Ruggles v. Ruggles
116 N.S. 52, 860 P.2d 182 (1993)
Joseph and Nancy were married
for 30 years. During that time Joseph had a job and was earning pension
The pension benefits would
only become available when Joseph retired. The longer he worked, the
more benefits he would receive when he eventually retired.
Joseph and Nancy lived in
New Mexico, a community property
Joseph and Nancy split up. As
part of the divorce settlement, it was decided that Nancy owned 48% of
Joseph's pension benefits. The question remaining was when would Nancy get the benefits?
Nancy argued that if Joseph
retired that day, Nancy would be entitled to receive $748 a month out of
the money Joseph would collect, so she wanted $748 a month starting
Joseph argued that he didn't
have any benefits now, so Nancy
was entitled to nothing now.
Joseph argued that when he
retired sometime in the future, Nancy would get 48% of whatever the
benefits were at that time.
The Trial Court found for
Nancy. Joseph appealed.
The Trial Court found that
in a community property State,
Nancy owned half of Joseph's pension. If she elected to (and she did)
she could cash the pension in immediately. If Joseph didn't want to cash
in his share, he would have to pay Nancy out of his own pocket.
The Appellate Court reversed.
The Appellate Court found
that the distribution of marital assets should be done on a "pay as
it comes in basis" (aka the pay-as-you-go Rule). Joseph had not received anything, so he
shouldn't have to pay anything out.
See Schweitzer v. Burch (103 N.M. 612 (1985)).
The Court found that Joseph
was always in charge of the decision about when he would retire, so if
Nancy had stayed married to him she could not have received any benefits
until he made the decision. Therefore her property interest in the
retirement money was always predicated on Joseph's decision to retire.
The Court found that by
using a Qualified Domestic Relations Order (QDRO), Nancy could get some of the retirement money directly
from Joseph's employer, so she wasn't wholly delayed.
QDRO is part of the Employee
Retirement Income Security Act
The New Mexico Supreme Court
The New Mexico Supreme Court
reversed their decision in Schweitzer and found that retirement funds are to be treated as all other
community assets upon dissolution of a marriage.
That's the lump sum (aka cash value) method. Retirement plan benefits are
awarded to the employee spouse at the time of dissolution and assets of
equivalent value are awarded to the non-employee spouse.
The Appellate Court had
used the reserved jurisdiction
method. Under that method, the court does not distribute the community
interests at the time of dissolution, by reserves jurisdiction to
distribute the benefits when the employee spouse actually receives them.
The Court looked to the case
law in other States and found that in community property States, the trend was that the non-employee
spouse is entitled to immediate distribution of assets upon dissolution
The Court noted that it is
best to distribute all property as soon as possible so as not to prolong
the divorce and minimize future contact between the ex-spouses.
After the divorce, Nancy shouldn't
have her future financial security in the hands of Joseph. It makes her
dependent on his decision to retire. Plus, what if he dies before
retirement? Then she would get nothing.
The Court remanded for trial
to see if there had been an agreement between the parties in their marital
settlement agreement (MSA). Any
decision the courts make as to distribution of assets is overruled by any
private agreement between the parties. So, if the MSA was clear about
when Nancy would receive her money, then that was controlling.
The Courts tend to favor a lump
sum distribution as opposed to ongoing
support because it is preferable to
have a quick, clean break between the parties rather than have them have
to deal with each other for years and years.
Aka a "fond fiscal
One problem with the lump
sum distribution is that it requires
the parties to have enough liquidity to transfer. In this case, Joseph
probably didn't have enough cash on hand to give to Nancy. In all
likelihood they had a house, which they sold, and Joseph's proceeds of
that were used to pay off Nancy.
For younger couples that
don't have a lot of assets, lump sum
may not be possible.