The Alabama Court of Civil Appeals recently issued an opinion in Buchanan v. Buchanan which addressed the issue of market fluctuations in retirement accounts. The facts in the case are common: husband and wife divorce, wife is awarded 50% of husband’s retirement account, the parties and/or their lawyers do not process the Qualified Domestic Relations Order to effectuate the transfer from Husband to Wife. Over three years later, the wife files a petition to hold the husband in contempt of court for failing to transfer her 1/2 of the retirement account.
Unfortunately for the parties, by then the value of the account had been reduced from $77,000 to $43,000 due to market fluctuations. The question was should the wife get 1/2 of $77,000 or 1/2 of $43,000? Who should bear the loss in value that occurred between the time of the divorce to the actual division of the accounts? The Appeals Court found that each party should share the market loss, which meant the wife would only get 1/2 of $43,000. The net result is that she lost $17,000 because a QDRO was not immediately prepared to divide the account.