Kentucky Case Law Review by Topic: July 2023

Kositzky v. Kositzky, Nos. 21-CI-00053, 2021-CA-1363-MR, 2021-CA-0355-MR (Ky. App. 2023)

Civ. R. 52.01: findings of fact
KRS 403.190(3): classification (retirement benefits)
Maintenance: retirement benefits
Marital Property: abuse of discretion, final hearing, retirement benefits, separate property, tracing
QDRO: coverture, merely implements decree
Witness: credibility, lay

Dated: July 21, 2023
Affirming
Not to be Published

Editor’s Note: Special thanks to family law attorney-extraordinaire Tim Theissen, for making sure this one didn’t slip through our QDRO fingers.

The parties were married in 1989. When their petition for dissolution was filed in 2021, both parties were retired; Wife was 66 and Husband was 76. The only witnesses at trial were the parties. Wife was awarded assets and sale proceeds in excess of $130,000, and sought a maintenance award to make up for the disparity in her ($637) monthly Social Security income, and Husband’s ($8,206) monthly retirement and Social Security income. In their disclosures, Wife listed living expenses of $4,752/month, and Husband listed living expenses of $4,635/month. Throughout the parties’ marriage, Husband had been the primary wage-earner. Both parties faced impediments to working at the time of the dissolution, due to Husband’s advanced age and Wife’s limited work experience.

What, adventure can’t be bucolic too?

Immediately after trial, both parties proposed separate findings: in Husband’s, Wife’s share of marital property was deemed sufficient to provide for her reasonable needs; in Wife’s, she was also awarded $2,000/month for 15 years and awarded attorney fees based on her lower income.

The trial court subsequently entered findings in which Wife was awarded no maintenance payments, in consideration of her marital property award and expected increase in income, once she began to receive her share of Husband’s pensions via QDRO. Further, the trial court found that Wife had failed in her pretrial documents and testimony to state the amount of maintenance needed for her reasonable needs.

Because [Wife] had not stated an amount of maintenance she claimed, the [trial court] determined that she was not entitled to an award pursuant to Kentucky Family Court Rules of Procedure and Practice (FCRPP) 5. In addition, the [trial court] determined that pursuant to Kentucky Revised Statutes (KRS) 403.200, both parties had been awarded sufficient property to provide for their reasonable needs. The [trial court] also declined to award any attorney fees or costs.

Wife moved for modification of the order with regard to awards of stock accounts, the retirement/pension accounts, personal injury money, and maintenance. Following arguments on Wife’s motion, the trial court entered an order denying the motion as to maintenance and Husband’s retirement accounts, and granting it as to Husband’s stock accounts and a personal injury award.

The trial court entered amended findings in which Wife was awarded half of the marital portion of Husband’s pension benefits. The amended findings expressly stated that such would only become final and appealable after the QDROs ordered therein were signed and entered with the trial court. Wife filed her appeal several days before the entry of the QDROs.

Husband subsequently sought to modify the findings to correct a valuation error and windfall to Wife. Wife opposed Husband’s motion, arguing at a subsequent hearing that the trial court had lost jurisdiction. The trial court granted Husband’s motion in part, and found it had retained jurisdiction because Husband’s motion was filed prior to the entry of the QDROs. In the amended decree that followed, the trial court added language further underlining its denial of Wife’s request for Maintenance. Wife then filed her second notice of appeal.

In her notices of appeal, Wife argued the trial court erred in: its failure to classify the marital/separate property portions of Husband’s pension benefits; its failure to award her maintenance; its ruling precluding her first notice of appeal prior to QDRO entry; its ruling in favor of Husband’s motion to modify the findings; and its maintenance modification in the amended decree.

Observing a ‘clearly erroneous’ standard of review for the trial courts’ findings of fact, the Court affirmed on all counts. The Court noted as a preliminary matter that, “due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.” The Court opined that the tasks of judging the credibility of witnesses and weighing evidence are within the exclusive province of the trial court.

Regarding the classification of the marital/separate property portions of Husband’s pension benefits, the Court dismissed Wife’s arguments related to 'tracing' pre-marital accruals, considering such to be inapplicable to this type of benefit. In short, Wife argued that the trial court failed to properly classify the pensions as marital or non-marital property and that Husband essentially lost his separate property claim in the pensions because he did not ‘trace’ or specifically identify the precise amounts that were pre-marital. The Court observed the retirement benefits at issue were accrued during the marriage in a definable manner (Editor’s Note: Think ‘defined benefit’ plan, or a traditional pension plan), presumably based on a ‘coverture’ fraction with a numerator of 10 years (the years of marriage overlapping with pension accruals), and a denominator reflecting Husband’s total years of pension service. Because the QDROs tendered by Husband were based on the presumed marital fraction, the Court found that the marital/separate property portions of Husband’s pension benefits were sufficiently classified for purposes of KRS 403.190(3), and that no further valuation evidence as to the actual amounts Wife would receive from the pensions was necessary.

Finally, as for her request for maintenance, while the Court found Wife had complied with procedural requirements, it also found that the trial court had nonetheless considered her request. Wife argued that the trial court was unable to perform meaningful analysis concerning her maintenance request, without knowing the eventual amounts she would receive from Husband’s pensions. As the Court already affirmed that these amounts could not be known prior to entry of the QDROs, and in light of Wife’s other marital property awards, it found no abuse of discretion.

Editor’s Note: IMHO, the takeaway here is that the Court observed that the marital/separate nature of the specific retirement assets in this case accrued in such a way that they were readily identifiable and could be appropriately classified based on one of the methodologies previously recognized under Kentucky law (i.e., the coverture or marital fraction). However, I do not believe this case should be read as having broad enough application to be relied upon for the proposition that tracing is irrelevant to all retirement assets. That said, best practices dictate that when drafting any settlement agreement, practitioners should ensure when dividing retirement that they have sufficiently classified the marital and non-marital portions either by identifying the actual values or by providing a precise formula (such as a marital fraction multiplied by the benefit at retirement) to determine the values. I say it all the time: Never just rely on the term “marital portion” when drafting. Always spell ‘it’ out. My final tip? Test yourself by not even utilizing the term “marital portion” at all when describing the marital/separate property portions of divisible retirement.

Hall v. Caudill, Nos. 18-CI-00293, 2022-CA-0894-MR (Ky. App. 2023)

Marital Property: division, separate property, source of funds, tracing

Dated: July 28, 2023
Affirming
Not to be Published

During the parties’ marriage, Wife used funds from her nonmarital inheritance for downpayments on two houses and furnishings. To allow her to recoup some of this, the trial court awarded her all of the parties’ real property and furniture, as part of their dissolution. The trial court further awarded Wife Husband’s vehicle to remedy his child support arrearage.

Husband appealed, arguing the trial court erred in its accounting of Wife’s inheritance expenditures, and in awarding her his vehicle. Noting its ‘abuse of discretion’ standard of review, the Court affirmed the trial court’s rulings.

Husband argued that the trial court did not apply the ‘source of funds’ rule, and that Wife had not presented sufficient evidence to trace her nonmarital claims. At trial, however, Wife had presented credible testimony supporting her claim, whereas Husband had been unable to recall key details or present credible testimony to the contrary.

We believe there was substantial evidence to show that [Wife] expended $81,500 of nonmarital funds during the marriage. [Husband], [Wife], and [Wife’s] father all testified that [Wife] spent these funds… In addition, while [Husband] testified that [Wife] was reimbursed these funds and that the closing costs were provided from joint funds, [Wife] and her father testified to the contrary. [Husband’s] testimony is not sufficient to reverse the conclusion of the trial court.

The Court similarly upheld the trial court’s award of Husband’s vehicle, noting that neither party disputed the child support arrearage.

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