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  • WisBar News
    March 16, 2010

    Court of appeals reverses circuit court on treatment of pension payment in divorce

    In Kelly v. Kelly (2009AP852, Mar. 11, 2010), the Wisconsin Court of Appeals reversed and remanded the judgment of the Rock County Circuit Court on the disposition of property and a pension payment in divorce.

    March 16, 2010 – In Kelly v. Kelly (2009AP852, Mar. 11, 2010), the Wisconsin Court of Appeals reversed and remanded the judgment of the Rock County Circuit Court on the disposition of property and a pension payment in divorce.

    Gary Kelly and Crystal Kelly were married for 25 years and had three children, two adults and one 16 year old who lived with Crystal. Crystal had worked for 19 years in the food service industry, but her job was eliminated in 2007. By the time of trial, she had still not found work and was collecting unemployment.

    Gary had worked for 31 years at the GM plant in Janesville, took an early retirement at the end of 2006, and began receiving pension payments of $3,056 per month. He was also unemployed at the time of trial.

    The parties had resolved the issues of custody and placement of their minor child, and the issues of property division, maintenance, and child support were tried. The parties’ primary assets were their home and Gary’s GM pension.

    The parties agreed that the pension had a present value of $292,702, but rather than ask the court to divide this asset based on present value, they disputed whether the monthly pension payment should be divided. Gary’s position was that he should receive the entire monthly payment, and pay maintenance and child support based on that income. Crystal’s position was that the monthly payment should be divided equally between them, which would eliminate the need for Gary to pay maintenance and result in a lower child support obligation.

    The court divided the assets and debts in such a way that Gary received $107,232 in net assets and Crystal received $24,500. Gary was ordered to pay $1,000 in maintenance for the next three years. Finally, the court ordered Gary to pay $350 per month in child support, which was 17 percent of his monthly pension payment minus the $1,000 maintenance.

    The proper case law

    While the circuit court has discretion in its decisions on property division, maintenance and child support, the court of appeals found that the circuit court made an error of law in this case, which they review de novo. See Id. ¶ 11.

    With regard to the treatment of Gary’s pension, the dispute arises over the parties’ reading of the case law. Crystal cites Steinke v. Steinke, 126 Wis. 2d 372, 376 N.W.2d 839 (1985), in that it permits the court to divide Gary’s pension by dividing the monthly pension payments, but the court must nonetheless treat those payments as part of the marital estate subject to the 50/50 division established under Wis. Stat. § 767.61(3). Gary cites Herdt v. Herdt, 152 Wis. 2d 17, 447 N.W.2d 66 (Ct. App. 1989) and Dutchin v. Dutchin, 2004 WI App. 94, 273 Wis. 2d 495, 681 N.W.2d 295, for the premise that the circuit court has discretion to treat the pension as an income stream to the pensioned spouse, who then pays a portion of the monthly pension payments as maintenance. See Id. ¶ 12.

    The court of appeals agreed with Crystal that Steinke, as a Wisconsin Supreme Court case, is controlling. As a result, they concluded that the pension should be included in the property division, and that if the circuit court decides to divide the pension by dividing the monthly payments, that the 50/50 presumption would still apply. See Id. ¶ 13. In that case, the supreme court concluded that a spouse’s, “interest in a pension plan is a part of the wealth brought to, or accumulated during, the marriage … [and therefore] the value ... must be included in the property division.” See Id. ¶ 14.

    The supreme court in Steinke continued by emphasizing, “the fact that the asset is paid out very similarly to how employment income is paid out … [does not] diminish its property character,”  that makes it subject to the presumptive 50/50 marital division under the statute. See Id. ¶ 17.

    The circuit court’s error

    The circuit court applied an incorrect legal standard with respect to Gary’s pension, by deciding that Dutchin provided the authority for it to treat Gary’s monthly pension payments not as an asset of the marital estate, but as his income, which the court then considered for purposes of maintenance and child support. See Id. ¶ 26.

    The court of appeals noted that there was no explanation in the record for dividing the monthly pension payments unequally because of an unequal division of other assets. In fact, the other assets were divided unequally in Gary’s favor, which should result in an unequal division of the monthly payments in Crystal’s favor, in the absence of any factors that overcome the presumption of an equal division. See Id. ¶ 27. As a result, the court of appeals reversed and remanded the property division.

    Because the issues of maintenance and child support will be significantly affected by the decision on dividing Gary’s monthly pension payments, the court didn’t undertake significant analysis on these issues as they will also be addressed upon remand.

    By Deborah G. Spanic, legal writer

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