Columnist Sandra Thompson: Pension benefit dispute drags on

Some divorce property disputes don't end when an ex-spouse dies. They extend beyond the grave, as in the case of Janis Kester.

At issue is who is entitled to the survivor benefits of Lupe Carmona's pensions: Janis, his designated beneficiary whom he divorced after six years of marriage, or Judy Carmona, whose marriage to Lupe right after his divorce ended with his death a year and a half later.

What initially looked like a fairly simple case of dividing marital assets turned into a two-year Family Court battle, which has cost both sides thousands of dollars in attorney's fees. Seemingly conflicting rulings and concerns over whether a Family Court judge has the authority to "circumvent" a federal pension law complicate matters.

After living together for two years, Janis and Lupe married in 1988. Lupe retired in November 1992 and began receiving monthly pension benefits. He filed for divorce in October 1994. The couple had no children.

The Carmonas were divorced in 1997. They divided up a fair amount of community property that included investments, money, homes, pensions and other items. Not all was done in a timely manner, prompting other court hearings.

In the original divorce decree, Judge Bob Gaston ruled that Lupe and Janis' pensions were their sole, separate properties. However, the decree did not address the pension survivor benefits. Prior to his retirement, Lupe chose an option that would give Janis a percentage of his monthly annuity benefits from the Hilton Hotel and stagehands' union upon his death.

A few weeks after his divorce, Lupe married Judy and wanted the survivor benefits to go to her in the event of his death.

According to a videotape of a Jan. 13, 1998, hearing, Gaston said: "If the pension plan allows him (Lupe) to change survivor benefits (to Judy), then he should be allowed to do that."

But the plan does not allow for that.

In another hearing Dec. 14, 1998, Gaston again said, "If the plan allows the change in beneficiary, it's OK. If not, it can't be changed."

Based on that, it seems logical that since the plan would not permit the change, Janis could keep the monthly benefits and the case would be over. Not so.

Marshall Willick, considered a legal expert in pension benefits, took over as Lupe's attorney in March 1998. He contended that when the judge gave Lupe his pension and Janis hers, that meant the survivor benefits also were his.

Willick told Gaston that the pension plan may consider making the beneficiary change if the court orders it.

Lupe died April 15, 1999. In an order dated April 16, 1999, Gaston said the beneficiary should be changed. He further ordered that if the plan could not make the change, any benefit sent to Janis would be placed in a constructive trust for Judy.

In a letter to Judy, a manager with Lupe's stagehands' union pension trust stated that under the terms of the plan and the Employment Retirement Income Security Act of 1974 (ERISA), Janis cannot be removed as beneficiary. Since Lupe began receiving his annuity benefits after he retired in 1992 (when he was married to Janis), he was not eligible to change the beneficiary.

The manager also stated that ERISA "preempts Judge Gaston's state-law based order, and prohibits him from affecting the pension trust in this manner."

So that ended the dispute, right? Wrong.

Willick contended there's nothing in ERISA that says the judge can't do what he did.

"Under ERISA, the court can't order them (pension plans) to do anything the plans don't allow. So the question is, 'What can the court do?' He (the judge) just wants the benefits to go to the right person (the new wife)."

Since she is the designated beneficiary and she was married to Lupe for several years, Janis says she is entitled to the survivor benefits. As the new wife, Judy says she is entitled.

"It's sad to me that we have people picking the bones of a dead person," Gaston said in court.

Janis said she only wants the judge to follow his original order that it was up to the plan on whether the beneficiary could be changed.

Further muddying the waters, Willick is seeking contempt charges against Janis for not placing the monthly benefits in the trust account in a timely manner. He said she's also in contempt for having taxes taken out of the total amount before she puts them in the trust account. Janis said her accountant told her to do so because the benefits are in her name.

The saga will continue May 1 when Gaston may rule on the contempt charges. Janis also expects to file appeals.

By the time the issue is settled, the attorney fees may exceed the value of the disputed benefits.

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