Domestic Relations – Equitable Distribution – Retirement Accounts

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Cheek v. Cheek. (Lawyers Weekly No. 11-07-0396, 11 pp.) (Elmore, J.) Appealed from the Yadkin County District Court. (Jeanie R. Houston, J.) N.C. App. Click here for the full text of the opinion.

Holding: Where a wife argues that the change in value in retirement accounts was a result of external, market forces, rather than any action taken by herself, and thus the diminution should be split between the parties, the trial court did not err in not classifying the change in value as divisible property but should have made findings of fact as to whether the decrease in property was due to the actions of the wife or passive forces.

Background

The parties were granted a divorce on June 27, 2007. An equitable distribution order was entered on Dec. 18, 2009 providing for an equal distribution of marital and divisible property. That order included a number of assets, including the marital home, vehicles, and bank and retirement accounts.

Discussion

The defendant-wife’s argument focuses primarily on the distribution of the parties’ retirement accounts. Each party owned three retirement accounts as of the date of separation; two of those belonging to the wife diminished substantially in value during the separation period.

The wife argues that the trial court erred by not considering that diminution in value as divisible property. Specifically, she argues that the change in value of the property in question was a result of external, market forces, rather than any action taken by her, and thus the diminution should be split between the parties. We disagree.

Under the plain language of the statute, all appreciation and diminution in value of marital and divisible property is presumed to be divisible property unless the trial court finds that the change in value is attributable to the post-separation actions of one spouse.

In sum, between the date of separation, May 17, 2006, and the date of the equitable distribution order, Dec. 18, 2009, the accounts diminished in value from a total of $131,373 to $37,199. However, on the worksheet attached to its order, the trial court listed the value of the wife’s 401(k) as $128,191 and the value of the wife’s other IRA as $3,182, that is, the accounts’ values as of the date of separation.

The wife argues that the difference in value should have been classified as divisible property because it was due to the kinds of market forces this court has classified as passive depreciation, in this case, rather than being attributable to the actions of one party.

While we agree that change in the actual value of the stocks was out of the wife’s hands, we cannot cast in the same light the wife selling the stocks, moving the money to a different account with a different firm, and purchasing/trading with the resulting funds. Such actions are managerial contributions and, as such, the trial court did not err in not classifying the change in value as divisible property.

However, we cannot endorse the trial court’s failure to make findings of fact regarding the nature of this property. In order to make the most accurate distribution of assets, the trial court should have made findings of fact as to whether the decrease in property was due to the actions of defendant or passive forces.

The presumption is that such diminution is divisible unless the trial court finds that the change in value is attributable to the post-separation actions of a spouse. If the trial court is unable to attribute a portion of the decrease to the active efforts of the defendant, then the presumption is that the entire loss is divisible and such loss should be apportioned evenly between the parties.

As such, we remand this case for entry of findings of fact on these points, and any adjustment of the award consistent with those findings.

Affirmed in part and remanded in part.