BE CAREFUL WHEN DIVIDING PENSIONS OR STOCK ACCOUNTS

Financial determinations in divorce cases are a moving and blurry target. Stock accounts and pension funds, in particular, vary in value from nanosecond to nanosecond. This makes writing language to divide these accounts treacherous territory. If you divide the accounts using a per centage, a change in the value of the account could upset the overall intended division of assets. If you use a number, problems are created when the amount of the account changes. A good example of this is found in the recent case of Wood v. Wood, No. 2009-CA-00679 SCT (Decided May 27, 2010). In that case the parties divided a pension account, using the following language in the agreement: “Wife shall receive $203,200 from the GGC savings account which has an estimated balance of $376,000. Husband shall receive the sum of $172,800.”

The agreement was made before the 2008 market crash. By the time of the hearing on the matter, the account was $206,000. The Wife contended she was owed the amount of $203,200. The Husband contended that even though they used specific numbers, they really intended to divide the account 54/46%. The court found that even though they did not use per centages, it was logical that they intended to use per centages because they used an estimated amount of the account and stated amounts for each person. The Court noted that to construe it any other way would make it impossible for the parties to pay each party what was specified.

One has to ponder how lucky the husband was that his lawyers stated an amount to go to him. Had they not, it is likely he would have lost the battle and ended up giving almost all of the account to his former wife.

While the vicissitudes of life make it nearly impossible to draft agreements to cover every contingency, the Wood case demonstrates the importance of using precise language and maybe even including some examples. For example, perhaps the husband’s lawyer should have made sure the agreement said, “The parties intend to divide the account by a per centage of 54% for Wife and 46% for husband, which at the present date would mean that Wife shall receive $203,200 from the GGC savings account which has an estimated balance of $376,000 and Husband shall receive the sum of $172,800. The parties recognize that the market balance will change from day to day and such change will change the actual amounts each receives, however, the per centage shall remain 54% for Wife and 46% for husband.” The Wife’s attorney might have tried to use the following language: “The parties intend to divide the account so that Wife shall receive $203,200 or 57% of the account upon the date of division, whichever is greater, and husband shall receive the balance. For example, if the amount of the account is greater than the current amount at the time of division, Wife shall receive 57%, even though that may be greater than $203,200. On the other hand, if the amount of the account is less than the current amount at the time of division, Wife shall still receive $203,200, even thought that may be a greater per centage than 57%.”

Of course, the problem with talking about what should have been done is that agreements are negotiated, and lawyers often cannot get the exact language they want in the give and take of negotiation.