Opinion ID: 2196616
Heading Depth: 1
Heading Rank: 3

Heading: The Pension

Text: Ronald next asserts that the magistrate erred in calculating the marital portion of Bernadine's pension. He asserts that the magistrate improperly deducted from Bernadine's portion of the pension an amount he determined to be a premarital portion of that pension and also thereafter deducted an allowance for future tax liabilities on the already reduced pension amount. He argues that the net effect of these two adjustments was to decrease the value of the pension awarded to Bernadine, which in turn then increased her total distributive share of the remainder of the marital estate. We agree with his claim of error. The trial record reveals that the magistrate found that the actuarial present value of Bernadine's pension was $788,918. He then proceeded to deduct a portion (approximately three years) of Bernadine's pre-marriage teaching service years reflected in the pension, to arrive at an adjusted sum of $703,918. However, we note from the record that he failed to consider trial testimony showing that Bernadine withdrew in August 1968 money representing six years of her teaching service from her pension and that she subsequently repurchased those service years in June 1990. We have previously stated that a trial justice in undertaking to distribute marital assets must initially separate nonmarital assets from the marital assets in accordance with § 15-5-16.1. Gervais v. Gervais, 688 A.2d 1303, 1305 (R.I.1997) (citing Hurley v. Hurley, 610 A.2d 80, 85 (R.I.1992)). In Quinn v. Quinn, 512 A.2d 848 (R.I.1986), we adopted the principle of transmutation to help guide such a separation of assets, holding that [a] transfer of nonmarital assets from one spouse to both spouses jointly, in the absence of clear and convincing evidence to the contrary, will be understood as evincing an intention to transfer the property to the marital estate. Id. at 852 (citing Carter v. Carter, 419 A.2d 1018, 1022 (Me. 1980)). The record before us does not reveal any evidence, such as Bernadine's use of nonmarital assets for the repurchase of the six years of premarital service, to indicate that she intended her pension-time repurchase to be considered part of her separate, nonmarital estate. Accordingly, upon review of the record, we believe that the presumption remained unrefuted at trial that the pension-time repurchase was intended to benefit the marital estate, and believe, therefore, that the magistrate erred by refusing to treat the entire pension as part of the marital estate. We consequently must remand the calculation of the marital portion of Bernadine's pension back to the Family Court for redetermination in light of our decision on this particular issue. We next take up and review Ronald's further contention that the magistrate erred in deducting an allowance for future federal and state taxes that Bernadine will be expected to pay on the pension amount awarded her. The magistrate reduced the total pension amount by approximately 20 percent to account for those future taxes, bringing the value of the pension down to $563,135. Ronald asserts that the deduction for future taxes was in error because the magistrate calculated the deduction without assistance of any expert testimony or other relevant evidence pertaining to the amount of tax, if any, that might actually be imposed. We agree. We initially note from the trial record that the testimony presented by Mark Magnus (Magnus), a pension valuation expert, did not touch on the issue of what taxes might eventually become due on Bernadine's pension. In fact, when queried on the tax implications for the pension, Magnus simply responded I don't know. I'm not a tax person. There was no other evidence presented at trial dealing with the taxation of Bernadine's pension. In his decision however, despite the record being completely devoid of such relevant and pertinent evidence, the magistrate nevertheless chose to consider the tax ramifications and selected the 20 percent tax reduction figure, apparently as a kind of a tax middle ground between minimum and maximum tax rates that could potentially be applicable to Bernadine. Although a magistrate's decision to take into account tax ramifications applicable to a property distribution is committed to his or her sound discretion, see Chace v. Finlay, 576 A.2d 1233, 1235 (R.I.1990), we believe, however, that sufficient evidence first must be adduced at trial to guide the magistrate in the reasoned exercise of that discretion. Without such evidence, we believe that a magistrate effectively would be operating in a judicial vacuum, dealing with complex issues beyond the ordinary ken of his or her duty and ability as a fact finder. Thus, because of the absence of any evidence in the trial record relating to the amount of any tax expected on Bernadine's pension to support the magistrate's decision, we must conclude that his decision in this regard necessarily amounted to mere speculation and constituted a clear abuse of his discretion. Accordingly, the pension tax issue also must be remanded to the Family Court for redetermination of any tax that will become due on Bernadine's pension.