When Courtney Carr got divorced, he had a right to a large military pension. He and his wife Beth agreed that he would elect a survivor’s benefit. This would give him a smaller pension payout, but if he died first, Beth would begin collecting $2,750/month as his survivor. An expert calculated that the present value of the survivor’s benefit was about $226,000.
The divorce judge decided that the couple’s assets should be split with 60% going to Beth and 40% going to Courtney (to reflect the fact that Courtney had more income potential). However, in splitting the assets 60% – 40%, the judge didn’t count the $226,000 value of the survivor’s benefit as an asset.
Courtney complained, saying that not counting the survivor’s benefit meant that Beth was getting $226,000 “free” in addition to her 60%.
And the Indiana Court of Appeals agreed with Courtney.
Beth argued that the survivor’s benefit wasn’t an asset because she might never receive it – if she died before Courtney, she’d get nothing.
But the court said that was true of pensions in general – for instance, Courtney wouldn’t get a penny if he died before retirement. And yet pensions are considered assets at divorce.
The court also noted that Courtney had accepted a lower monthly payout in return for the survivor’s benefit, so he should be compensated for doing something that benefited his ex-wife.