Opinion ID: 1287890
Heading Depth: 1
Heading Rank: 3

Heading: valuation and distribution issues

Text: The next issue which must be addressed is whether the magistrate court properly valued and distributed the disputed community assets. The trial court has sufficient discretion to consider the circumstances of each case and decide the most equitable manner for valuing and dividing the marital portion of pension benefits. Maslen v. Maslen, 121 Idaho 85, 91, 822 P.2d 982, 988 (1991). In reviewing the magistrate court's disposition of community property, this Court will not disturb the disposition unless there is evidence of an abuse of discretion. Koontz v. Koontz, 101 Idaho 51, 52, 607 P.2d 1325, 1326 (1980); see also Olsen v. Olsen, 125 Idaho 603, 606, 873 P.2d 857, 860 (1994) (vacating and remanding the decision of the trial court where it applied the inappropriate rates to capitalize excess earnings and to discount for marketability in determining the value of the marital interest in the closely held corporation).
This Court has recognized different methods of valuing pension plans, such as the time rule method and the accrued benefit method. Maslen, 121 Idaho at 89-90, 822 P.2d at 986-87. Because retirement benefit plans are so varied in their provisions, funding, and administration, valuation cases are to be decided on an individual basis. Id. at 91, 822 P.2d at 988; Shill v. Shill, 115 Idaho 115, 120, 765 P.2d 140, 145 (1988) ( Shill II ). The benefits should be valued at the time of divorce, because benefits acquired after the divorce are the separate property of the employee spouse. Id. The magistrate court was within its discretion to determine the method of distribution of community assets, and we will not disturb this magistrate court's installment method of distribution of the Baldersons' community assets. However, in applying this method of distribution, the valuation of the community interest in the retirement benefits requires a discounting of the benefits to their present day value as of the date of divorce. If the benefits are not discounted to their present value, the value assessment does not accurately reflect the non-employee spouse's actual interest in the benefits, and the value of the benefits can be inflated, resulting in an inequitable distribution of the assets. The magistrate court calculated the community interest in the disposable military retirement benefits as being the amount Gerald would receive as of the date of divorce based on his date of divorce income and his time spent in active service during the marriage, or $1,479.10 per month. [1] Sherry's interest in the benefits was determined to be one-half of the community interest, or $739.55 per month. The magistrate court properly considered the benefits that were earned during the marriage in its valuation of the community interest in the retirement benefits, but it failed to calculate the present value of those benefits by calculating the lump sum future value of Gerald's retirement benefits and discounting that sum to its present-day value prior to determining the value of Sherry's interest in the benefits and distributing the assets.
Under I.C. § 32-712(1)(a), the trial court has the power to distribute community property in an equitable manner unless there are compelling reasons to distribute the property otherwise. The general rule is that the trial court should, if possible, order the disposition of the community property upon divorce to give each spouse sole and immediate control of his or her determined share. Maslen v. Maslen, 121 Idaho 85, 92, 822 P.2d 982, 989 (1991). However this rule must be applied within the confines of Idaho's statutes which delineate separate and community property interests. I.C. §§ 32-903, 32-906; Shill II, 115 Idaho 115, 118, 765 P.2d 140, 143 (1988); Maslen, 121 Idaho at 94, 822 P.2d at 991 (McDevitt, J. concurring in the result). In Shill v. Shill, 100 Idaho 433, 599 P.2d 1004 (1979) ( Shill I ), this Court recognized two possible methods for dividing a pension plan: [o]ne is to award the employee the pension and assign the non-employee-spouse assets of a value equal to the present value of the contingent benefits. (the lump sum method) The other method of dividing the rights is to reserve jurisdiction until retirement and divide the actual monetary benefit when received. (the as if, and when method) Id. at 437, 599 P.2d at 1008. However, in situations like the present one, where the largest marital asset is the retirement benefit and an inequitable division of the pension benefits would result from using either of the first two methods, this Court has recognized another method of dividing the assets. Beesley v. Beesley, 114 Idaho 536, 541-42, 758 P.2d 695, 702-03 (1988). This method of distributing the benefits allows a court to make an award of installment payments in lieu of a lump sum award. Id. When an award is made under the installment method, the interest accruing on the award at the rate used to discount the retirement benefits to their present value is to be awarded to the recipient spouse. Id. Although a lump sum award is the preferred method of distribution, the magistrate court was within its discretion to consider the circumstances of this case and to decide that the lump sum method paid in installments was the most equitable manner for valuing and dividing the marital portion of pension benefits. Maslen, 121 Idaho at 91, 822 P.2d at 988. The magistrate court's method of distribution of a determined lump sum in installments gave Sherry immediate control of a sum equal to her determined share of the benefits paid out over time. Insufficient property was available to make an offsetting award equal to the value of the retirement benefits, and the other methods of distribution would have resulted in an inequitable division of the retirement benefits. This distribution method is in accord with Idaho's case law and furthers the policies of separating the parties' interests in the property. The parties have immediate control over their interest in the community property and a lesser risk to future expectations of a contingent interest in the retirement benefits. The magistrate court did not abuse its discretion in ordering Gerald to begin making immediate payments to Sherry of an amount equal to her interest in the military retirement benefits. However, the magistrate court did not correctly calculate the interest to which Sherry is entitled. Because Sherry was awarded a sum equal to her interest in the retirement benefits to be paid in installments, she is entitled to interest accrued at the rate used to discount the retirement benefits to their present value. Beesley, 114 Idaho at 541, 758 P.2d at 702. The decision of the magistrate court is vacated to the extent that it failed to discount the community interest in the retirement benefits to their present day value and remanded for a calculation of the present day value of the community interest in the retirement benefits for purposes of distributing to Sherry a sum equal to one-half that value. Also on remand the magistrate court is to calculate the interest on the installment payments to which Sherry is entitled.