Kimberly L. Eads v. Robert J. Eads, Jr. , 114 N.E.3d 868 ( 2018 )

FILED
Nov 16 2018, 9:32 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Jonathan R. Deenik Janice Mandla Mattingly
Deenik Law, LLC Janice Mandla Mattingly, P.C.
Greenwood, Indiana Carmel, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Kimberly L. Eads, November 16, 2018
Appellant-Petitioner, Court of Appeals Case No.
18A-DR-249
v. Appeal from the Johnson Superior
Court
Robert J. Eads, Jr., The Honorable Peter D. Nugent,
Appellee-Respondent Judge
Trial Court Cause No.
41D02-1110-DR-779
Vaidik, Chief Judge.
Case Summary
[1] In October 2011, Kimberly L. Eads (“Wife”) filed a petition to dissolve her
marriage to Robert J. Eads (“Husband”). Nearly six years later, in July 2017,
the trial court issued a decree dissolving the parties’ marriage. In the decree,
the court used a coverture fraction to determine that 77.2% of Husband’s
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 1 of 23
firefighters’ pension was earned during the marriage. The court then ordered
Husband, once he retires, to forward half of 77.2%, or 38.6%, of his monthly
pension payment to Wife each month and then issue her a Form 1099-R (an
IRS form for distributions from pensions and retirement plans) so that Wife
pays the taxes on her share of his pension. In addition, the court found that
Wife, who receives social-security disability payments for injuries she sustained
in a car accident, is entitled to rehabilitative maintenance and ordered Husband
to pay her $1000/month for twenty-four months. Finally, the court ordered
each party to pay their own attorney’s fees.
[2] Both Husband and Wife now appeal. We conclude that the trial court erred in
calculating the coverture fraction because it included pension rights that
Husband earned after Wife filed for divorce. We therefore remand this case
with instructions for the court to apply one of two methods—the date-of-
retirement approach or the date-of-divorce approach—to determine the portion
of Husband’s pension that was earned during the marriage. We also conclude
that the trial court erred in ordering Husband to issue Wife a Form 1099-R each
year and therefore order the court to consider different options of making Wife
responsible for the taxes on her share of Husband’s pension. Although we find
no abuse of the trial court’s discretion in ordering each party to pay their own
attorney’s fees, we find that the record does not support an award of
rehabilitative maintenance. On remand, the court must determine whether
Wife is entitled to incapacity maintenance instead of rehabilitative
maintenance. We therefore affirm in part and reverse and remand in part.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 2 of 23
Facts and Procedural History
[3] Although the dissolution decree covers many topics, this appeal concerns only a
few of them. Accordingly, we set forth the facts that are relevant to the issues
the parties raise on appeal.
[4] Husband began working as a firefighter on February 7, 1994. As a firefighter,
Husband is a member of the 1977 Police Officers’ and Firefighters’ Pension and
Disability Fund (“1977 Fund”), which is administered by the Indiana Public
Retirement System (INPRS). Appellant’s App. Vol. II p. 23 (Finding 37); see
also Thatcher v. City of Kokomo, 962 N.E.2d 1224, 1225 n.1 (Ind. 2012) (“The
‘1977 Fund’ is a disability and pension fund for police officers and firefighters
established by Indiana Code section 36-8-8-4 that is managed by [INPRS].”).
Members of the 1977 Fund become vested with twenty years of service and are
eligible for an unreduced retirement benefit when they have twenty years of
service, are at least fifty-two years old, and have separated from service.
Appellant’s App. Vol. II p. 23 (Finding 37); see also Ex. 1. Unlike other
pensions, the 1977 Fund pension is not subject to a Qualified Domestic
Relations Order (QDRO).1
1
According to INPRS,
The fund is not required by federal law to honor [QDROs]. The 1977 Fund is not
authorized by law to split payments between payees. . . . The Fund will not make any
payments directly to a Fund Member’s alternate payee under a QDRO. . . . The Fund
will also not make any payments prior to the time that distributions would otherwise
begin to the member by law. This means that the member must have actually retired or
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 3 of 23
[5] About three-and-a-half years after Husband began working as a firefighter, on
November 15, 1997, Husband and Wife married. In 2000, Wife was involved
in a car accident and sustained back injuries. See Tr. Vol. II p. 9 (Wife testifying
that her back injuries prevent her from sitting, standing for long periods of time,
and concentrating and that her medications make her sleepy). Wife, who
worked as a finance manager before the accident, has not worked since the
accident. Id. Wife was eventually awarded social-security disability payments
dating back to 2000. In 2002 and 2003, Husband was “medically retired” due
to an injury. Appellant’s App. Vol. II p. 23 (Finding 39); Tr. Vol. III p. 177.
Husband then returned to work.
[6] On October 25, 2011—which was before Husband, then age forty-five, became
vested in his 1977 Fund pension—Wife filed for divorce.2 In the petition, Wife
requested spousal maintenance. Tr. Vol. II pp. 95-97. After Wife filed for
divorce, Husband and Wife did not live together or commingle assets. The
separated from employment from a 1977 Fund covered position in order for the Fund to
begin making payments to the member.
Ex. 2C.
2
According to INPRS, on October 25, 2011, Husband “was not vested in a pension benefit”; however, if
Husband separated from employment on October 25, 2011, “he could have withdrawn his member
contribution account balance,” which at that time was approximately $67,853.45. Ex. 2C; see also Tr. Vol. II
pp. 216-17. After becoming vested, however, Husband cannot withdraw his member contributions “because
[they] are used to fund the 1977 pension benefit.” Ex. 2C.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 4 of 23
divorce was pending for nearly six years. During this time, Husband reached
twenty years of service and thus became vested in his pension.
[7] The final hearing was held over the course of three days between December
2016 and February 2017. Husband was still working and thus continuing to
accrue pension benefits. At the hearing, substantial time was devoted to
Husband’s 1977 Fund pension, as it was one of the parties’ two major assets
(the other being the marital residence). Wife presented evidence from Dan
Andrews, a Franklin College business and accounting professor and a CPA.
Specifically, Andrews testified that Husband’s monthly benefit amount
(calculated by INPRS as though Husband had separated from service on
October 4, 2016—the date of valuation—and would apply for an unreduced
retirement benefit when he turned fifty-two in July 2018) would be $3254.86
and that the present value of Husband’s 1977 Fund pension was $1,278,133.26.
See Tr. Vol. II pp. 200, 223; Ex. 2A. Andrews, at Wife’s request, then applied
the coverture fraction formula (discussed below), concluding that Husband
earned 61.52% of his pension during the marriage. Tr. Vol. II pp. 201-02; Ex.
2A (although Andrews testified that the coverture is 61.54%, his report provides
that the coverture is 61.52%).3 Both Husband and Wife asked the trial court to
3
According to Exhibit 2A, Andrews calculated the length of marriage as 13.94 years, that is, from November
15, 1997 (date of marriage) to October 25, 2011 (date Wife filed for divorce). Andrews calculated the term of
Husband’s employment as 22.66 years, that is, from February 7, 1994 (date of hire) to October 4, 2016 (date
Husband’s pension was valued).
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 5 of 23
order the other party to pay their attorney’s fees. Tr. Vol. II p. 111; Tr. Vol. III
p. 49.
[8] On July 5, 2017, the trial court issued a decree of dissolution of marriage, which
it amended in December following the parties’ motions to correct error. The
amended decree addresses Husband’s 1977 Fund pension as follows:
46. The Court finds that the period of time from the date of
[Husband’s] employment (February 7, 1994) until the Date of the
Decree (July 5, 2017) to be a total period of 281 months.
However, the parties were not married for the first 40 months of
[Husband’s] employment, and there was [a] 24-month period of
time in 2002-3 in which [Husband] was not working and
contributing to his pension. Therefore, the pension vesting
period was 217 months. (281 months – 64 months). Thus, the
percentage of the pension earned during the marriage is 77.2%
(217 divided by 281). [Wife] is entitled to half of that amount, or
38.6%.
*****
48. [Wife] presented evidence in the form of a valuation report
prepared by Dan Andrew[s] for [Husband’s] 1977 Police and
Firefighter pension. (Exhibit 2A). The Court accepts . . .
Andrew[s’] valuation and places a value of $1,278,133.26 on said
pension. However, only 77.2% of that amount was earned
during the marriage, or $986,718.83.
Appellant’s App. Vol. II p. 24. The court then divided the $986,718.83 equally,
awarding Husband and Wife each $493,359.42. Id. at 27 (Finding 59). As to
how Wife would receive her share of Husband’s pension, the court explained:
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 6 of 23
62. Because the parties do not have sufficient assets to divide the
value of [Husband’s] pension, the Court elects to divide the
monthly benefit instead.
63. [Husband’s] pension benefit at age 52 is calculated to be
$3,254.86 per month . . . . [Husband] could apply for a reduced
pension benefit January 1, 2017 in the amount of $2,894.22.
(Exhibits 1, 2A, 2B, 2C).
64. Upon his retirement, [Husband] shall forward 38.6% . . . of
his monthly pension each month to [Wife], as a [QDRO] is not
possible with the Firefighter Pension. Because [Husband] . . .
cannot determine his income tax liability before his earnings are
calculated, [Husband] shall forward the pension amount directly
to [Wife] and, each year, issue her a Form 1099 for her share of
the pension.
65. The Court chooses this method of distributing [Husband’s]
pension due to the parties lacking sufficient resources to
otherwise allocate sufficient assets and the inability of the
pension to be divided by [QDRO].
Id. at 28.4
[9] As for Wife’s request for spousal maintenance, the court found:
4
This method of distributing Husband’s retirement benefits is referred to as the deferred-distribution method.
Under this method, the court makes no immediate division of the retirement benefits but determines the
future benefits to which the non-owning spouse is entitled. Kendrick v. Kendrick, 44 N.E.3d 721, 726 (Ind. Ct.
App. 2015), trans. denied. Traditionally, the benefits have been stated as a share of the owning spouse’s future
benefit, and payment can be ordered to come directly from the owning spouse. Id. Under the other method,
the immediate-offset method, the court determines the present value of the retirement benefits and awards the
non-owning spouse his or her share of the benefits in an immediate lump-sum award of cash or property
equal to the value of his or her interest. Id.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 7 of 23
74. The Court finds that [Wife] is disabled and in need of
maintenance. [Wife] has been determined to be disabled by the
Social Security Administration and receives Social Security
Disability payments. [Wife] has been unable to work for several
years.
*****
82. The Court GRANTS [Wife’s] request for spousal
maintenance. The Court has reviewed I.C. 31-15-7-2 and the
trial exhibits and agrees that [Wife] is in need of spousal
maintenance. While [Wife] does currently receive disability
income, it is not sufficient to sustain her needs. Pursuant to I.C.
31-15-7-2(3), the Court finds that [Husband] shall pay to [Wife]
the sum of $1,000.00 or 16.2% of his monthly income as
rehabilitative maintenance for a period of twenty-four (24)
months.
Id. at 29-30. Finally, the trial court ordered Husband and Wife to pay their own
attorney’s fees:
86. Each party will receive sufficient funds from the sale of the
marital residence out of which to pay his or her attorney fees.
Accordingly, each party shall be responsible for his or her
attorney fees and costs.
Id. at 30.
[10] Wife now appeals, and Husband cross-appeals.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 8 of 23
Discussion and Decision
I. Husband’s Firefighters’ Pension
[11] It is well settled that in a dissolution action, all marital property, whether
owned by either spouse before the marriage, acquired by either spouse after the
marriage and before final separation of the parties, or acquired by their joint
efforts, goes into the marital pot for division. Ind. Code § 31-15-7-4(a);
Falatovics v. Falatovics, 15 N.E.3d 108, 110 (Ind. Ct. App. 2014). “Final
separation” generally means the date that the petition for dissolution of
marriage is filed. Ind. Code § 31-9-2-46. “Property” is defined in part as all the
assets of either party or both parties, including:
(1) a present right to withdraw pension or retirement benefits;
(2) the right to receive pension or retirement benefits that are not
forfeited upon termination of employment or that are vested (as
defined in Section 411 of the Internal Revenue Code) but that are
payable after the dissolution of marriage; and
(3) the right to receive disposable retired or retainer pay (as
defined in 10 U.S.C. 1408(a)) acquired during the marriage that
is or may be payable after the dissolution of marriage.
Ind. Code § 31-9-2-98(b). “The requirement that all marital assets be placed in
the marital pot is meant to insure that the trial court first determines that value
before endeavoring to divide property.” Montgomery v. Faust, 910 N.E.2d 234,
238 (Ind. Ct. App. 2009). “Indiana’s ‘one pot’ theory prohibits the exclusion of
any asset in which a party has a vested interest from the scope of the trial
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 9 of 23
court’s power to divide and award.” Falatovics, 15 N.E.3d at 110 (quotation
omitted). While the trial court may decide to award a particular asset solely to
one spouse as part of its just and reasonable property division, it must first
include the asset in its consideration of the marital estate to be divided. Id.
[12] After determining what constitutes marital property, the trial court must then
divide the marital property under the presumption that an equal division is just
and reasonable. Barton v. Barton, 47 N.E.3d 368, 379 (Ind. Ct. App. 2015),
trans. denied. This presumption may be rebutted by relevant evidence that an
equal division would not be just and reasonable, such as the extent to which the
property was acquired by each spouse before the marriage. Ind. Code § 31-15-
7-5. However, the trial court must state its reasons for deviating from the
presumption of an equal division in its findings and judgment. Barton, 47
N.E.3d at 379.
[13] We first note that Husband does not argue on appeal that his 1977 Fund
pension is not “property” because it was not vested when Wife filed for divorce.
See In re Marriage of Adams, 535 N.E.2d 124, 125-26 (Ind. 1989) (holding that a
police pension that vested after the dissolution petition was filed but before the
dissolution decree was entered was “property” according to Section 31-19-2-
98(b)(2)5 as a right to receive pension or retirement benefits not forfeited upon
termination), reh’g denied; see also Kirkman v. Kirkman, 555 N.E.2d 1293, 1294
5
At the time of Adams, this statute was located at Indiana Code section 31-1-11.5-11 (repealed in 1997).
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 10 of 23
(Ind. 1990) (applying Adams to situation where the husband’s pension vested
after the dissolution decree was entered and concluding: “In contrast to Adams,
Danny Kirkman’s right to pension benefits was neither vested nor had it
become ‘not forfeited upon termination’ prior to the entry of the dissolution
decree”); but see Granzow v. Granzow, 855 N.E.2d 680, 684 n.1 (Ind. Ct. App.
2006) (calling into doubt Kirkman’s use of “the date of dissolution as the point
on which to identify marital property subject to division”). Accordingly, we
start from the premise that Husband’s 1977 Fund pension is marital property to
be divided between the parties.
[14] Wife argues that the trial court erred “by utilizing a coverture fraction” to
exclude a portion of Husband’s 1977 Fund pension from the marital pot
because it resulted in an unequal division of the marital property “without
sufficient justification,” contrary to Indiana law. Appellant’s Br. pp. 8, 10. But
it was Wife’s own expert who applied the coverture fraction to Husband’s
pension (in both his report and at the hearing). See Tr. Vol. II p. 201 (Andrews
testifying that Wife asked him to calculate the coverture). Wife has therefore
invited any error concerning the trial court’s application of the coverture
fraction to Husband’s pension. In any event, the trial court included Husband’s
“pension rights” “in the marital pot.” Appellant’s App. Vol. II p. 24 (Finding
47). The court explained, however, that it was setting aside a portion of the
pension to Husband because it was earned before the parties’ marriage; the
court then equally divided the rest of the pension. Id. (Finding 46). This
satisfies Indiana law.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 11 of 23
[15] Husband challenges the trial court’s division of his 1977 Fund pension.
Specifically, he argues that the trial court improperly calculated the percentage
of his pension that was earned during the marriage as 77.2%. He claims that
the percentage should be lower, because the court improperly included pension
rights that he earned after Wife filed for divorce. Husband is correct.
[16] The court calculated 77.2% using a coverture fraction. Specifically, the court
found:
46. The Court finds that the period of time from the date of
[Husband’s] employment (February 7, 1994) until the Date of
the Decree (July 5, 2017) to be a total period of 281 months.
However, the parties were not married for the first 40 months of
[Husband’s] employment, and there was [a] 24-month period of
time in 2002-3 in which [Husband] was not working and
contributing to his pension. Therefore, the pension vesting
period was 217 months. (281 months - 64 months). Thus, the
percentage of the pension earned during the marriage is 77.2%
(217 divided by 281). [Wife] is entitled to half of that amount, or
38.6%.
Appellant’s App. Vol. II p. 24 (emphasis added). The court then ordered
Husband to forward 38.6% “of his monthly pension each month” to Wife. Id.
at 28 (Finding 64).
[17] Determining the portion of a pension that was earned during a marriage “is one
of the most difficult tasks in all of equitable distribution.” 2 Brett R. Turner,
Equitable Distribution of Property 3d, Defined Benefit Plans: The Coverture
Fraction § 6.25 (Nov. 2017 update). Because neither the employer nor the
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 12 of 23
employee normally makes specific contributions to such a plan, the court
cannot use a proration of funds. Id. Rather, the court can use a proration of
time. Id. This proration is used to determine the coverture fraction, that is, the
portion of the pension that was earned during the marriage.6 Id. There are two
formulas used to calculate the coverture fraction. The first one, which a “large
majority” of courts use, is the date-of-retirement approach:
Date-of-retirement coverture fraction = creditable time during marriage
total creditable time
Id.; see also Morey v. Morey, 49 N.E.3d 1065, 1071 (Ind. Ct. App. 2016)
(explaining that the numerator is the period of time during which the marriage
existed while pension rights were accruing and the denominator is the total
period of time during which pension rights accrued). For example, if the
employee is employed for 20 years, 12 of which occurred during the marriage,
then 12/20 or 60% of the pension was earned during the marriage. Turner,
supra, § 6.25. To compute the total marital interest in the pension, the fraction
is multiplied by the employee’s monthly benefit at retirement. Id.
[18] The second formula, which a “small but significant minority” of courts use, is
the date-of-divorce approach:
Date-of-divorce coverture fraction = creditable time during marriage
total creditable time at divorce
6
According to Turner, “marital share fraction” is more accurate terminology than “coverture fraction.”
Turner, supra, § 6.25 at n.0.50.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 13 of 23
Id. Although the numerators are the same in both formulas, this fraction uses
total creditable time at divorce as the denominator, because the fraction is
multiplied by what the monthly payment would be at divorce. Id. As Turner
explains it, “[d]ifferent formulas are required because the denominator of the
fraction must match exactly the period of time over which the employee
acquired the benefit by which the fraction is being multiplied.” Id. For
example, an employee works 30 years: 5 years before the marriage, 15 years
during the marriage, and 10 years after the marriage. According to the evidence
presented, the employee’s pension payment would have been $1000 per month
had he retired at divorce. Thus, the coverture fraction is years married divided
by years of employment at divorce, or 15/20 (75%). Id. To compute the total
marital interest in the pension, the fraction is multiplied by what the monthly
payment would be at divorce (not the actual pension payment, which
presumably would be larger), 75% x $1000 per month= $750 per month. Id.
[19] Here, the trial court did not use either formula. We therefore remand this case
with instructions for the court to re-calculate the coverture fraction,
acknowledging that Husband has since turned fifty-two and might be retired.
To assist the trial court, we illustrate how each of the formulas would work in
this case.
[20] Using the date-of-divorce approach, the numerator of the coverture fraction is
the creditable time during marriage, which is calculated from November 15,
1997, the date of marriage (since Husband was already accumulating pension
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 14 of 23
benefits when the parties got married),7 to October 25, 2011, when Wife filed
for divorce. See Barton, 47 N.E.3d at 380 & n.15 (calculating the numerator
from the date of marriage to the date the dissolution petition was filed); Turner,
supra, § 6.25 at n.28 (explaining that the ending date for the numerator is the
“date of classification,” which in Indiana is the date of “final separation”). This
is a period of 167 months.8
[21] The denominator is the total creditable time at divorce, which is calculated
from February 7, 1994 (Husband’s date of hire) to October 4, 2016 (date
Husband’s pension was valued).9 This is a period of 271 months. 167/271 is
61.62%.10 To compute the total marital interest in the pension, 61.62% is
multiplied by Husband’s estimated monthly benefit amount of $3254.86
(calculated by INPRS as though Husband had separated from service on
October 4, 2016, and would apply for an unreduced retirement benefit when he
7
The earliest starting date is the date of marriage. However, the date of marriage is not always the starting
date because the employee could have started working after the date of marriage. In such a case, the date
would be the date the employee started earning pension rights.
8
Although Husband testified, and the trial court found, that Husband did not accrue pension rights for
twenty-four months while he was “medically retired,” INPRS and Andrews said he did. See Exs. 1 & 2C; see
also Ind. Code § 36-8-8-12(e) (“Time spent receiving disability benefits, not to exceed twenty (20) years, is
considered active service for the purpose of determining retirement benefits.”); Tr. Vol. II p. 218 (Andrews
testifying that “time off on disability in the 77 Plan counts as time served”). Therefore, the twenty-four
months should be included.
9
If Husband’s pension could have been valued on the date Wife filed for divorce, that date presumably
would have been used. However, Husband’s pension was not vested when Wife filed for divorce and
therefore had no value (other than Husband’s member contributions). Neither party objected to using
October 4, 2016.
10
This is almost the same number that Andrews calculated—61.52%. See Tr. Vol. II p. 202; see also Ex. 2A.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 15 of 23
turned fifty-two in July 2018), which is $2005.64. According to the trial court’s
finding, Wife would be entitled to 50% of this monthly payment, or $1002.82.
[22] The date-of-retirement approach can also be used. As with the date-of-divorce
approach, the numerator is 167 months. However, the denominator, the total
creditable time, cannot be determined until Husband retires. If, on remand,
Husband has retired, the denominator would be from February 7, 1994
(Husband’s date of hire), to Husband’s date of retirement. To compute the total
marital interest in the pension, the resulting fraction would be multiplied by
Husband’s actual monthly pension payment. If, however, Husband is still
working, this formula can be used, but the denominator cannot be calculated
until Husband retires. Likewise, the monthly benefit amount would be not
known until Husband retires. If, on remand, Husband is still working, the trial
court may place the formula in its order for the parties to calculate at Husband’s
retirement.
[23] Husband’s next argument addresses taxes on Wife’s portion of his pension.
According to Indiana Code section 31-15-7-7, “The court, in determining what
is just and reasonable in dividing property under this chapter, shall consider the
tax consequences of the property disposition with respect to the present and
future economic circumstances of each party.” Here, the trial court ordered
Husband, upon retirement, to forward a percentage of his monthly pension
payment each month “directly to [Wife] and, each year, issue her a Form 1099
for her share of the pension.” Appellant’s App. Vol. II p. 28 (Finding 64); see
Cross-Appellee’s Br. p. 6 (stating that the trial court was likely referring to Form
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 16 of 23
1099-R). Husband contends that Form 1099-R is not the proper way to
transfer the tax burden on Wife’s portion of his pension to her. We agree.
[24] According to the IRS, Form 1099-R should be filed “for each person to whom
you have made a designated distribution or are treated as having made a
distribution of $10 or more from,” among other things, retirement plans and
pensions. IRS, About Form 1099-R, https://www.irs.gov/forms-pubs/about-
form-1099-r. But Wife is not receiving a distribution from her pension; rather,
Husband is receiving a distribution from his pension and then giving Wife a
portion of it as part of the property settlement. Once Husband retires and starts
receiving his pension, he will receive a Form 1099-R from INPRS for the full
amount of his annual benefit and thus be responsible for taxes on the full
amount. Accordingly, Form 1099-R is not a proper way to transfer Wife’s tax
burden to her.11 On remand, the trial court can address the tax consequences by
reducing Wife’s percentage of Husband’s monthly pension payment to account
for the fact Husband is paying taxes on her portion. Or, if Husband has retired
and his monthly pension payment is known, the trial court can determine the
net, or after-tax, amount of Husband’s monthly pension payment based on his
11
As explained earlier, Husband’s 1977 Fund pension is not subject to a QDRO. However, when a deferred-
distribution award is implemented through a QDRO, the plan administrator gives a separate benefit check to
each spouse, and each spouse is responsible for his or her own tax consequences. 2 Brett R. Turner,
Equitable Distribution of Property 3d, Defined Benefit Plans: Deferred Distribution Method § 6.32 (Nov. 2017
update).
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 17 of 23
withholding12 and then multiply the coverture fraction by Husband’s net
monthly pension payment.
II. Maintenance Award
[25] Wife contends that the trial court erred in awarding her “rehabilitative”
maintenance instead of “incapacity” maintenance. Spousal-maintenance
awards in Indiana are “restricted to three, quite limited options”: incapacity,
caregiver, and rehabilitative. In re Marriage of Gertiser, 45 N.E.3d 363, 367 (Ind.
2015) (quotation omitted). Indiana Code section 31-15-7-2 sets forth the
requirements of each:
A court may make the following findings concerning
maintenance:
(1) If the court finds a spouse to be physically or mentally
incapacitated to the extent that the ability of the incapacitated
spouse to support himself or herself is materially affected, the
court may find that maintenance for the spouse is necessary
during the period of incapacity, subject to further order of the
court.
(2) If the court finds that:
12
According to INPRS, it must “withhold federal taxes on monthly payments. You may choose not to have
taxes withheld. Make sure to complete the tax withholding forms when you apply for benefits.” INPRS,
[1977 Fund] Member Handbook: Taxation of Retirement Benefits,
https://www.in.gov/inprs/77fundmbrhandbooktaxationofrtmtbenefits.htm. If the trial court is worried that
Husband will withhold too many taxes, thus decreasing the amount that Wife receives each month, the court
can order Husband to withhold a specific amount.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 18 of 23
(A) a spouse lacks sufficient property, including marital
property apportioned to the spouse, to provide for the
spouse’s needs; and
(B) the spouse is the custodian of a child whose physical or
mental incapacity requires the custodian to forgo
employment;
the court may find that maintenance is necessary for the spouse
in an amount and for a period of time that the court considers
appropriate.
(3) After considering:
(A) the educational level of each spouse at the time of
marriage and at the time the action is commenced;
(B) whether an interruption in the education, training, or
employment of a spouse who is seeking maintenance
occurred during the marriage as a result of homemaking or
child care responsibilities, or both;
(C) the earning capacity of each spouse, including
educational background, training, employment skills, work
experience, and length of presence in or absence from the
job market; and
(D) the time and expense necessary to acquire sufficient
education or training to enable the spouse who is seeking
maintenance to find appropriate employment;
a court may find that rehabilitative maintenance for the spouse
seeking maintenance is necessary in an amount and for a period
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 19 of 23
of time that the court considers appropriate, but not to exceed
three (3) years from the date of the final decree.
[26] In the absence of an agreement between the parties, the trial court’s authority in
ordering maintenance is limited to these three statutory options. Cannon v.
Cannon, 758 N.E.2d 524, 526 (Ind. 2001) (“Where none of these circumstances
exist, a court may not order maintenance without the agreement of the
parties.”). This is because the policy regarding spousal maintenance reflects a
clear legislative intent to retain fairly strict limits on the power of courts to order
maintenance without the consent of the parties. Id.
[27] In its findings, the trial court quoted only Section 31-15-7-2(1), which addresses
incapacity maintenance, but then found that Wife was “disabled” and entitled
to “rehabilitative maintenance” under Section 31-15-7-2(3) for twenty-four
months (unlike incapacity maintenance, which lasts for the duration of the
incapacity until further order of the court, rehabilitative maintenance may not
exceed three years from the date of the final decree). 13 However, the trial
court’s findings do not address the requirements for rehabilitative maintenance.
And Wife concedes that “[t]here is no evidence of record which would support
a finding of ‘Rehabilitative Maintenance.’” Appellant’s Br. p. 12. Further
adding to the confusion is the fact that the trial court found that Husband “does
13
Wife posits that the trial court awarded her rehabilitative maintenance for twenty-four months so that it
ended “at approximately the time she will begin receiving her share of [Husband’s] monthly pension benefit.”
Appellant’s Br. p. 13.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 20 of 23
not have the financial means to meet all the obligations this Court has now
burdened him with and pay the spousal maintenance award.” Appellant’s App.
Vol. II p. 30 (Finding 84) (emphasis added). Accordingly, we remand this case
to the trial court with instructions to determine whether Wife is entitled to
incapacity maintenance, taking into consideration Husband’s ability to pay.
Barton, 47 N.E.3d at 375-77. If the court awards Wife incapacity maintenance,
it should last for the “period of incapacity, subject to further order of the court.”
III. Attorney’s Fees
[28] Both Husband and Wife asked the trial court to order the other party to pay
their attorney’s fees, but the court ordered Husband and Wife to pay their own
fees. The court reasoned that they will each “receive sufficient funds from the
sale of the marital residence.” Appellant’s App. Vol. II p. 30 (Finding 86).
Wife contends that the trial court erred in not ordering Husband to pay her
attorney’s fees. Pursuant to Indiana Code section 31-15-10-1, a trial court may
order a party in a dissolution proceeding to pay a reasonable amount of the
other party’s attorney’s fees. Barton, 47 N.E.3d at 377. The court has broad
discretion in deciding whether to award attorney’s fees. Id.
[29] In determining whether to award attorney’s fees in a dissolution proceeding,
trial courts should consider the parties’ resources, their economic condition,
their ability to engage in gainful employment and earn income, and other
factors bearing on the reasonableness of the award. Id. A party’s misconduct
that directly results in additional litigation expenses may also be considered. Id.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 21 of 23
Consideration of these factors promotes the legislative purpose behind the
award of attorney’s fees, which is to ensure that a party who would not
otherwise be able to afford an attorney is able to retain representation. Hartley
v. Hartley, 862 N.E.2d 274, 286-87 (Ind. Ct. App. 2007). When one party is in a
superior position to pay fees over the other party, an award is proper. Id.
[30] Wife argues that the court should have ordered Husband to pay her attorney’s
fees of $22,000 due to her disability as well as Husband’s superior earning
capacity and conduct during the divorce proceedings, such as his failure to
appear at some of the hearings and his failure to fully comply with discovery.
The trial court made several findings regarding the parties’ financial situation.
That is, the court found that the parties were living “well above their means
while married,” that a “balloon payment” on the mortgage became due during
the dissolution proceedings, and that “[Husband] and [Husband] alone has
been responsible for the obligations relating to the marital residence during the
almost 6-year pendency of this case.” Appellant’s App. Vol. II p. 30 (Findings
83 & 84). Although the trial court did not make any findings regarding
Husband’s conduct, the trial court was well aware that the divorce had been
pending for nearly six years. The trial court did not abuse its discretion in
ordering each party to pay their own attorney’s fees. However, because this
case is being remanded, the court can revisit the topic of attorney’s fees if it
chooses.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 22 of 23
[31] Affirmed in part and reversed and remanded in part.
Riley, J., and Kirsch, J., concur.
Court of Appeals of Indiana | Opinion 18A-DR-249 | November 16, 2018 Page 23 of 23