The unanimous decision said a former spouse of a South Dakota Retirement System participant can have her share of the pension benefits directed to her estate if she dies before her ex-husband. With the ruling, the state Supreme Court overruled a lower court decision that determined the pension payments would stop after her death, according to a Rapid City (South Dakota) Journal report.
Previously, the lower court had agreed with participant Richard Davich’s argument that the purpose of retirement plans is to provide for people only until death, a point the state high court disagreed with on the basis that the pension payments are a property right that transfers to that person’s estate at death. “An interest in a retirement plan is marital property, subject to an equitable division,” wrote Chief Justice David Gilbertson.
Davich, a former Rapid City teacher and his former wife, Patricia Paul divorced in 1988 following a 28-year marriage. As part of the divorce settlement, Paul was awarded a portion of her former husband’s pension benefits, based on South Dakota precedents that a retirement plan is a marital asset and property right, since personal contributions to pension plans is money that otherwise would have been available to the marriage partners.
However in 2000, as Davich was preparing for retirement, he filed a suit in the Pennington County Circuit Court to challenge details of the pension settlement with his ex-wife. Specifically, he wanted to offer his former spouse a partial lump-sum settlement in lieu of continued monthly pension payments.
Circuit Judge Jeff Davis decided the divorce settlement contained nothing that entitled Paul to a lifetime benefit from Davich’s retirement account, and he awarded her a $59,000-lump sum. Paul appealed the circuit court’s decision to the state Supreme Court, which overturned the circuit judge last year, sending the issue back to him.
At the circuit court’s second go-around of the case, Paul asked that her share of the monthly retirement benefits be extended to her estate if she dies before he does, but Davis rejected the request. Davis instead orderedPaul’s share of her former husband’s pension to revert to him when she dies.
Paul appealed the decision, arguing she could have done as she pleased with her share of the pension money if she had agreed to a lump-sum settlement and if she died before that money was gone, it would go to her heirs as part of her estate. The high court agreed, again reversing Davis’ earlier ruling, decreeing Paul’s share of a retirement plan awarded in a divorce is a property right that transfers to that person’s estate at death.