Texas Divorce Attorney Blog
Pensions and retirement accounts can complicate property division, especially in a high net worth Texas divorce. Retirement accounts often include both separate and community property. In a recent case, a former husband challenged the court’s valuation of the wife’s pension and the resulting property division.
According to the appeals court’s opinion, the parties had been married nearly 30 years when the wife left and filed for divorce. The trial court found the husband had committed fraud on the community and awarded the wife a disproportionate division of the community estate.
The trial court found the assets of the reconstituted community estate were worth more than $1.8 million. The court also found the community had debts totaling more than $87,000. The court allocated a net estate of over $920,000, or 50.96% of the reconstituted community estate, to the wife and over $888,000, or 49.04%, to the husband.
Valuation of the Pension
The court determined the community’s interest in the wife’s pension was $400,939.25 and awarded that entire amount to the wife. On appeal, the husband challenged whether there was sufficient evidence to support that valuation.
The wife argued the court’s valuation was supported by the evidence, noting that her sworn inventory identified the pension’s value as $407,500 three months before the divorce.
The husband argued there was undisputed testimony the pension was fully vested, the wife was already eligible for retirement with full benefits, and that she would get matching contributions from her employer when she retired.
An estimate from the pension system dated a year before the divorce indicated the wife’s pension would have a total estimated value greater than $1.6 million dollars, including over $1.1 million in matching contributions from her employer.
The wife’s expert opined that the community interest in the wife’s pension would have a discounted present value of over $1.7 million if she had retired in 2022. The husband’s expert’s report stated the pension’s value in 2022 was over $2.4 million. Neither of the experts testified. The wife argued the valuations in the experts’ reports did not indicate an abuse of discretion because the experts based their valuations “off some payout of the account over a variable number of years. . .”
Failure to Properly Include Employer Contributions
The appeals court pointed out, however, that the wife’s expert had stated a discounted “present” value. Her expert had also projected her life expectancy was an additional 28 years and that she would receive $8,850 per month from the pension. Based on these calculations, the wife would receive about $3 million during her lifetime if the annuity payments stayed constant.
The appeals court noted that pension rights are a contingent property interest and community asset, even “prior to accrual and maturity.” The appeals court concluded the trial court had abused its discretion by either not including the employer’s matching contributions or by undervaluing them. If the retirement estimate from the pension system was correct, the matching contributions were worth over half the total value of the reconstituted community estate as calculated by the trial court. The appeals court therefore concluded the error probably resulted in the court rendering an improper judgment.
The appeals court acknowledged the “difficulty” of dividing retirement benefits due to their mixed character and the uncertainty of the amount to be paid out by an annuity and noted that the trial court has broad discretion in determining how to divide it.
The appeals court affirmed the dissolution, but reversed the portion of the judgment dividing the community estate. The appeals court remanded to the trial court to consider a new division of the community estate.
Contact a Skilled Dallas Divorce Lawyer
In a long-term marriage, pensions and retirement accounts can be significant assets. Determining the community’s interest in pensions and retirement accounts can be complex, especially if the spouse participated prior to the marriage. If your marriage is ending with a high-value pension or retirement account, the knowledgeable high net worth Texas divorce attorneys at McClure Law Group can help you seek a fair share of the assets. Schedule a consultation at 214.692.8200.