Father’s Disability Pension Is Separate Property

In reversal, a California Court of Appeals has ruled that Trial Court was wrong by awarding Mother a community property share of Fathers California State Teachers Retirement System (“CalSTRS”) disability allowance because those benefits were Fathers separate property. In the case of In re Marriage of Walker, Father, a school teacher since 1986, married Mother in 1993. They separated in January 2008, and Mother filed for legal separation, while Father, then 47, stopped teaching because of disability. Mother subsequently obtained a restraining order due to domestic violence, as well as a Trial Court order limiting Father to supervised visitation with their two minor children. In June of 2008, Trial Court ordered Father to pay child support of $1,191 per month and temporary spousal support of $681 per month. In November of 2008, Trial Court modified the visitation order from supervised to therapeutic.

After Mother successfully joined CalSTRS to the case as a Claimant, CalSTRS notified Mother and Father that it had placed a legal hold on Fathers account, pending resolution of family law issues. Mother and Father later sold their family home and placed the sale proceeds in a trust account. In June of 2009, Trial Court ordered the release of $4,000 of Fathers share of that account to pay for the children’s “education related activities” and to bring Fathers delinquent support payments current. Trial Court also lowered Fathers child support payments to $1,000 per month and temporarily suspended his spousal support payments.

Meanwhile, Fathers application for CalSTRS disability allowance had been granted retroactive to December 2008, but Father was not receiving benefits because of the hold on his CalSTRS account. On June 26, 2009, CalSTRS sent Mothers attorney a letter, stating that Mothers community property share of Fathers disability allowance had been calculated at 35.22% or $1,838 per month, and explaining the relationship between Fathers disability benefits and his retirement benefits. In August of 2009, Mother and Father stipulated to an order for a Domestic Relations Order regarding Fathers disability benefits whereby Mother would receive direct payment of her community property share of those benefits, as calculated by CalSTRS, and Father would receive the remainder. Mother and Father also stipulated that Domestic Relations Order would be prepared by named attorney, that Father should receive $8,000 from the trust account per agreed upon conditions, and that payments should be made to the parties as described. They also agreed to the preparation of another Domestic Relations Order concerning Mothers community property share of Fathers CalSTRS retirement benefits. On September 3, 2009, Trial Court issued another stipulated order in accordance with the terms of that Domestic Relations Order.

In August of 2010, Father, represented by new counsel, filed a motion to set aside the Trial Courts orders of August of 2009, and September of 2009, to obtain additional funds from the trust account, and to have Trial Court issue an “Employment Efforts Order” regarding Mother. Father sought the set-aside on basis of mistake or fraud, stating that he had agreed to the stipulated orders because of CalSTRSs letter regarding Mothers community property interest in his disability allowance, bolstered by representations of Mother and her attorney, which led him to mistakenly believe that she had such an interest. Father also stated that he needed trust account funds to pay his new attorneys fees, as well as professional fees of psychotherapist for counseling regarding visitation issues.

In September of 2010, Mother moved to modify child and spousal support, for fee award, and for imposition of child support security account. Mother also filed an opposition to Fathers motion, claiming that Fathers disability benefits were community property and that she could not work full time because she was home-schooling the parties oldest child, who had a learning disability. Trial Court subsequently denied Fathers motions, finding that there was no mistake because Mother had a community property interest in Fathers disability allowance, and that disability allowance took the place of retirement benefits. Trial Court refused to release more funds to Father from the trust account and declined to order an employment evaluation on the basis of the current facts.

Claiming that Trial Court was wrong in denying his set-aside motion and his other requests, Father appealed, and now, a California Court of Appeals has reversed Trial Courts decision regarding Fathers disability allowance. The Appellate Court has ruled that (1) the case of Stenquist I (1978) 21 Cal.3d 779 [community has interest in disability retirement benefits elected in lieu of regular retirement benefits] and similar cases are distinguishable because Father did not elect disability allowance in lieu of retirement benefits; (2) Mother received her community property share of Fathers retirement benefits through a separate Domestic Relations Order; and (3) per the case of Saslow (1985) 40 Cal.3d 848, Fathers disability allowance is Fathers separate property because it replaces post-separation earnings lost during pre-retirement period of disability. Therefore, the Appellate Court held that Trial Court erred by finding that Father made no mistake by agreeing that Mother had a community property share in his disability allowance, and that Trial Court should not have denied his set-aside motion. Accordingly, the Appellate Court reversed that order. The Appellate Court declined to consider Fathers other contentions because they may be impacted by this reversal and refuses to assign Fathers case to another judge on remand of the case back to Trial Court.

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