Omitted Assets in an Arizona Divorce Decree
A divorce decree in Arizona is intended to divide all community property between the spouses. So, what happens to omitted assets in an Arizona divorce decree. Often a “catch-all” provision in the decree states that all property in the physical possession of each spouse belongs to that spouse. In the case of Ringear v. Rinegar, 290 P.3d 1208 (Ariz. Ct. App. 2012) the Arizona Court of Appeals discussed whether a divorce court has the authority to reopen the case when community property is accidentally omitted.
Margaret and Michael Rinegar married in 1999 and divorced in 2006. Margaret worked for Qwest, and, as part of her compensation, received earned various retirement benefits, including a qualified pension plan, a non-qualified pension plan, stock options, and a 401(K) savings and investment plan.
The Rinegars entered into a divorce agreement dividing their property and debt, but the contract specifically excluded the Qwest retirement assets. When the matter came to trial in September, 2005, the court determined that more testimony was necessary to resolve the issue of spousal support for Michael. The trial was continued until July, 2006, before a different judge.
During the trial, Michael’s expert testified that the qualified pension plan and the 401(k) plan could be divided between the spouses, but non-qualified pension plan could not be divided until Margaret received it. The second judge approved the divorce agreement, divided the qualified pension plan and the 401(k) and awarded spousal support. However, no mention was made of the stock options or the non-qualified pension plan. The decree contained a catch-all provision allocating to each party the property in their respective possession as their sole and separate property.
In 2010, Michael sent a request for information about those accounts to Qwest and filed a motion to reopen the divorce decree to allocate them. Margaret opposed this, but the court agreed with Michael. It also ordered Margaret to pay his attorney fees.
A Divorce Court Can Reopen a Decree to Allocate Omitted Assets
The Court of Appeals first made clear that an Arizona divorce court has the authority to reopen a decree if community assets are inadvertently omitted. It contrasted this with the rule that assets a couple deliberately omits from the decree cannot serve as the basis of a motion to reopen.
Margaret argued that the catch-all provision awarded the non-qualified pension plan and the stock options to her, since they were personal property in her possession. However, the Court of Appeals disagreed.
It noted that the law requires that property allocated in a catch all provision must be specifically described in the divorce. The mere mention of other retirement assets during the divorce proceeding was not sufficient. The Court concluded: “The assets at issue are complex and are not the type of property that can properly be disposed of in a catch-all provision.”
Awarding the Assets to Margaret Would Not Be Fair
The general rule in Arizona is that community assets must be divided equally between the spouses, unless circumstances make an equal award unfair. Margaret argued that since Michael received the marital home, the court meant her to have these retirement assets to balance the equities. The Court of Appeals did not agree. It noted that the divorce court lowered spousal support payments to Michael to balance the equities of his being awarded the marital home, and never mentioned these retirement assets as an offset. It also stated that if Margaret were allowed to keep these large retirement assets as her separate property, the result would be an inequitable division of property.
Michael’s Delay in Asking for the Assets Did Not Waive His Rights
Last, Margaret argued that Michael waived his right to request part of these assets because he waited until 2010 to ask for them. The Court of Appeals rejected this, since the delay did not hurt Margaret in any way. Further, it ruled that the divorce court’s award of attorney fees to Michael was appropriate given the fact that Margaret’s salary was twice Michael’s salary. It also awarded Michael his attorney fees on appeal.