WADE (DAVID K.) VS. WADE (DEBORAH LAWLESS)Annotate this Case
RENDERED: DECEMBER 12, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
DAVID K. WADE
APPEAL FROM PULASKI CIRCUIT COURT
HONORABLE JEFFREY T. BURDETTE, JUDGE
ACTION NO. 04-CI-00119
DEBORAH LAWLESS WADE
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BEFORE: CAPERTON, TAYLOR AND WINE, JUDGES.
WINE, JUDGE: The underlying facts of this action are not in dispute. David Kim
Wade (David) and Deborah Lawless Wade (Deborah) were married in 1971 and
separated on December 17, 2003. Deborah filed a petition for dissolution of the
marriage on January 30, 2004. Following three years of litigation, the trial court
entered findings of fact, conclusions of law and a decree of dissolution of the
marriage on March 14, 2007. David now appeals from the trial court’s division of
the parties’ pension benefits. Finding no error or abuse of discretion, we affirm.
During the course of the marriage both David and Deborah
accumulated pension benefits with the Kentucky Retirement Systems. David is
retired from his employment as an engineer with the Kentucky Department of
Transportation. From his state pension, he receives gross retirement income of
$4,362.72 per month, or a net retirement income of $3,664.16 per month. He is
also entitled to a minimum social security benefit of $1,229.00 per month upon
eligibility. Deborah is a retired school teacher. She receives net income of
$1,953.00 per month from the Kentucky Retirement Systems. She also receives
$1,249.00 per month in social security disability income, giving her a total monthly
income of $3,202.00.
The trial court, citing Kentucky Revised Statutes (KRS) 61.690(2),
first held that retirement or disability benefits “shall not be classified as marital
property or as an economic circumstance . . . in an action for dissolution of
marriage.” However, the quoted language is not from KRS 61.690(2), but from
KRS 161.700(2). Furthermore, the exemption under this section applies to
retirement or disability benefits accrued under the Kentucky Teacher’s Retirement
System. On the other hand, neither party disputes the application of the
exemption, and the record indicates that Deborah spent at least part of her career as
a school teacher. Therefore, we shall assume, as did the trial court, that the
exemption applies in this case.
The trial court further noted that this exemption for pension benefits is
limited by KRS 403.190(4), which provides:
If the retirement benefits of one spouse are excepted from
classification as marital property, or not considered as an
economic circumstance during the division of marital
property, then the retirement benefits of the other spouse
shall also be excepted, or not considered, as the case may
be. However, the level of exception provided to the
spouse with the greater retirement benefit shall not
exceed the level of exception provided to the other
Based on the application of this statute, the trial court found that
David’s pension is exempt from division as marital property only up to the value of
Deborah’s pension. The trial court valued David’s pension at $912,935.38 and
Deborah’s pension at $525,472.97. Consequently, the court concluded that the
value of David’s pension in excess of $525,472.97 is not exempt. Thus, the court
found $387,462.41 of David’s pension to be marital and subject to division. The
Court then directed the parties to submit a Qualified Domestic Relations Order
(QDRO) to divide the martial portion of David’s pension.
David raises two issues with respect to the trial court’s valuation and
division of the pension plans. He first argues that the trial court should have
valued the plans as of the date of the dissolution decree. The trial court based its
valuation of the pension plans on the deposition testimony of Charles Estes (Estes),
CPA, an expert retained by David. Estes calculated the values of the parties’
pension plans in 2005, which was after David retired but before he began drawing
David argues that the trial court should have reopened the proof to
obtain the values of the pension plans as of the date of the decree. As a general
rule, we agree with David that pension and profit-sharing plans should be valued
on the date of the divorce decree. Armstrong v. Armstrong, 34 S.W.3d 83, 86 (Ky.
App. 2000), citing Clark v. Clark, 782 S.W.2d 56, 62 (Ky. App. 1990). However,
this rule must be applied in light of the practicalities of submitting evidence in a
dissolution proceeding. As the trial court noted, it relied on the values assigned to
the pension plans by David’s own expert.
Moreover, David has never indicated exactly how he was prejudiced
by the court’s use of the 2005 figures. As the trial court pointed out in its order
denying David’s motion to alter, amend or vacate, Deborah was already drawing
benefits as of the date of Estes’s deposition, and clearly her pension plan would not
have increased in value after that time. Furthermore, David admitted that he
retired on August 15, 2005, the same day that Estes calculated the value of his
pension plan. David never moved to reopen the proof prior to the entry of the
decree, and he concedes that that there is no proof that the values of the parties’
pension plans were any different as of the date of the decree. In the absence of any
contrary evidence, the trial court did not clearly err by relying on the values offered
by David’s expert in 2005.
The central issue in this case concerns the trial court’s method of
valuing the parties’ respective pension plans. In Armstrong, supra, this Court
described three methods for dividing marital pensions: the net present value
method, the deferred distribution method, and the reserved jurisdiction method.
The net present value method results in the nonemployee spouse receiving a lump sum to be distributed
immediately. It has also been referred to as the
“immediate offset” method because the lump sum may
be offset by the value of other marital property. This
method is frequently used when the value of the pension
is low because the employee spouse has worked for his
or her employer for only a few years or because the job is
a low paying one.
In the deferred distribution method, the court
predetermines the percentage of the pension income that
the non-employee spouse will be eligible to receive once
the pension is vested and matured. The marital interest
of the non-employee spouse is distributed in accordance
with that percentage at a later date. In the reserve
jurisdiction method, the percentage of the pension
income to be received by the non-employee spouse is
determined later when the pension has vested and
Armstrong, 34 S.W.3d at 85-86 (citations and footnotes omitted).
In this case, the trial court applied the deferred distribution method.
After allowing for the KRS 403.190(4) exemption, the court divided the remainder
of David’s pension in half, and then directed the parties to submit a QDRO for the
disbursement of the funds. David argues that the deferred distribution method was
inappropriate because this method requires an approximation of the value of the
benefits based on the parties’ life expectancies. Rather, he contends that the plans
could be more accurately valued using the net present value method, and the trial
court should have used that method to offset the value of his pension plan against
other marital property.
We cannot find that the trial court abused its discretion by applying
the deferred distribution method. First, Estes was unable to offer an exact
valuation of the present net value of Deborah’s pension. David makes no showing
that he lacked an opportunity to obtain this information prior to submission of the
case to the court. Without a present net value for both pensions, the trial court
could not divide the pensions using this method.
Furthermore, the trial court found that using the net present value
method was inappropriate in this case.
The net present value method is generally used when the
pension can be valued accurately and the marital estate
includes enough assets to offset the award of the pension
plan to the employed spouse. . . . In the case at bar,
[David] and [Deborah] had a net worth in real and
personal property that was vastly inferior to the nearly
$400,000 of pension funds. Rather than set up monthly
payments for the remainder due to [Deborah], this Court,
using its discretion, chose instead to defer the payments
from the pension fund in a Qualified Domestic Relations
The trial court has considerable discretion to select a method of
valuing pensions when making a just division of the parties’ marital and nonmarital property. See Overstreet v. Overstreet, 144 S.W.3d 834 (Ky. App. 2003),
and Poe v. Poe, 711 S.W.2d 849 (Ky. App. 1986). While the present net value
method may have been an appropriate method for valuing the pensions, the trial
court had insufficient evidence to accurately value both pensions under that
method. Considering the limited amount of other marital property, we cannot say
the trial court abused its discretion by using the deferred distribution method.
Finally, David argues that the deferred distribution method is
inappropriate because the Kentucky Retirement Systems will not recognize a
QDRO under these circumstances. In support of this argument, David cites Moore
v. Bradley-Moore, No. 2004-CA-000693-MR, 2006 WL 1716798 (Ky. App.
2006), an unpublished opinion by this Court. In Moore, the parties agreed to
divide their pensions using the deferred distribution system. However, the husband
later moved to modify the agreement after the Kentucky Retirement Systems
refused to accept the QDRO. The trial court in Moore granted the Kentucky Rules
of Civil Procedure (CR) 60.02 motion and then went on to value and divide the
pensions using the present net value method. This Court affirmed, finding that the
trial court did not abuse its discretion by changing the division method.
Unlike in Moore, however, there is no evidence in this case that the
Kentucky Retirement Systems will not accept a QDRO under these circumstances.
If such is the case, then David may move to modify the judgment pursuant to CR
60.02, as did the parties in Moore. Since David did not raise this issue before the
trial court, he is not entitled to present it for the first time on appeal. Regional Jail
Authority v. Tackett, 770 S.W.2d 225, 228 (Ky. 1989).
Accordingly, the judgment of the Pulaski Circuit Court is affirmed.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Joel R. Smith
Ralph D. Gibson