Alabama Family Law Blog

The Alabama Court of Civil Appeals recently issued an opinion in Buchanan v. Buchanan which addressed the issue of market fluctuations in retirement accounts. The facts in the case are common: husband and wife divorce, wife is awarded 50% of husband's retirement account, the parties and/or their lawyers do not process the Qualified Domestic Relations Order to effectuate the transfer from Husband to Wife. Over three years later, the wife files a petition to hold the husband in contempt of court for failing to transfer her 1/2 of the retirement account.

Unfortunately for the parties, by then the value of the account had been reduced from $77,000 to $43,000 due to market fluctuations. The question was should the wife get 1/2 of $77,000 or 1/2 of $43,000? Who should bear the loss in value that occurred between the time of the divorce to the actual division of the accounts? The Appeals Court found that each party should share the market loss, which meant the wife would only get 1/2 of $43,000. The net result is that she lost $17,000 because a QDRO was not immediately prepared to divide the account.

The court's reasoning was that because both parties were equally responsible for the delay, they should equally share the loss. The bottom line is, if you are due the money, make sure you get a lawyer to immediately prepare the paperwork to make certain you get what you bargained for.

My question is what would the husband's position have been if the market value had gone up $34,000 in the interim. And more impotantly, would the Court's conclusion be the same - i.e. that the wife whould get more than she bargained for and share in the increase of the account? To be logically consistent, it seems the Court would have to rule that she would share in any increase, if that had happened.

My mother was married to my stepfather for 19 1/2 years. He is about to retire soon. We contacted Vanguard to see how my mother would be ensure to get her share of the benefits. They have requested QDRO be filled out. What is the time limitations on getting this done. The divorce papers do no mention the division or retirement benefits. When my mom questioned the clerk during the divorce precedings...they told her that in the state of Alabama, it's automatic that you will get half of the retirement benefits. Now Vanguard is stating that in order to divide the benefits...the QDRO has to be filled out.

What steps can we take to take care of this?

You advice is greatly appreciated.

Vanguard is correct. A QDRO is generally needed to divorce these types of accounts. And the comment from the clerk that the retirement is automatically divided equally is simply not true. Your mother needs to take a copy of her divorce decree (and any subesequent court orders) to a divorce lawyer immediately to see if anything can be done at this point. I wish her luck.

It sounds to me like the court of appeal in Alabama was sending a message to the legal community, and who should be burdened with the damages caused by a lawyer's neglect in taking out an order and effecting a transfer. Does the word "malpractice" appear in the court of appeal judgment?
Tom

I read on MSN money section, moneycentral.msn.com/investor concerning knowledge about wills, the following question, No.2., asked "You are divorced and remarried. Your divorce agreement does not say anything about the retirement plan you started during your first marriage and you have not looked at it since you divorced. Your will leaves everything to your second spouse. Who gets your retirement plan if you die?" The answer is "Your first spouse gets the retirement plan money. Be glad that you won't be around when spouse No.2 finds this out."

Does this law apply in Alabama. Thanks.