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Retirement Benefits - State Pensions Preemption
© 2005 National Legal Research Group, Inc.
WISCONSIN: Waln v. Waln, ___ Wis. 2d ___, 694 N.W.2d 452 (Ct. App. 2005).
The trial court erred by holding that a state pension plan was not marital property. The plan's spendthrift provision prohibited division by means of payments from the state, but it did not prohibit division by means of payments from the owning spouse.
The parties were divorced following a 26-year marriage. The husband worked for the City of Milwaukee Police Department during the marriage, accumulating a Wisconsin state pension. The pension was set to enter pay status in 2007, so it was vested but unmatured at the time of the divorce case.
The wife argued that the husband's pension was acquired during the marriage, and that it was marital property. She sought 50% of each future payment received by the husband, plus an order directing him to elect survivor benefits on her behalf. The trial court rejected her request, finding that the pension was not subject to division. The court relied upon a spendthrift clause in the statute establishing the state pension plan, preventing assignment of any benefits under the plan.
The wife appealed, and the Wisconsin Court of Appeals reversed. It has long been settled that retirement benefits are marital property under Wisconsin equitable distribution law. (Benefits accumulated before the marriage would not be marital property in most dual-classification states, but Wisconsin is one of a small number of states which treat property acquired before the marriage as marital property, although the presence of such property can be an important division factor.) The Wisconsin Supreme Court had already held that the spendthrift provision at issue did not prevent a wife from reaching state pension benefits for nonpayment of alimony, through a process known as quasi-garnishment. The court had reasoned that state pension plans "are created for the protection, not only of the employee or insured, but for the protection of his family. Similarly, the purpose of exemptions is to relieve the person exempted from the pressure of claims that are hostile to his and his dependents' essential needs." Courtney v. Courtney, 251 Wis. 443, 449, 29 N.W.2d 759, 762 (1947). The Wisconsin Court of Appeals had held in Lindsey v. Lindsey, 140 Wis. 2d 684, 412 N.W.2d 132 (Ct. App. 1987), that the state could not be ordered to pay pension benefits directly to the nonowning spouse. Lindsey did not reach the issue of whether such benefits could be treated as marital property and be divided by means of an offsetting award or periodic payments between the parties themselves, but the court did hold that the court could make orders to protect the nonowning spouse's interest. Inherent in this holding was the recognition that state pension benefits could be divided by means other than direct payments made by the state:
[Lindsey] examined a spendthrift provision and determined that the circuit court had the discretion to order a specific payout selection or enter other orders to protect the non-employee spouse's interest in the pension. Implicit in the holding is that the non-employee spouse does, in fact, have an interest in those funds. That conclusion is consistent with the policies embraced in the legislative scheme of Wis. Stat. chs. 766 and 767 shared ownership of assets during marriage and presumptive equal division of assets at divorce and does no violence to the language of the spendthrift provision.
Waln, 694 N.W.2d at 457. The trial court therefore had erred by concluding that the pension was not marital property.
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