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Court News Ohio
Court News Ohio

Unvested Military Retirement Benefits Earned During Marriage Qualify as Marital Asset

A trial court must take the value of unvested military retirement benefits into account when dividing marital assets in a divorce, the Ohio Supreme Court ruled today.

The 4-3 decision reverses the judgment of the Third District Court of Appeals and returns the case to the trial court for additional proceedings.

Christen Daniel and Sean Daniel married in 1995 and had three children. Just before the marriage, Mr. Daniel enlisted in the National Guard. After two separations, the couple divorced in 2011. At the time of the divorce hearing, Mr. Daniel had served for 16 years in the Guard and had reenlisted for six more years. He will be eligible for military retirement benefits when he reaches 20 years of credit.

At the Daniels’ divorce trial, the magistrate determined that Ohio law does not allow retirement benefits that have not yet vested to be divided in a divorce, and the trial court agreed. On appeal, the Third District affirmed, stating that insufficient evidence was presented at trial to require division of the asset. Ms. Daniel appealed to the Ohio Supreme Court.

Writing for the court’s majority, Justice William M. O’Neill explained that “marital property,” as defined by statute, includes “[a]ll interest that either or both of the spouses currently has in any real or personal property, including, but not limited to, the retirement benefits of the spouses, and that was acquired by either or both of the spouses during the marriage.” He noted that the statute does not distinguish between vested and unvested benefits.

In Hoyt v. Hoyt (1990), the Ohio Supreme Court held that pension benefits that have vested are marital property. Quoting Hoyt, Justice O’Neill wrote that when dividing pension assets, trial courts must balance “‘resolv[ing] the issues between the parties so as to disassociate the parties from one another or at least minimize their economic partnership’” and “‘obtain[ing] a result which will preserve the asset so that each party can procure the most benefit.’”

Hoyt recognizes that while it is desirable to bring finality to the parties’ marriage by dividing assets once and for all, doing so is not possible in all cases, because it sometimes leads to an inequitable result,” Justice O’Neill continued.

He concluded that an exact current value of the retirement benefits and the date of vesting are not required to resolve this matter, because Ms. Daniel’s percentage share of the benefit can be calculated based on the couple’s years of marriage and other information the trial court had.

“The fact that [the asset’s] precise value will not become fixed, if it ever does, until some future date is irrelevant,” he wrote. “The trial court had enough information in this case to make an equitable division of the benefits ….”

Joining the majority were Justices Paul E. Pfeifer, Sharon L. Kennedy, and Judith L. French. Justice Terrence O’Donnell dissented. Justice Judith Ann Lanzinger also dissented in an opinion joined by Chief Justice Maureen O’Connor.

In his dissent, Justice O’Donnell wrote that the majority has ignored the use of the word “currently” in the statute’s definition of marital property.

“[F]uture interests in property that might possibly vest, if at all, after the termination of a marriage have not been acquired during the marriage, are not currently owned by either or both spouses, and a spouse currently has no interest in such benefits,” Justice O’Donnell wrote. “Therefore, they are not marital property subject to equitable division by a trial court.”

He concluded: “In this case, at the time of the divorce, Sean Daniel did not currently own any right to military retirement benefits from the National Guard, because he had not accumulated 20 years of service credit. Nor did he currently have an interest in those benefits, because that interest had not vested and could only vest into an enforceable right to payment in the future – only after termination of the marriage.”

In a separate dissent, Justice Lanzinger noted that only Ms. Daniel filed a brief in this case and was heard at oral argument. Justice Lanzinger would hold that the court should not have accepted the case at all.

She wrote that unvested retirement benefits are not marital property because neither spouse has a current property interest that the statute requires. She noted that vesting is a contingency and that benefits do not exist or accumulate until they vest.

“The statute does not have the expansive meaning the majority gives it,” she concluded. “It may well be that that this court should adopt a rule that unvested military retirement benefits accrued during the marriage constitute marital property subject to division even while those benefits remain unvested. However, such a change in precedent should not occur without robust adversarial presentation. This issue is too important in its ramifications to be decided with half of the argument unpresented and unheard. ”

2012-2113. Daniel v. Daniel, Slip Opinion No. 2014-Ohio-1161.

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