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Holman v. Holman6/13/2002
TO BE PUBLISHED
OPINION OF THE COURT
REVERSING AND REMANDING
I. ISSUE
This appeal presents an issue of first impression in Kentucky. After thirteen (13) years of service as a firefighter, but before his pension vested, Appellant became totally and permanently occupationally disabled. Appellant retired and began receiving monthly disability retirement benefits . When his marriage to the Appellee was dissolved several years later, the trial court classified Appellant's future entitlement to disability retirement benefits as marital property and awarded Appellee a portion of those benefits . Were Appellant's disability retirement benefits properly classified as marital property? We hold that disability retirement benefits are properly classified as marital or non-marital property according to the character of the property they replace . Accordingly, Appellant's future, post-dissolution disability retirement benefits, which replace his future non-marital earnings as a firefighter, constitute Appellant's separate non-marital property.
II . BACKGROUND
The material facts regarding Appellant's pension were stipulated to by the parties and are therefore undisputed . In 1974, the Appellant went to work as a firefighter with the Lexington-Fayette Urban County Government (LFUCG). The parties married seven (7) years later in 1981 . Six (6) years later, in 1987, Appellant retired from his firefighter position due to total and permanent occupational disability and began receiving monthly benefit payments that will continue throughout his lifetime so long as his disability continues. The parties' marriage was dissolved in 1997.
At the time of his marriage, Appellant had contributed $6,859 .00 towards his pension with LFUCG, and he contributed an additional $11,206.40 during his marriage for a total contribution of $18,065.40 . At the time of his retirement, his pension had not vested because he had not "completed at least twenty (20) years of total service."
Accordingly, if Appellant had terminated his employment with LFUCG in 1987 without being found occupationally disabled, he would have been entitled to receive only his $18,065.40 contribution.
The parties disagreed as to whether Appellant's future entitlement to retirement disability benefits from LFUCG constituted marital property. The trial court recognized the issue as one of first impression and characterized Appellant's retirement disability payments as marital property subject to equitable division because Appellant was able to work in another capacity despite his disability :
It appears to the Court that a determination must be made whether or not this disability retirement fund should be viewed differently than other retirement funds . This Court also believes that a determination must be made on a case-by-case basis.
Case law indicates that disability payments are different in that it is compensation for the inability to earn wages from that occupation in the future . In many cases, this may be true in that the party receiving the disability payments may not be able to work in his chosen field and often can not work in any field in which he could earn approximately the same income. The case under submission is distinguished in that [Appellant] has been able to earn a living by owning and operating his own business.
This Court holds that the retirement account is marital property, subject to division and distribution by the Court, even though it is based on a disability . It was serving as income since the retirement and can not be viewed only as compensation for the [Appellant] not being able to work or
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