< Private Investigators

< Site visits

# ACQUIRING INFORMATION FROM SCHOOLS, SCHOOL DISTRICTS ANDOTHER GOVERNMENT AGENCIES AND OVERCOMING ROADBLOCKS

< Learn Each Agency's Procedure for Acquiring Information and Documents Aheadof Time % Call them, or get them online

< Subpoena Records% School district% Daycare/preschool% LVMPD% CPS

< Roadblocks & Overcoming Roadblocks% Some agencies may require an Order (versus a Subpoena)% Ex Parte Order from the Court% Factor in enough time for obtaining an Ex Parte Order

4

# ACQUIRING INFORMATION FROM MEDICAL PROVIDERS,PSYCHOLOGISTS, ETC., AND OVERCOMING ROADBLOCKS

< Request Information for Any Health Care Provider for Either Party and the MinorChild(ren)% Name, Phone Number, Address and Dates of Treatment of Any Health Care

Provider for Either Party and the Minor Child(ren)• Interrogatories• Depositions

< Roadblocks & Overcoming Roadblocks% Providers not willing to provide information - hide behind health care privacy

act% Include HIPPA release for each provider in Requests for Documents% Order from the Court if necessary

# WHAT FORMS DOES EVERY PARALEGAL NEED TO HAVE AND KNOW TOASSIST IN PUTTING ON A CHILD CUSTODY CASE?

< COPE Information

< Interrogatories

< Pre-Trial Memorandum

# AT TRIAL

< Be Familiar with All Pleadings, Affidavits and Orders Filed in the Case

< Anticipate What Your Attorney Is Going to Need% Exhibits% Deposition transcripts

< Pay Close Attention to Testimony Given by Each Witness% Rebuttal witness(es)/exhibits

< Be a Liaison Between Your Attorney and Your Client% Follow up questions for witness(es) in cross or re-direct% Clarifying information

# SECRET WEAPONS AND TIPS

5

Annual Family Law Conference at Ely

March 7, 2013

Advanced Track

Jennifer V. Abrams, Esq. Jon Matero Michael L. Rosten, CPA/CFF, CFE, CVA Marshal S. Willick, Esq.

What the heck happened to bring us to this point?

General FDF

Detailed FDF/Complex Divorce Litigation

NRCP 16.205 Paternity/Custody Cases

Marshal S. Willick

Willick Law Group

3591 East Bonanza Rd., Ste. 200

Las Vegas, NV 89110-2101

(702) 438-4100

fax: (702) 438-5311

website: willicklawgroup.com

Materials: http://willicklawgroup.com/cle-materials/

e-mail: [email protected]

Detailed Financial Disclosure Form

Annual Family Law Conference at Ely,

2013

6252 South Rainbow Blvd., Suite 100 Las Vegas, Nevada 89118 P. 702.222.4021 F. 702.248.9750 www.TheAbramsLawFirm.com

Presented by

Jennifer V. Abrams, Esq.

Table of Contents Additional pages may be added for real property, vehicles, and/or children’s expenses

Page 1of 10 • General Case

Information

Caption

Name

Occupation

Education

Disability

Names and ages of the children

Whether the children are

of this or another

relationship

Current marital status

Current Spouse’s Employment and Wages

Total fees paid to date, retainer available / amount owed

Page 2 of 10 Income and Expense Summary Self calculating

Income

Expense

Monthly Deficit/Surplus

Page 3 of 10 Income figures are derived from the Personal Income Worksheet

Wages Regular Pay

Wages

Allowances

Wages

Business Income

Wages

% of Business Owned

Anyone who operates a business or a professional practice as a sole proprietorship must complete Schedule C of the Individual Income Tax Return.

If individuals operate separate sole

proprietorships, a Schedule C is required for each business.

People who share profits and losses from unincorporated businesses are required to report their income on a partnership tax return. The partnership itself is not taxed. The income of the partnership flows through to the individual partners through a K-1. Each partner typically reports his/her K-1 ordinary income/loss on Schedule E of the individual income tax return. Other components are reported elsewhere on the individual return such as interest income, dividends received, and capital transactions.

In order to avoid double taxation at the corporate level, shareholders may elect to be treated as an S Corporation. The S Corporation itself is not taxed. The income of the S Corporation flows through to the individual shareholders through a K-1. Each shareholder typically reports his/her K-1 ordinary income/loss on Schedule E of the individual income tax return. Other components are reported elsewhere on the individual return such as interest income, dividends received, and capital transactions.

Unlike the S Corporation tax return, the C Corporation return does not include K-1’s for each of the shareholders because it is not a flow-through entity.

Earnings are taxed at the corporate level and,

if these same earnings are distributed as dividends, they are taxed again at the individual level.

Cash or Accrual tax basis? Schedule C or Form 1065 Partnerships only • Delaying the reporting

of income or, advancing the recording (accrual basis) or payment (cash basis) of costs or expenses distorts annual income.

• Cash basis accounting is particularly common to service businesses and professional practices.

Many businesses report on a cash basis for income tax reporting purposes but use an accrual basis for internal reporting.

For example, law firms keep an A/R listing yet most, if not all, report on a cash basis for tax purposes.

Therefore, the tax schedules attached to the Detailed FDF may report on a different basis than the interim financial reports.

When using an accrual tax basis, an increase

in sales is reported as Gross Receipts even if no cash is received.

Quality of A/R and expected timing of

payments should be assessed for additional cash flow.

• If the box is checked, the

net profit or loss may only be indicative of a partial year of operations.

• Expenses for the

business may be greater than they will be in future years because of start-up costs associated with the first year of operations.

If the business uses an accrual tax basis, gross receipts and cash receipts may be completely different figures. On an accrual basis, gross receipts are sales, whether or not cash is actually collected.

Certain cash receipts may not be reported –

consult a forensic accountant.

• This line item reflects taxable income that is not considered “Gross Receipts or sales” (unusual receipts involving the business but not in the ordinary course of business).

• This unusual income

should be analyzed to determine whether it is recurring or not.

• Automobile expenses are usually overstated – watch for double expensing on FDF

• Depreciation expense has no effect on cash flow unless a reserve account is used.

• Rapid depreciation write- offs under IRS Section 179 usually result in overstatement of operating expenses for that year. (Up to $500,000 in 2012).

• Employee benefit programs may be overstated if for the benefit of friends or relatives.

• Legal and professional services – may not be recurring in the same amounts each year.

• Office expenses is a convenient place to bury a multitude of personal expenses – watch for double expensing on FDF.

• Rent to a relative or friend should be reviewed for FMV.

• Repairs and maintenance should be analyzed to determine if it is recurring at the same level or not.

• Travel, meals, and entertainment is another convenient place to bury personal expenses, especially travel with the new companion.

• Wages would not include wages to the sole proprietor but may include payments to the spouse, friends, or relatives. Alternatively, consider added expense to replace spouse who was helping in the business without pay.

Expenses for Business Use of Home: The amounts already deducted as a business expense should not be included in the personal expenses sections of the FDF.

Net Profit or Loss: Net profit is subject to self employment tax.

• Line 10:

Guaranteed Payments to Partners Certain partners receive cash payments that are deductible in arriving at partnership income. These are known as “Guaranteed Payments.” A partner’s “Guaranteed Payments” are reported on his or her K-1 separately from the partner’s share of partnership income.

• Lines 16a & b:

Depreciation schedules aid in identifying assets that have been written off but still have value. The depreciation schedule is also useful for evaluating claimed cash flow need of the business for investment in new equipment. Examination of yearly asset purchases can form part of the basis for an opinion concerning the annual outlay.

• Lines 2 & 3:

Obfuscation of ownership interests and complexity in business relationships result when multi-level partnership interests exist. This is true for all types of business entities. For example, an individual spouse may be a partner in a partnership that is the general partner for a limited partnership that invests in other partnerships. When such entanglements exist, organization charts may be helpful to explain business structure to clients and judges.

Schedule K-1 for Form 1065 US Return of Partnership Income Boxes L, 4, and 19 provide Information relative to cash flow

Schedule K-1 for Form 1120S US Income Tax Return for an S Corporation Box 16, D and E provide information relative to cash flow

Foreign transactions may indicate assets outside of the U.S. (See Form 1065 Schedule B; Form 1120S Schedule K; Form 1120 Schedules B and K. Also see Form 1040, Schedule B, Part III).

Consider whether or not the litigant has control over the distributions from the business entity.

Spousal/Child Support

• Disability • Govt. Benefits • Pension/Retirement

• Interest/Dividend • Partnership/Trust • Gross Rental Income

Other Income

Page 2 of 10 • Income/Expense Summary

Page 4 of 10 • Personal

Deductions Worksheet

Taxes

Income Tax Withholding

Actual Monthly Amount Used

Deductions often decrease over the tax year in higher

income brackets $0

$50

$100

$150

$200

$250

$300

JAN

FEB

MAR AP

R

MAY JUN

JUL

AUG

SEP

OCT

NO

V

DEC

For more detailed information – please refer to

IRS Publication 15 – Employer’s Tax Guide

Health Insurance Premium

Note: • Actual (not average)

amount used because premiums can change

• Non-Health Insurance • Retirement/Pension • Savings


Net Monthly Income


Page 5 of 10 • Personal Expense

Worksheet: Necessities

• Paid for… • Paid by…

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Worksheet: Discretionary

House Maintenance

Pet Expenses

• Credit Cards • Installments

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Page 6(a) of 10 • Additional Real

Property Worksheet

Property #1

Property #2

Rental Income

Property #1

Property #2

Page 3 of 10 • Personal Income

Worksheet

Property #1

Property #2

Expenses

Total Expenses

Property #1

Property #2



Property #1

Property #2

Net Income/Loss

Total Net Income/Loss

Page 6(b) of 10 • Additional

Vehicles Worksheet

Additional Vehicle #1

#2

#3

#4

#5

#6

#7

#8

#10

#9

Loan/Lease

Insurance

Note: Multi-car discount may be lost by separating the insurance policies

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Page 6(c) of 10 • Child(ren)’s

Personal Expense Worksheet

• Clothing • Medical • Entertainment

• Education

• Transportation


Page 7&8 of 10 • Asset & Debt

Worksheet

Account Info

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Note: Explanation of why it is separate property should go in “notes” section at the bottom of Page 8

Gross Value

Amount Owed

Net Value

Page 9 of 10 • Signature Page

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Page 10 of 10 • Certificate of

Service

For the most updated versions of the

General & Detailed Financial Disclosure Forms

- please visit -

www.TheAbramsLawFirm.com

Guest Presenter: Jon MateroPresident / CEO

702-252-HERO (4376)

[email protected]

We Are Living in a Digital World

Importance of Information

Multiple Sources

www.network-heroes.com

Suspicion

Ordered Due to Good ‘Persuasion’

Ordered with Proper Documentation


Financial Information (QuickBooks, Quicken, iBank, etc)Spreadsheets / Word Documents / PDF’s / Tax Returns

EmailBrowsing HistoryLOB Applications

Call Logs / Text Messages / Images

www.network-heroes.comwww.network-heroes.com

Obtaining DeviceProduce Copy with Proper Equipment

Get 2 Done!1 Gets Sealed / 1 Available for Review (Client, Attorney, etc.)

Spy SoftwareEtc.


Chain of Custody

Signed Affidavit

Expert Witness / Testimony



Preservation is Extremely Important!

Obtain Device ASAP!

No, I Will Not Perform Work At The Home!


Proper Amount of Time Allocated

Money – Retainer or Payment for Services Rendered

Realistic Expectations


MagicViolate Ethics

Break LawImage Device ‘Stolen or Obtained Illegally’

Release Information Without Proper Authorization


???


Jon MateroPresident / CEO

702-252-HERO (4376)

[email protected]

Presentation by:Michael L. Rosten, CPA/CFF, CFE, CVA

March 7, 2013

Presented at:Family Law Conference

**Advanced TrackNevada State BarLocation: Ely, Nevada

Overview & Highlights:• Accounting Equation: Assets = Liabilities + Capital/Equity

Double Entry Bookkeeping Process

Forensic Accountant/Investigator = Fact FinderRE: Property (Assets & Liabilities); Income

Valuator = Determine value of community asset(s)

• Standard business reports: Income Statement, Balance Sheet, Statement of Cash Flows

• Standard sources of financial information: Tax returns, Financial Statements, Bank Statements

Forensic Accounting:1. The forensic accounting process [fact finding] results in a financial analysis or conclusion that is suitable for presentation in court.

2. Involves application of knowledge and skills to collect, analyze and evaluate evidential matter, and to interpret and communicate findings, whether in the courtroom, boardroom or other setting.

Forensic Credentials:• Certified Public Accountant (CPA); States issue license

• Certified in Financial Forensics (CFF); For CPAs, by American Institute of Certified Public Accountants (AICPA)

• Certified Fraud Examiner (CFE); By Association of Certified Fraud Examiners

• Certified Forensic Financial Analyst (CFFA); By National Association of Certified Valuation Analysts (NACVA)

Fundamental Forensic Knowledge (AICPA):

• Professional Responsibilities

• Laws, Courts and Dispute Resolution

• Planning and Preparation

• Information gathering and Preservation

• Discovery Process

• Reporting, Experts and Testimony

Specialized Forensic Knowledge (AICPA):

• Bankruptcy, insolvency and reorganization

• Computer forensic analysis

• Economic damage calculations

• Family law

• Financial statement misrepresentations

• Fraud prevention, detection and response

• Valuation

Forensic Accountant/CFF Knowledge Graphic:

Source: AICPA, Forensic Accounting and Valuation Services Niche.

Forensic Accounting Investigation Process

|----Business Organization/Operating Entity----|

Realm of Potential Deception

Reporting

Internal & External operational and financial reports

Processing Information

•Accounting system

•Interpretation of data

•Transactional support

Environment of Business/Entity

•Organization and personal integrity and ethical values

•Operating characteristics of management

•Operating philosophy/style

•Competence of personnel

1. Allegations (Predication)

•Contained in a legal complaint

•From discussions with attorney

•From discussions with

management

2. Gain An Understanding Of

•Business goals & Objectives

•Reporting requirements

•Processing environment

•Contractual rights and obligations

4. Engagement Outcome

Allegations

+ Understanding

+ Forensic Techniques

Conclusions

3. Forensic Techniques•Apply to financial data

Using:

•Business operating data

•Transactional support

•3rd party information

•Background searches

Books & Records

Source: Dictionary for accountants by Eric Kohler

Foundation: Integrity of Management

Bank Statements (a)Tax Returns (b)

Financial Statements & Underlying Accounting Records (a)Outside CPA‐Audit/Attest (b)

Standard Records Triad

(a) Detailed transaction records.(b) Summarized, most likely lacking details in deliverable.

External DocumentsAttest Reports

Internal DocumentsOperating Reports

Control DocumentsBank Statements

Sources of Records Used

Proof‐of‐CashIssues: Timing& Non‐Cash

Process Map/Methodology

Forensic Methodology:

• Foundational/Planning.

1. Establishing objectives and corresponding budget

2. Searches for existing conflict issues

3. Preparation of engagement letters

4. Establishing protocol for records production

5. Begin developing understanding of principal parties to the litigation matter (litigants and their affiliates).


• Interpersonal/Backgrounding & Development.

1. Interview and dialogue with parties

2. Inventory available testimony (depos)

3. Background searches on the litigants and affiliates.

Note: To be continually refined throughout engagement.

Forensic Methodology:• Data Collection and Analysis. For example…

1. Common size comparison of financials.2. Year-to-year comparison of personal tax returns.3. Scheduling of deposits and withdrawals of the known bank

accounts.4. Tracing funds to determine likelihood of undisclosed

assets, including analysis of disbursements.5. Observation, such as surveillance to establish expectations.6. GOAL: Identification and Interpretation!!

Note: To be continually refined throughout engagement, based upon findings developed.


• Data Collection and Analysis, continued.

7. Procedures should be focused on identifying anomalies among the data, including such questions as “Are the facts (income, expense, cash flow, etc.) in line with the independent expectations developed?”

• Reporting. Reports will be developed that are appropriate to the setting. Conclusions and findings should be in sync with the previously established objectives.

Forensic Accounting v. AuditingForensic Accounting Auditing

Focus procedures on:

(1) fraudulent accounting and reporting

(2) misappropriation of assets

Seek to confirm or refute existence of specific problems or allegations, extent and cause

Normally has few predetermined boundaries

Analyst infuses process with completeness & integrity

Perform exam in accordance with generally accepted auditing standards (GAAS)

Provide opinion on financial statements for general or limited use

Conduct audit procedures in accordance with an accepted methodology and procedures

Reliability based on representations of management and existing finance/ reporting personnel

Valuation Credentials:• Certified Public Accountant (CPA); States issue license

• Accredited in Business Valuation (ABV); For CPAs, by AICPA

• ASA Accreditation; Granted by the American Society of Appraisers

• Certified Valuation Analyst (CVA); For CPAs, by NACVA

• Accredited Valuation Analyst (AVA); For non-CPAs by NACVA

Business Valuation:Property division is the primary reason to perform a business valuation, which may also include determining value of an intangible asset.

Under current accounting conventions, the recorded values on books and records of businesses represent historical cost, not current values. And, the net book values would be even lower than historical costs as a result of past depreciation expensing.

Business Valuation Overview:• Identify the property to be valued. For example, partnership,

interest in law firm, corporation, patent, trademark, business operated under an assumed name, etc.

• Determine proper Standard of Value.

• Determine economic benefits to the owner(s) – operating income, sales, net income, etc. (Apply Forensic Techniques)

• Using accepted methods/analytic processes, estimate values using the principal of Substitution to determine value or ranges thereof.

Standards of Value:

• Fair Market Value. Willing buyer and seller, neither under compulsion to buyer or sell (Hypothetical).

• Fair Value. FMV w/o minority or marketability discounts. Standard used in Shareholder Oppression cases.

• Value to the Holder/Investment Value. Value to the current owner.

Standards of Value:

• Intrinsic Value. More analytical application of Investment Value (e.g., Stock Analyst approach).

• Value pursuant to Buy-Sell Agreement. Amounts therein are not actually ‘value’ and typically not used for divorce matters.

• Liquidation Value. Absent the ‘going concern’ assumption. Two versions: 1) orderly liquidation and 2) forced liquidation (e.g., fire-sale).

Foundational Guidance:Revenue Ruling 59-60: Requires broad understanding of multiple factors, including economy and the subject business:

1. Nature and history of business.2. Economic outlook, including industry.3. Financial condition of business.4. Earnings and dividend capacity of business/company.5. Existence of goodwill.6. Percentage of the company to be valued.7. Market prices of similar publicly-traded companies; however,

may be size differential issues.

Reporting:Each certifying body has their own rules on reporting, but using the AICPA Business Valuation Standards as representative, there are two primary types:

1. Valuation Engagement. Applying approaches and methods deemed appropriate in the circumstances by the analyst (professional judgment), resulting in a conclusion of value.

2. Calculation Engagement. Applying approaches and methods based upon agreement with the client (more limited than valuation engagement), resulting in a value calculated in compliance with the agreement.

Thank you.

Michael Rosten, CPA/CFF, CFE, CVA ……………[email protected]

FORENSIC ACCOUNTING & LITIGATION SERVICES

PHONE: 702-384-1120 *** FAX: 702-870-2474

6100 ELTON AVENUE, SUITE 1000; LAS VEGAS, NV 89107