In a very recent case handed down, entitled IRMO Green (2012)__Cal.App.4th__(CA 1/4 –Opinion filed May 16, 2012, a California appeals court decided that a husband’s use of community funds during the marriage to purchase military service credit in CalPERS makes the service credit community property even though husband’s military service was completed before the parties married.

In the case, Husband served in the U.S. Air Force for four years ending in 1986.  In 1989, Husband began working as a firefighter in Dublin.  The department was a participant in CalPERS.  Husband then married wife in 1992.

In 2002, Husband exercised his right to buy four years of PERS service credits for his military service.  Husband elected to pay for credits through monthly installment payments over fifteen (15) years.   $11,462 was spend in community earnings to purchase the military credits prior to the parties separating in 2007.

The parties litigated the issue regarding how to characterize Husband’s military service credit.  Husband contended that because his right to purchase military service credit arose prior to the parties’ marriage, all four years of the credit were his separate property.  He acknowledged that the money used to pay for the purchase before the parties’ separation was community property but contended the community was entitled to nothing more than reimbursement.

Wife argued the military service credits were community property and urged the court to place them in a separate account for her benefit through PERS.  A court-appointed expert proposed awarding a pro rata share of the purchased service credit to Wife, representing the percentage of payments toward the military service credit made with community funds.

The family law trial court concluded that the military service credit portion of the CalPERS pension was Husband’s separate property and awarded it to him.  Husband was ordered to pay Wife $6,699.54, which represented half of the installment payments made with community funds during the marriage plus interest at six percent.  Wife appealed, and the trial court decision was reversed.

COMMUNITY PROPERTY INTEREST IN MILITARY SERVICE CREDIT

The appellate court agreed that it was error for the trial court to characterize Husband’s military serviced credit as separate property.  The appellate court stated that in determining whether the community has an interest in pension rights, courts look to when a party acquired a property interest in them.  In other words, when did the pension right become more than an “expectancy”?

Although Husband completed his military service before his marriage to Wife, when he left the military he had no property interest whatsoever in the CalPERS retirement plan because he did not begin working for the CalPERS participant until three years later.  Even after Husband started working for a CalPERS participant, his right to a military service credit was simply an “expectancy”.

The appellate court determined that the military service credit was indisputably purchased during the marriage with community funds.  Thus, the contractual right to receive four additional years of retirement credit based on premarital military service was obtained during the marriage and it was stamped a community asset from then on.

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