QDRO Corner: Is the Survivor Benefit Worth the Negotiation?

Most pensions allow for the participant to designate a survivor to continue to receive payments from the pension after the participant’s death. Traditionally, plan participants select their spouse as the survivor, but upon divorce, they often no longer wish for their spouse to receive such a benefit.

Here are some factors to consider when discussing with your client whether it’s worth a negotiation regarding the disposition of the survivor benefit in the divorce:

1.    What is the cost of the benefit (described in the June 22, 2021 blog post)? Is the cost worth it to them as compared to the anticipated benefit?  Would life insurance or a beneficiary designation on another account be more cost effective?

 2.    Does the plan allow for multiple survivors? If you represent the plan participant, see if your client anticipates getting remarried, and if so, how soon. Some plans, such as military retired pay, only allow for one survivor. In this situation, even if the designated survivor doesn’t receive the maximum survivor benefit, the rest cannot be awarded to anyone else, even a future surviving spouse. Alternatively, FERS and CSRS with the federal government will allow the survivor benefit to be divided between multiple survivors, so long as the total benefit amongst the survivors does not exceed the maximum benefit allowed.

3.    Does the plan have a remarriage restriction? If you represent the alternate payee, it is important to note if there is a possibility of losing the survivor benefit upon the alternate payee’s remarriage, or remarriage before reaching a certain age. Specifically with FERS and CSRS, if the survivor remarries before reaching age 55, the survivor benefit may be lost. Similarly, in some plans if the survivor’s second marriage ends then the survivor benefit may be reinstated.

Using these considerations, and others, you might discover that a negotiation over the survivor benefit, at least from your client’s perspective, might not be worth the current expense, and therefore could be an easier concession to make, and the energy can be focused somewhere it will benefit your client more. It is for this reason, that we suggest obtaining the plan documents and considering the plan specific rules while drafting a settlement agreement, rather than waiting to draft the QDRO until after the divorce.

QDRO Corner: What is the Process to Draft a QDRO?

A QDRO or COAP is specifically drafted for each retirement plan. Federal law requires that certain items be included in the QDRO, such as the participant and alternate payee’s last known mailing addresses, and the amount to be transferred to the alternate payee. However, plans can require that additional, more administrative language be included in the QDRO, such as what happens if the plan over or under pays the alternate payee, or when the alternate payee is allowed to designate a beneficiary.

In order to know the special requirements of each plan, we have to receive these terms from the plan. Some plans have these terms readily available to share and can email them upon request. Other plans require that the plan participant request the terms and share them with us.  Other plans insist on mailing the terms rather than emailing. The speed with which a plan can provide the information greatly impacts how quickly the QDRO can be prepared.  

Once we have these terms from the plan, we’ll draft the QDRO in accordance with the settlement agreement or court order. For any required term that is not addressed by the settlement agreement or court order, we’ll advise as to the options of how to address it. Sometimes there are terms in the settlement agreement or court order that are prohibited by the plan, and we’ll consult with the client to figure out the closest allowable option. We’ll also have a call with the client to review the QDRO to ensure the client understands the QDRO, and how the company will handle processing the QDRO once it is finalized. 

In addition, many plans will review a draft QDRO (ie: before it is submitted to Court) to ensure its compliance with federal law and the terms of the plan. This is beneficial for multiple reasons, but mostly to ensure that once a document is executed by the Court, the parties know that it will be accepted by the plan. However, the biggest down side is that many plans take 30-45 days to complete the review and then mail a letter describing the outcome of the review to our office. In many cases, the letter from the plan states that once the QDRO is signed by the judge, it will be accepted by the plan.

Alternatively, if a QDRO does need to be revised before it can be accepted by the plan, the letter from the plan will clearly state what changes need to be made. As a matter of course, we submit the draft to the plan to review, and the leave it to the client if they would like to wait for the response before submitting to the Court.

Special Requirements for Orders Dividing Military Retired Pay

Military service members (and uniformed members of other agencies) can receive

retired pay from the military if they satisfy the minimum service requirements. Orders

dividing military retired pay can vary greatly in the amount of information needed within

the order based on the service member’s status with the military (i.e.: retired and

receiving retired pay, retired but not yet receiving pay, still in service, etc.).

In general, the distinction for what information is needed is based on whether the

service member is or is not already receiving retired pay when the divorce becomes

final. If the service member is not yet receiving retired pay when the divorce becomes

final, then the Order will need to include the member’s high-3 at the time of the divorce,

and the member’s years of creditable service at the time of the divorce, or, in the case

of a reservist, the member’s creditable reserve points at the time of divorce. The

member’s high-3 is the average of the member’s highest consecutive 36 months of pay.

If the service member is already receiving retired pay, then this additional information is

not needed.

The appropriate military pay center will use this information to determine whether the

amount awarded to the former spouse is an allowable amount. In cases where the

award is a percentage or formula, the military will use the information to determine the

amount the former spouse will be paid.

Obtaining this information requires cooperation from the service member to provide

such information. As is the case in many divorces, the former spouse may want

documentation of such information since it will have an impact on the amount the former

spouse receives. The information will not be provided by the military, so it is imperative

that the service member cooperate. As with many people who own the retirement

interest being divided, service members may be reluctant to provide the information

about their service; however, without this information the order will not be accepted by

the military.

Since the divorce may not be entered until months after a separation and settlement

agreement is reached, the parties may want to agree on these figures in their

agreement, rather than leaving it as an open issue to resolve once the divorce is final. In

addition to preparing the Retirement Order, we can help draft the language in a

settlement agreement regarding this asset to ensure that all elements are covered.

What is Nesting?

Unlike typical shared parenting time agreements, which have children traveling back and forth between each parent’s home, in a nesting agreement, the parents alternate spending time in the family home (the nest), and the children stay put.

In most cases, separating parents who opt for nesting see the arrangement as a temporary fix for the benefit of the children. Eventually, each spouse will need his or her own home to live separately with the children. Separating parents may opt for nesting if they cannot afford to support two households, if they are still working out their final divorce settlement, or if they want to delay any potential disruption to the children. If used, nesting should only be a temporary arrangement. Nesting may help children through the separation because it allows the children to temporarily stay in the home to which they are accustomed.

There are few options for parents when it comes to nesting. Some separating parents opt to share or have separate rental accommodations. Others will stay with family or friends. Some will organize a combination of each option when they are not with the children.

The most obvious benefit of nesting is financial. Couples who reside together can save money when they only have to support one family home. If the plan is eventually to sell the family home, nesting can be a beneficial financial decision because couples can nest until the housing market is favorable to their needs or until other ancillary matters are resolved. Sometimes, nesting is necessary for couples that need time to reestablish themselves financially before they sell the family home. Arguably, the emotional benefit of nesting for children is maintaining the children’s stability while the parents work through their differences, and avoiding any abrupt changes for the children.  

There are, however, considerable downsides of nesting, particularly for extended periods of times. For instance, couples may struggle to move on with their lives after separating if they are continuing to share living spaces. For separating couples that do not communicate well, nesting can be complicated because it requires the couple to agree on the continued maintenance of the home and the nesting schedule. Further complications may be added when the separating spouses have started dating new partners. There may be privacy concerns for any shared spaces in the nest. Nesting, even for a temporary period, is not recommended for couples going through contentious litigation. 

For separating parents who communicate well enough to share spaces, nesting can be financially and emotionally beneficial, in the short term, for both the children and parents. Of course, it is vital that nesting couples have a written agreement outlining the parameters of the nesting situation. If you are interested in exploring a nesting arrangement or looking for legal representation in your divorce, reach out to Markham Law Firm today at 240-396-4373.

QDRO Corner: Federal Pension Plans

There are 34 federal pension plans (according to a 1996 report by the General Accounting Office). Of these pension plans, approximately 97% of the federal workforce participate in either the Federal Employees’ Retirement System, Civil Service Retirement System, or the military pension system.

Each plan has its own set of rules for vesting, contributions, and division upon divorce. The plans also are maintained by different agencies. For example, the Office of Personnel Management manages FERS and CSRS, whereas the Defense Finance Accounting Service manages the military pension system, and the Department of State manages the Foreign Service Pension Systems. If you represent a person who has worked at any time for the federal government (as a civilian or military member) or their spouse, it is very important that you have them look into the benefits available to them. 

While approximately 97% of the federal workforce participate in one of the three plans listed above, the federal workforce is very large, so it is quite possible you may represent someone in the remaining 3%. Other common plans in the DC Metropolitan area include the Foreign Service Pension System and the Federal Reserve Plans.

Many of these plans will also allow the interest to be transferred from one plan to another, should the employee work for an agency and accrue interest in one plan, and then transfer agencies and begin to accrue interest in another plan. In a settlement agreement, it is important to address the possibility of the employee consolidating their interest into one plan, and if representing the employee, to address whether any of the interest is pre-marital.

If you think you have a client or an opposing party with a federal pension plan and need assistance determining the possible benefits or what can be divided by a court order, we can help .

Divorce and Frozen Embryos in Maryland

When a relationship dissolves, disputes may arise over cryopreserved embryos that the couple preserved during the relationship. In early 2021, a California judge ended a six-year-long legal battle between actress Sofia Vergara (of Modern Family fame) and her former fiancé over embryos the couple created during their relationship. The California judge in Vergara’s case ruled that she and her ex-fiancé must obtain each other’s written permission in order to use the embryos. In Maryland, the Court of Special Appeals recently issued an important decision on embryo disposition in Maryland. The appellate decision in Jocelyn P. v. Joshua P. addressed an issue of first impression in Maryland, and has now clarified the legal landscape for embryos disposition at separation or divorce. Notably, ART is common in Maryland, which ranks among the top quarter of states with the highest rates of ART usage. 

In Jocelyn P., the lower court aligned with the California judge’s approach in Vergara’s case, which was ultimately overturned by the Maryland appellate court. The lower court’s approach is commonly referred to as “contemporaneous mutual consent,” and requires both parties to agree before anything can be done with frozen embryos. The Maryland appellate court instead outlined a “blended contractual/balancing-of-interests approach,” finding that, “courts should first look to the preference of the parties in any prior agreement expressing their intent regarding pre-embryos” and, in the absence of such an agreement, “courts should seek to balance the competing interests.”

The most impactful language came from the appellate court’s discussion about ART contracts. The court condemned “boilerplate language” and held that “as matter of first impression, progenitors, not fertility centers, must expressly and affirmatively designate their own intent with respect to disposition of pre-embryos.” The court further held that “boilerplate language in third-party form contracts that lack expression or direction from the progenitors will not qualify as express agreement regarding what to do with pre-embryos.” The appellate court is directing parties engaged in ART to create clear contracts stating their plans for preserved embryos in the case of divorce or separation. Anything less, such as personal and inarticulate contracts, will no longer suffice to control the disposition of cryopreserved embryos.

Regardless of the lower court’s outcome for Jocelyn and Joshua when addressing this new case law on remand, the appellate court opinion exemplifies the importance of creating a clear contract addressing ART, which frequently arises in the family law context. At Markham Law Firm we continue to stay knowledgeable about recent family law decisions from our courts of appeal. Do not hesitate to reach out today at 240-396-4373.

Guardianships and Britney Spears: What is #FreeBritney About?

On June 23, 2021, Britney Spears spoke openly in court about the conservatorship that has controlled her financial and personal life for the past thirteen years. Spears’ testimony was powerful. She shared that under the conservatorship she is forced to have an IUD even though she would like more children, and that in the past she was forcibly given medications, such as lithium, that further limited her ability to function autonomously. Unsurprisingly, Spears referred to the conservatorship as “abusive,” and her testimony further ignited the #FreeBritney movement, which has protested Spears’ conservatorship for over a decade. So, what is a conservatorship and how is it legally allowed to restrict Spears’ autonomy?

In Maryland, unlike California, conservatorships are termed guardianships. To initiate a guardianship in Maryland, a person (typically a family member or close friend) must petition the court for guardianship over another. The petitioner must show that guardianship over the person or property is the least restrictive means available to assist the individual. The court must find that the individual is unable to manage his or her own affairs (personal or financial) due to a disability or minority. Qualifying disabilities range from age to mental illness. Spears’ father, Jamie Spears, originally petitioned the California court for conservatorship over Spears due to mental illness after the highly publicized incidents in which Spears shaved her head and attacked a paparazzi’s vehicle.

There are two types of guardianships: guardian of the person and guardian of the property. The court can determine that an individual with a disability needs one or both types of guardians. Spears’ conservatorship concerns both her person and her property.

Although Spears appeared in court on June 23, she has not petitioned the court to end her conservatorship. Instead, Spears previously asked the court to permanently remove her father, Jamie Spears, who temporarily relinquished his authority citing to illness. The court ultimately denied Spears’ request. While an individual living under a guardianship can assert objections throughout the process, the court decides who to appoint as guardian.

Spears’ opposition to her conservatorship is not unique. Oftentimes, individuals will oppose their own guardianships, in which case a trial is held, and the court must decide if the guardianship is necessary. Some guardianships are voluntary, but many are not the choice of the individual living under the guardianship, a conflict that is inherent to the concept of guardianship. Thus, Britney does not have the power to #FreeBritney, rather the decision to do so is within the purview of the court.

At Markham Law we handle guardianship matters with the utmost care and compassion—reach out today at 240-396-4373 with any of your Maryland guardianship needs.

QDRO Corner: Cost of Survivor Benefits

Most pension plan survivor benefits come at a cost. The reason for this is because most pension plans determine the benefit amount assuming that the payment will be made only during the life of the retiree.  In order to extend payments for an additional life, the plan will decrease the monthly benefit to apply those funds toward the survivor benefit. To be clear, this cost is taken by the plan as a deduction each month from the monthly pension benefits.  

Things to consider regarding the cost of the survivor benefit.

1. The larger the survivor benefit, typically, the larger the cost. Some plans determine the cost actuarily while other plans have a set fee schedule.

2. How does the cost for the survivor benefit get paid? There are two ways that plans can take the cost from the parties, the first option is as a reduction to both or either party’s monthly benefit and the other is ‘off the top’ of the monthly benefit.

   1. Reduction to both or either party’s benefit. Under this scheme, the parties can determine whether one party pays the entire cost, or if they will share the cost equally. This scheme results in the plan taking the cost AFTER the monthly benefit is divided between the parties.

   2. Off the top. Under this scheme, the parties cannot allocate the cost of the survivor benefit to either party. The plan takes the cost of the survivor benefit BEFORE dividing the monthly payment between the parties. In essence, this results in the parties paying their proportional share of the survivor benefit. If the parties want to shift the cost, they’ll have to determine an equalizing payment to be made on a monthly basis between themselves, separate from the QDRO.   

Some plans provide a certain amount of survivor benefits without any cost, but will charge a very high cost for any survivor benefit amount above the free survivor benefit amount.

If you don’t know if there’s a cost, it’s best to reach out to the plan in advance of signing an agreement. You’ll be able to find out if there is a cost, what the cost is, and how the plan requires the cost be paid. Such information can help the parties determine whether the benefit is worth the cost, and can save the parties from negotiating for this after everything else is resolved.

If you have any QDRO questions, please reach out to Beatriz Giglioli at bgiglioli@markhamlegal.com

What we know about the high-profile Bill and Melinda Gates divorce

On May 3, 2021, in what may be Twitter’s most famous divorce tweet of all time, Melinda French Gates and Bill Gates announced that they are ending their marriage. Bill Gates is the fourth richest person in the world, with a net worth of approximately $124 billion. The Gates’ settlement of marital property could be the largest of all time. Understandably, the Gates desire to keep the details of their high-profile divorce private. One month into the Gates’ announcement, here is what we do know about this multi-billion-dollar divorce.

1. Each party will be represented by at least three law firms, including attorneys versed in Washington State family law. One of Melinda French Gates’ attorneys is celebrity divorce lawyer Robert Stephan Cohen.

2. Melinda French Gates could become the second richest woman in the world after the divorce is finalized. In fact, on the day the couple announced their separation, Bill transferred $2.4 billion dollars in securities to Melinda, officially making her a billionaire separate from her husband.

3. Melinda French Gates is not asking for alimony. Instead, she will likely receive billions of dollars in assets—similar to Mackenzie Bezos, who received a four percent stake in Amazon (worth $38 billion), when she divorced Amazon founder and the richest man in the world, Jeff Bezos.

4. The couple has no minor children. The youngest Gates child is 18, suggesting that the couple may have waited for her to reach legal adulthood before divorcing.

5. In 2017, Bill Gates announced that each his three children would inherit $10 million of his fortune, but there is speculation that Melinda French Gates is attempting to increase that amount in the couple’s settlement.

6. While there is speculation that the Gates had a prenup, their separation agreement will likely supersede the terms of any premarital agreement.

7. In addition to billions of dollars in Microsoft stock, the Gates’ divorce will divide the couple’s real estate, which is worth $170 million and includes their 66,000 square foot home outside of Seattle, Washington.

8. The Gates’ art collection is worth $124 million and includes works by artists from Leonardo da Vinci to Winslow Homer. The collection could also be divided in the divorce settlement.

9. Although the Gates announced their divorce in 2021, it is rumored that Melinda French Gates hired divorce lawyers in 2019 when news broke about her husband’s alleged friendship with convicted sex offender Jeffery Epstein.

10. While the Gates are divorcing, they will both continue to devote time to the Bill and Melinda Gates Foundation which aims to reduce disease, poverty and inequity worldwide.

Those are the highlights of what we know so far about Bill and Melinda Gates divorce. Dividing 27 years’ worth of monetary and non-monetary contributions to a marriage is no simple task.

If you are considering separation or you are involved in a divorce in Maryland or the District of Columbia, contact our team at Markham Law Firm at 240-396-4373. It is vital that you secure highly competent legal representation even if your assets do not include a da Vinci.

QDRO Corner: Oh, what’s in a name?

In order for a QDRO to be accepted by the plan, it must refer to the plan by its proper name. It’s a simple rule but is easily violated. Plan names may appear on the regular account statement, in an online portal account, in the employee handbook/benefits statement, and in correspondence between the employer/plan and the employee. However, some of these sources may refer to a plan by an old name, or a shortened version of the name. In addition, some plans may be known generally by the name of the umbrella plan, but there are subplans and the specific subplan name must be included in the QDRO.

One large plan in the Maryland/DC area that is quite particular about this is the Maryland State Retirement and Pension System. This is the plan in which public school teachers in Maryland participate. Based on when the teacher started working for the state and a few other criteria, the teacher could be a participant in the Teachers’ Retirement System or the Teachers’ Pension System. Getting this one-word difference wrong will result in the State rejecting the order.

The best way to avoid this simple error is to obtain a statement of the plan and compare the name listed there to the plan name listed in the Summary Plan Document (which can be obtained by calling the plan and asking for it). When drafting agreements or seeking a share of a retirement benefit in court, be sure to use the correct plan name for the best specificity. This will delay any ambiguity for the QDRO drafter.