Maryland Court Upholds Marital Agreement Dividing Pension Benefits

50-percent-1143660Under Maryland law, “marital property” is a term used to identify property that was acquired during the length of a marriage. In contemplation of divorce, spouses often seek to divide up marital property by virtue of a settlement agreement. Under Section 8-105 of the Maryland Family Code, courts have the power to enforce the provisions of such agreements. The statute provides that a settlement agreement that has been incorporated, but not merged into the final decree, may be enforced as a judgment or as an independent contract. It is important to understand how these legal rules can affect your divorce proceeding. For assistance and guidance on how to prepare and present your case, you are encouraged to contact a local Maryland divorce attorney as soon as possible.

In a recent divorce case, a Maryland court of special appeals was confronted with a dispute over the terms of a settlement agreement purporting to divide the couple’s pension and retirement benefits. Here, the couple got married in 1989 and separated in 2006. The wife filed a complaint for absolute divorce in 2008. In February 2009, the husband filed a counter-complaint for absolute divorce, custody and other relief. On July 30, 2009, the court issued a judgment of divorce, incorporating the parties’ agreements – resolving all remaining issues. As part of this judgment, the court referenced the parties’ agreement concerning all of the property issues related to this case, which included a division of the couple’s pension interests.

Approximately a month later, the military informed husband that he would be relieved of duty and afforded “retired pay” that would be calculated based upon a 60% disability rating. In January 2010, the trial court issued a Marital Property Consent Order, which identified the parties’ agreement regarding the division of marital property, namely that wife would be entitled to 50 percent of the marital property portion of husband’s monthly pension. Throughout a series of court proceedings, wife argued that husband was in contempt for failing to divide his military pension. Husband argued that he was now only receiving disability payments, which are not subject to division under federal law.

The trial court ultimately found that in July 2009, the parties agreed to divide their pension interests, and there was no evidence – at that time – to suggest that the law prohibited husband from agreeing to divide that interest. The court concluded that although the Consent Order was entered in January 2010, it contained a binding “contract” that was entered into the record in July 2009 (before information concerning husband’s disability issue arose).

The court of special appeals affirmed the decision, relying in part on Maryland case law, which held, “where parties enter into an agreement or contract to transfer portions of their retirement pay, the Court will uphold the contract even if the retirement pay is a disability payment.” Further, under Maryland contract law, a provision that divides retirement benefits includes disability benefits “unless they are expressly excluded.”

The court here concluded that wife’s share of husband’s “military pension fund” included his disability retirement benefits. Husband tried to argue that wife was aware of his disability at the time of their contract negotiations. However, the court pointed out that there is no evidence in the record that husband sent or otherwise disclosed the government’s findings that he was recommended for temporary retirement based on disability.

This case is a good example of the need to be extremely careful when identifying, characterizing, and dividing up marital property.  The outcome has the potential to impact each spouse’s financial status going forward. Parties anticipating a divorce are strongly encouraged to contact Anthony A. Fatemi, an experienced Maryland family law attorney, for representation and legal guidance in all aspects of divorce. Mr. Fatemi can be reached at (888) 519-2801 or (301) 519-2801.

Related Blog Posts:

Maryland Court Reviews Wife’s Request for Certain Pension Benefits in Divorce

Maryland Court Interprets Settlement Agreement Dividing Marital Property

Maryland Court Denied Husband’s Attempt to Set Aside Marital Settlement Agreements

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