Deliduka v. Deliduka, CO-83-1261

• Decision Date: 04 April 1984
• Docket Number: No. CO-83-1261,CO-83-1261
• Citation: 347 N.W.2d 52
• Parties: Mary E. DELIDUKA, Respondent, v. George E. DELIDUKA, Appellant.
• Court: Minnesota Court of Appeals

Page 52

347 N.W.2d 52

Mary E. DELIDUKA, Respondent, v. George E. DELIDUKA, Appellant.

No. CO-83-1261.

Court of Appeals of Minnesota.

April 4, 1984.

Review Denied July 26,1984.

Syllabus by the Court

1. Military pensions are marital property as defined by Minn.Stat. § 518.54.

2. The Uniformed Services Former Spouses' Protection Act grants states authority to treat all disposable retired pay as marital property, but limits direct government payments to former spouses to 50 percent of disposable retired pay.

3. The trial court properly refused to consider tax considerations not raised at trial in calculating the husband's net income available for maintenance and child support.

4. The trial court's award of minimal temporary maintenance was not an abuse of discretion considering the wife's earning potential and her share of the marital property.

5. The trial court's assignment of attorney fees was not an abuse of discretion.

Medard B. Kaisershot, Crystal, for appellant.

Marilyn J. Michales, Minneapolis, for respondent.

Heard, considered and decided by FOLEY, P.J., and WOZNIAK and SEDGWICK, JJ.

OPINION

SEDGWICK, Judge.

This is an appeal from a dissolution judgment and from an order denying a new trial. The husband contends that the trial court erred by awarding his wife 50 percent of his gross military retirement benefits and by failing to make certain tax calculations in determining income available for child support and maintenance.

The wife contends that the court abused its discretion by granting her temporary rather than permanent maintenance and by not requiring her husband to pay her attorney fees.

Affirmed as modified.

FACTS

Mary and George Deliduka were divorced in June 1983 after 23 years of marriage. The Delidukas, ages 48 and 45 respectively, had seven children. The children, ages 21, 20, 18, 17, 15, 13, and 9, all live with Mrs. Deliduka. The court granted Mrs. Deliduka custody of all four minor children.

Mr. Deliduka was an officer in the U.S. Air Force during the Delidukas' marriage. He retired in 1980 after 20 years of service. He has a vested interest in a military retirement pension plan. According to a retirement pay statement submitted at trial, he receives $1566.46 gross/$1380.04 net per month from the pension.

Mr. Deliduka now works as a training coordinator for Trane Sentinel, Inc. Pay stubs submitted at trial show that he receives $957.85 gross/$731.73 net bi-weekly from Trane.

Mrs. Deliduka was a full time homemaker from 1960 until 1981. In 1981 to help the family meet expenses she took a job as an adult newspaper carrier. Her net salary from the route is approximately $714 per month.

The Delidukas' debts at the dissolution totalled $16,701.66. Their only significant assets were their home and Mr. Deliduka's military pension.

The parties dispute the trial court's treatment of military retirement benefits as a marital asset, its award of spousal maintenance of $100 per month for three years, and child support of $900 per month for the four minor children, with reductions as each child reaches majority, and attorneys fees.

ISSUES

1. Are military retirement benefits marital property subject to division between spouses in a dissolution proceeding in Minnesota?

2. Does the trial court's award to the wife of 50 percent of her husband's military retirement benefits violate the Uniformed Services Former Spouses' Protection Act?

3. Did the trial court abuse its discretion by:

a. failing to take into account tax considerations not raised at trial in calculating Mr. Deliduka's income?

b. failing to award permanent maintenance to a long term homemaker with four minor children?

c. ordering the parties to pay their respective attorney fees?

ANALYSIS

1. Mr. Deliduka contends that the trial court erred in treating his military pension benefits as martial property. Minn.Stat. § 518.54, subd. 5, defines marital property as:

property, real or personal, including vested pension benefits or rights, acquired by the parties, or either of them, to a dissolution * * * at any time during the existence of the marriage relation between them. (emphasis added)

Therefore, Mr. Deliduka's military pension qualifies as marital property.

2. Appellant also challenges the award of 50 percent of his gross military pension benefits to his wife as a violation of 10 U.S.C. § 1408, the Uniformed Services Former Spouses' Protection Act. He argues that the Act limits the maximum portion of military pension benefits a court may award to a former spouse to 50 percent of "disposable retired pay." Disposable retired pay is gross retired pay less deductions authorized by 10 U.S.C. § 1408(a)(4). ¹

The act is new and the United States Supreme Court has not definitively interpreted its provisions. A fair reading shows that the act grants states the authority to treat all disposable retired pay as marital property, ² but limits direct government payments to former spouses to 50 percent of disposable retired pay (65 percent for multiple court orders). ³ That means that a state court wishing to award a former spouse more than 50 percent of disposable retired pay must order direct government payments and payments by the member of the military to the spouse. ⁴

In this case the trial court intended to award Mrs. Deliduka one half of her husband's gross military pension as a division of marital property. Since the parties had inadequate resources to permit a lump sum settlement, the court provided for installment payments to Mrs. Deliduka.

The trial court tried to give Mrs. Deliduka her half of the gross pension by ordering direct government payments to her under 10 U.S.C. § 1408. But, since § 1408 limits direct payments to former spouses to 50 percent of disposable retired pay, direct payments alone would not result in Mrs. Deliduka receiving 50 percent of the gross pension.

The trial court erred only in its method of disbursing pension payments to the wife. To guarantee its intended division of marital property, the court, in addition to ordering direct government payments, should have ordered Mr. Deliduka to make monthly supplemental payments. Mrs. Deliduka would then receive her ful one-half of the gross pension--50 percent of the disposable pension would be paid by the federal government, and the difference between 50 percent of gross pension and 50 percent of disposable pension would be made by payments from Mr. Deliduka.

3. Mr. Deliduka contends that his income available for maintenance and child support was overestimated because the court presumed that the parties would each pay income tax on their respective halves of the pension. He correctly notes that the trial court's income calculations were expressly premised upon the Deliduka's each paying income taxes on their respective halves of the military pension. But his argument that he must pay income tax on the entire pension, while his wife escapes all tax liability, is without merit.

Tax regulations technically require him to pay withholding on the entire amount and prohibit withholding from direct pension payments to his wife. However, he will ultimately be liable for income tax only on his half of the pension. The trial court properly recognized the nature of the pension asset, i.e., that it was marital property, but structured its payout as periodic payments for tax purposes. By labeling its disposition of the pension benefits a division of marital property, but structuring installment payments over more than 10 years, the trial court anticipated IRS treatment as periodic payments taxable to Mrs. Deliduka under 26 U.S.C. § 71 and deductible by Mr. Deliduka under 26 U.S.C. § 215.

Mr. Deliduka has confused tax withholding with ultimate tax liability and ignores the fact that withholding may be adjusted. A taxpayer has both the ability and the right, under the withholding tax regulations, to increase his maximum allowable exemptions to reflect his actual tax obligation. Mr. Deliduka cites no authority for his argument that he is only entitled to claim himself and the four minor children as exemptions.

The trial judge recognized that uncertainties about the application of federal tax laws and the Uniform Services Former Spouses' Protection Act could upset his calculations. So his decree specifically invites Mr. Deliduka to come back to court for adjustments of support and maintenance should he have to pay income tax on more than his one-half share of the pension. If, after consulting a tax attorney or accountant, the planned division of tax liabilities proves impossible, Mr. Deliduka can return the matter to the trial court for modification of maintenance and child support. If he does, it will be his obligation to prove that the tax treatment carefully considered by the trial court to give this family the maximum monetary benefit from the pension division will not work.

3a. Mr. Deliduka's claim that the trial court miscalculated his income tax rate is also unsubstantiated. Other than pay statements reflecting withholding for taxes, he made no effort to provide facts to the trial court concerning his income tax liabilities. In a motion for amended findings he alleged that the withholding amounts on the pay stubs did not accurately reflect his tax...