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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Gordon v. Gordon (8/10/2018) sp-7273

Gordon v. Gordon (8/10/2018) sp-7273

           Notice:   This opinion is subject to correction before publication in the P                    ACIFIC  REPORTER.  

           Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  

                                                                                                                        

           303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  

                                                                                                                           

           corrections@akcourts.us.  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                       



GREGORY  GORDON,                                                 )  

                                                                 )     Supreme  Court  No.  S-16639  

                                Appellant,                       )  

                                                                                                                                 

                                                                 )     Superior Court No. 3KN-13-00583 CI  

           v.                                                    )  

                                                                 )                         

                                                                      O P I N I O N  

                     

PATRICIA GORDON,                                                 )  

                                                                 )                                           

                                                                      No. 7273 - August  10, 2018  

                                Appellee.                        )  

                                                                 )  



                                                                                                              

                      A            

                        ppeal from the Superior Court of the State of Alaska, Third  

                                                                                     

                      Judicial District, Kenai, Anna Moran, Judge.  



                                                                                                             

                      Appearances:  Noah H. Mery, Gilman & Pevehouse, Kenai,  

                                                                                                                  

                      for   Appellant.              William   Walton,   Walton,   Theiler   &  

                                                                       

                      Winegarden, LLC, Kenai, for Appellee.  



                                                                                                           

                      Before:  Stowers, Chief Justice, Winfree, Maassen, Bolger,  

                                           

                      and Carney, Justices.  



                                         

                      BOLGER, Justice.  



I.         INTRODUCTION  



                                                                                                                                 

                      The superior court issued a decree divorcing Gregory Gordon and Patricia  



                                                                                                                                 

Gordon and dividing the marital estate.  One of the largest components of the marital  



                                                                                                                                

estate was a retirement medical benefit earned by Patricia during the marriage through  



                                                                                                                                       

her employment with the State of Alaska.  The superior court found that the benefit was  


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entirely marital, but the court concluded that including the full value of the benefit in the                                                                                                                                                                                                                                                                                         



marital estate (which the court determined should be divided 50/50) would result in a                                                                                                                                                                                                                                                                                                         



"windfall" to Gregory. The court therefore applied "the coverture fraction as if [Patricia]                                                                                                                                                                                                                                                          



had remained working for the State" - even though Patricia had in fact quit her job with                                                                                                                                                                                                                                                                                        



the State during the marriage.                                                            



                                                            We agree with Gregory's argument that the court erred in applying this                                                                                                                                                                                                     



adjusted coverture fraction.  The coverture fraction is used to determine what part of a                                                                                                                                                                                                                                                                      



retirement benefit is marital property and what part is separate property.  It should not  



be used to discount the value of marital property or as a guideline for equitably dividing                                                                                                                                                                                                                                                                    



marital property.  The superior court should have characterized the retirement medical                                                                                                                                                                                                                         



benefit as marital or separate in accordance with the actual coverture fraction, valued the                                                                                                                                                                                                                                                                                           



benefit at its full value, and divided the marital estate - including the retirement medical                                                                                                                                                                                                                                                                     



benefit - between the parties according to the statutory equitable factors. We therefore                                                                                                                                                                                                                                                                   



reverse the court's equitable distribution of the marital estate and remand for further                                                                                                                                                                                                                                                                             



consideration.  



II.                           FACTS AND PROCEEDINGS                                             



                                                            Gregory and Patricia married in 2000 and separated in 2013 following a                                                                                                                                                                                                                                                            



domestic violence incident. For much of the marriage - from 2001 until shortly before                                                                                                                                                                                                                                                                                  

                                                                                                                                                                                                                                                                                                            1         During that time,  

the parties' separation - Patricia worked for the State of Alaska.                                                                                                                                                                                                                                                                                                          



Patricia was enrolled in the Public Employees' Retirement System (PERS) and earned  

                                                                                                                                                                                                                                                                                                                                                                     



a pension and a retirement medical benefit. Patricia earned these benefits entirely during  

                                                                                                                                                                                                                                                                                                                                                                       



the marriage, and the benefits vested during the marriage.  

                                                                                                                                                                                                                                                                     



                              1  

                                                                                                                                                                                                                                                                                                                                                                                 

                                                            Actually, Patricia worked for both the City of Kenai and the State. For ease  

                                                                                                                                                                                                                                                                                                                                                                                                

of reference, in this opinion we refer to her employment as only being with the State.  



                                                                                                                                                                                            -2-                                                                                                                                                                                7273  


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                                                            Patricia filed for divorce soon after the parties' separation, and the superior                                                                                                                                                                                                                  



court held a trial over several days in May, June, and August 2016.                                                                                                                                                                                                                                               A major point of                                                     



contention at trial was Patricia's PERS medical benefit.                                                                                                                                                             



                                                            Financial planner Sheila Miller gave expert testimony on the value of the                                                                                                                                                                                                                                               



PERS pension and medical benefits.  She estimated the present value of the pension at                                                                                                                                                                                                                                                                                                    



 $154,727 and the present value of the retirement medical benefit at $195,610.                                                                                                                                                                                                                                                                             Reports  



outlining Miller's assumptions and methodology were admitted into evidence.                                                                                                                                                                                                                                        



                                                            Miller also testified about the mechanics of equitably distributing the value                                                                                                                                                                                                                                 



of the PERS benefits. Patricia was 42 years old at the time the trial ended and would not                                                                                                                                                                                                                                                                                          



be eligible to receive the pension and medical benefit until she turned 60, the applicable                                                                                                                                                                                                                                                          



retirement age.                                                      Moreover, the medical benefit was personal to her, and she could not                                                                                                                                                                                                                                          



 share it with Gregory or sell it.                                                                                                       Miller suggested that the superior court could divide the                                                                                                                                                                                  



                                                                                                                                                                                                                                                                                                                                                                                               2  

PERS pension and medical benefits using a qualified domestic relations order (QDRO).                                                                                                                                                                                                                                                                                                                  



Assuming "a 50/50 division," Miller testified that the QDRO would assign Gregory a  

                                                                                                                                                                                                                                                                                                                                                                                            



 share of Patricia's monthly pension payment equal to 50% of the monthly  pension  

                                                                                                                                                                                                                                                                                                                   



payment plus 50% of the value of Patricia's monthly medical benefit.   Because the  

                                                                                                                                                                                                                                                                                                                                                                                  



medical benefit and pension were of comparable value, Miller's proposed QDRO would  

                                                                                                                                                                                                                                                                                                                                                                      



as a practical matter assign "basically . . . all of the" pension to Gregory, leaving Patricia  

                                                                                                                                                                                                                                                                                                                                                                

with the medical benefit.3  

                                                                                                                    



                              2                             See Laing v. Laing                                                                       , 741 P.2d 649, 658 (Alaska 1987) ("[A] 'qualified                                                                                                                                              



domestic relations order' (QDRO) can be filed with the administrator of the employee                                                                                                                                                                                                                                     

 spouse's pension plan.                                                                                If and when the employee spouse's pension vests and matures,                                                                                                                                                                                        

the plan administrator makes appropriate payments directly to the non-employee former                                                                                                                                                                                                                                                                              

 spouse in accordance with the QDRO." (citation omitted)).                                                                                                                                                                                                                



                              3                             For  example,  in  one  post-retirement  year,  the  health  benefit  is  worth  

                                                                                                                                                                                                                                                                                                                                                                     

approximately  $1,800  per  month  and  the  pension  worth  approximately  $1,130  per  

                                                                                                                                                                                                                                                                                                                                                                                 

                                                                                                                                                                                                                                                                                                                                       (continued...)  



                                                                                                                                                                                           -3-                                                                                                                                                                               7273
  


----------------------- Page 4-----------------------

                               Patricia addressed the PERS benefits in her testimony, as well.                                                                                    She stated   



that she would prefer to withdraw her PERS contributions - worth approximately                                                                                          



$64,000 - immediately and have these contributions divided between the parties, even                                                                                                            



though doing so would result in forfeiture of her retirement health benefit and                                                                                                                    the  



employer contributions to her pension.                                                      She explained that she did not want the medical                                             



benefit if she would have to assign practically all of her pension to Gregory.                                                                                                      



                               Following   trial,    the    superior    court    issued    a    divorce    decree    with  



accompanying findings of fact and conclusions of law.                                                                            Among other things, the decree                            



distributed the marital estate.                                         The court began its equitable distribution analysis by                                                                      



discussing   some   of   the   factors   listed  in  AS   25.24.160(a)(4),   including   the   parties'  



respective   ages,   health  issues,   work   histories,   educational   backgrounds,   earning  

                                                          4    Based on these factors, the court determined that a "50/50  

capacities, and finances.                                                                                                                                                                



                3              (...continued)  



                                                                                                                                                                                                       

month, and thus under a 50/50 division, Gregory would be entitled to $900 + $565 =  

                                                                                                                                                                                         

$1,465  per  month.                               The  proposed  QDRO  would  assign  Gregory  the  entire  $1,130  

                                                                                                                                                                                                     

pension, and Patricia would pay Gregory $335 out of pocket to cover the balance.  In  

                                                                                                                                                                                         

another year, Patricia's medical benefit is worth about $1,000 per month and her pension  

                                                                                                                                                                                                       

around $1,160 per month, and thus the QDRO would assign Gregory $500 + $580 =  

                                                                                                                                                                                      

$1,080  of the monthly  pension  payment.                                                               Patricia would  not have to  pay  Gregory  

                                                                                                                                                                                             

anything out of pocket, but he would receive almost all of the pension payment.  



                4              The AS 25.24.160(a)(4) factors are:  

                                                                                                           



                               (A)             the length of the marriage and station in life of the  

                                                                                                                                                                    

                               parties during the marriage;  

                                                                          



                               (B)             the age and health of the parties;  

                                                                                                          



                               (C)             the  earning  capacity  of  the  parties,  including  their  

                                                                                                                                                                

                               educational backgrounds, training, employment skills, work  

                                                                                                                                                               

                               experiences,  length  of  absence  from  the  job  market,  and  

                                                                                                                                                                  

                               custodial responsibilities for children during the marriage;  

                                                                                                                                                 

                                                                                                                                                                           (continued...)  



                                                                                                  -4-                                                                                          7273
  


----------------------- Page 5-----------------------

property division [was] appropriate."                                                                                         



                                             The superior court then proceeded to discuss the parties' principal assets.                                                                                                                                                                          



It identified "the valuation and division of [Patricia's] medical retirement benefit" as the                                                                                                                                                                                          



"most difficult and contentious issue" in the case.                                                                                                                   The court determined that Patricia's                                                      



PERS medical benefit was marital property as it was "earned during the marriage," and                                                                                                                                                                                               



the court calculated that a 50/50 division of the marital estate would result in Patricia                                                                                                                                                                   



"ow[ing]   [Gregory]   $97,805   [i.e.,   half   of   $195,610]   for   his   portion   of   the   medical  



retirement benefit." The court stated that such a division would be inequitable and would                                                                                                                                                                                  



constitute "a windfall" to Gregory.                                                                                     The court noted Miller's suggestion that Patricia                                                                                             



"reimburse[Gregory]for his portion                                                                                      ofthemedical retirement benefits"by "giv[ing]him                                                                                                           



her full PERS [pension]." But the court found this option problematic as it "would leave                                                                                                                                                                                      



 [Patricia] with no retirement except for medical benefits."                                                                                                                                      



                      4                      (...continued)  



                                                                                                                                                                                                                                        

                                             (D)                   the financial condition of the parties, including the  

                                                                                                                                                 

                                             availability and cost of health insurance;  



                                                                                                                                                                                                                                         

                                             (E)                   the conduct of the parties, including whether there has  

                                                                                                                                                                                

                                            been unreasonable depletion of marital assets;  



                                                                                                                                                                                                                                         

                                             (F)                   the desirability of awarding the family home, or the  

                                                                                                                                                                                                                                  

                                            right to live in it for a reasonable period of time, to the party  

                                                                                                                                                                         

                                            who has primary physical custody of children;  



                                                                                                                                                                                                              

                                             (G)                   the circumstances and necessities of each party;  



                                             (H)                   the time and manner of acquisition of the property in  

                                                                             

                                             question; and  



                                                                                                                                                                                                                                          

                                             (I)                   the income-producing capacity of the property and the  

                                                                                                                                                                  

                                            value of the property at the time of division.  



                                                                                                                                           -5-                                                                                                                                  7273
  


----------------------- Page 6-----------------------

                                                                                  5                                            6  

                     The court discussed             Hansen v. Hansen               and  Engstrom v. Engstrom                 ,  cases  



                                                                                                                             7  

addressing application of a coverture fraction to retirement medical benefits.                                                   After  



                                                                                                                             

summarizing  the  cases,  the  superior  court  concluded  that  "[t]he  coverture  fraction  



                                                                                                                                     

discussed in Hansen  and Engstrom  does not technically apply because [Patricia] no  



                                                                                                                                     

longer works for the State of Alaska."  The court also concluded that "[t]o date, the  



                                                                                                                             

Alaska Supreme Court has not addressed th[e] precise issue" of how to prevent "marital  



                                                                                                                                  

retirement benefits that vest during a marriage from becoming a windfall to the other  



                                                                                                                                   

spouse  if  the  court  cannot  use  the  coverture  fractions  suggested  in  Hansen  and  



                    

Engstrom."  



                                                                                                                                       

                     The superior court reasoned, however, that it had power as a "court of  



                                                                                                                             

equity" to craft a solution in light of "the financial condition of the parties, the conduct  



                                                                                                                                  

of the parties, including any conduct causing the unreasonable depletion of assets, [and]  



                                                                                                                                     

the     circumstances             and      necessities         of     the     parties"        -      factors       set     forth      in  



                                                                                                                         

AS  25.24.160(a)(4).                The  court  proceeded  to  consider  these  factors  and  ultimately  



                                                                                                                                     

determined that an "equitable approach would be to award [Gregory] $34,407 for his  



                                                                                                      

portion of [Patricia's] medical retirement [benefit]."  The court explained:  



                                                                                                                

                     The court reached this figure by using, as a guideline, the  

                                                                           

                     coverture fraction as if [Patricia] had remained working for  

                                                                                                                

                     the State of Alaska.  If [Patricia] had continued to work for  



           5          119  P.3d   1005  (Alaska  2005).  



           6         350  P.3d  766  (Alaska  2015).  



           7         The  coverture  fraction  is "   the  portion  of   [a  retirement benefit]  which  the  



law  deems  to  have  been  acquired  during  the  marriage."   2  BRETT  R. TURNER, EQUITABLE  

DISTRIBUTION  OF  PROPERTY    6:25,  at  149  (3d  ed.  2005).   It  is  calculated  by  dividing  the  

number   of   years   that   a   spouse   worked   during   the   marriage   for   the   employer   who   is  

providing   the   benefit   by   the   total   number   of   years   that   the   spouse   worked   for   the  

employer.   Engstrom,  350  P.3d  at  770-71.  



                                                                  -6-                                                            7273
  


----------------------- Page 7-----------------------

                                   the State of Alaska until age 60 she would have had 33 years                                                                                   

                                   of service.                  The marital or coverture portion would be 11.6                                                                      

                                   years [based on Patricia's employment between 2001 and                                                                                             

                                   2013].    Using the coverture fraction of 11.6 years over 33                                                                                          

                                   years of service means the [marital] portion would be 35% of                                                                                            

                                   the   medical   retirement   benefit.     Under   this   analysis,   the  

                                   marital   share   of   the   medical   retirement   benefit   equals  

                                                           8] and [Gregory's]one half-share would be $34,407.  

                                   [$68,815                                                                                                                                                       



Thus, the superior court effectively awarded Gregory 18% of the PERS medical benefit  

                                                                                                                                                                                                                 



and Patricia 82% of the benefit.  

                                                                                     



                                   The court divided therest ofthemarital estate, including the PERS pension,  

                                                                                                                                                                                                             



50/50.  By splitting the PERS medical benefit 18/82 and the rest of the marital estate  

                                                                                                                                                                                                                    



50/50, the court effectively awarded Gregory 41% of the estate and Patricia 59% of the  

                                                                                                                                                                                                                           



estate (accepting Miller's valuations of the PERS benefits).  

                                                                                                                                                             



                                   Gregory  now  appeals.                                               He  argues  that  the  superior  court  "erred  in  

                                                                                                                                                                                                        



characterizing  [the]  PERS  medical  retirement  benefits  as  a  'windfall'  "  and  in  

                                                                                                                                                                                                                            



determining "that the coverture fraction 'does not technically apply.' " He further argues  

                                                                                                                                                                                                                  



that the court erred in "imput[ing] an additional 21.4 years of theoretical" employment  

                                                                                                                                                                                                  



to Patricia, thus reducing "the coverture . . . from 100% to 35%."  He contends that the  

                                                                                                                                                                                                                           



court should have considered the full value of the PERS medical benefit in dividing the  

                                                                                                                                                                                                                           



marital estate 50/50.  

                                     



III.              STANDARD OF REVIEW  

                                                                   



                                   The equitable distribution of a marital estate is a three-step process.  First,  

                                                                                                                                                                                                                     



the trial court "determin[es] what property is available for distribution" - that is, the  

                                                                                                                                                                                                                           



                  8                In its analysis, the superior court stated that the marital share is $68,615.                                                                                                                     



But we substitute $68,815 because this is the value the superior court provided in its                                                                                                                                      

property table and is more consistent with the court's determination that Gregory's "one                                                                                                                               

half-share would be $34,407."                                                     



                                                                                                              -7-                                                                                                     7273
  


----------------------- Page 8-----------------------

                                                                                             9  

court characterizes property as marital or separate.                                            Second, the trial court values the                      



                 10                                                                                                               11  

property.                                                                                                     

                      And third, the trial court "divid[es] the property equitably." 



                        The first step - the characterization of property as marital or separate -  

                                                                                                                                                         



may require the trial court to make factual findings concerning "the parties' intent,  

                                                                                                                                                  

actions, and contributions to the marital estate."12   We review these factual findings for  

                                                                                                                                                        



clear error, "but whether the trial court applied the correct legal rule . . . is a question of  

                                                                                                                                                          

law that we review de novo."13                                 "The second step,  valuation of assets, is a factual  

                                                                                                                                                

determination that we review for clear error."14                                       "We review the trial court's third step,  

                                                                                                                                                     

the equitable allocation of property, for an abuse of discretion."15  We will find an abuse  

                                                                                                                                                   



of discretion if the division was "based on a clearly erroneous factual finding or mistake  

                                                                                                                                                

of law," or if the division was "clearly unjust."16  

                                                                       



            9           Horning v. Horning                   , 389 P.3d 61, 63-64 (Alaska 2017) (quoting                                      Limeres  



v.  Limeres, 320 P.3d 291, 296 (Alaska 2014)).                          



             10         Id.  at  63.  



             11         Id.  (quoting  Limeres,  320  P.3d  at  296).  



             12         Beals  v.  Beals,  303  P.3d  453,  459  (Alaska  2013).  



             13         Id.  (quoting  Hanson  v.  Hanson,   125  P.3d  299,  304  (Alaska  2005)).  



             14         Id.  



             15         Id.  



             16          Wagner  v.   Wagner,  386  P.3d   1249,   1251  (Alaska  2017).  



                                                                            -8-                                                                     7273
  


----------------------- Page 9-----------------------

IV.        DISCUSSION  



                     In Hansen v. Hansen we explained that "post-retirement health insurance  

                                                                                                                            

benefits are compensation for work previously performed."17  

                                                                                                                          

                                                                                                   Accordingly, retirement  



                                                                                                                               

"[h]ealth insurance benefits earned during the marriage are a marital asset of the insured  



                                                                                                                             

spouse," whereas retirement health insurancebenefits earnedbefore or after the marriage  



                                                                             18  

                                                                     

are typically the insured spouse's separate asset. 



                     If a spouse earned a medical retirement benefit through employment both  

                                                                                                                                    



during and outside the marriage, the benefit will be partly marital property and partly  

                                                                                                                                 



separate.  In that situation, the trial court must "determine the percentage of the benefit  

                                                                                                                                

that is marital by calculating the 'coverture fraction.' "19   "This fraction is calculated by  

                                                                                                                                       



dividing the number of years worked during the period of coverture" - that is, the  

                                                                                                                                      



number of years worked for the employer during the marriage - "by the total number  

                                                                                                                               

of years worked" for the employer.20  

                                         



                     Thus, the coverture fraction is a tool used during the characterization step  

                                                                                                                                    



of the equitable distribution process.  It is used to determine the portion of a retirement  

                                                                                                                           



medical benefit (or any other retirement benefit) that should be counted  as marital  

                                                                                                                               

property and the portion that should be counted as separate property.21                                             The coverture  

                                                                                                                    



           17         119 P.3d 1005, 1015 (Alaska 2005).              



           18        Id. ; see id. at 1009 ("Marital property includes all property acquired during  

                                                                                                                                 

the marriage 'excepting only inherited property and property acquired with separate  

                                                                                                                             

property which is kept as separate property.' " (quoting Lewis v. Lewis, 785 P.2d 550,  

                                                                                                                           

558 (Alaska 1990))).  

                     



           19        Id. at 1015.  

                               



           20        Id. ; see also Engstrom v. Engstrom, 350 P.3d 766, 770-71 (Alaska 2015).  

                                                                                                                                 



           21        See 2 TURNER, supra note 7,  6:25, at  150 ("[T]he coverture fraction is  

                                                                                                                                        

                                                                                                                     (continued...)  



                                                                   -9-                                                            7273
  


----------------------- Page 10-----------------------

fraction   is   not   used   during   the   valuation   step   or  the   division   step   of   the   equitable  



distribution process.                  Other principles govern those steps.                               In particular, a trial court        



should value a retirement medical benefit based on "the amount of the premium subsidy                                                     

                                                22   And a trial court must divide the marital estate - which  

provided by the employer."                                                                                                                   



includes the marital portion of a retirement medical benefit - in light of the equitable  

                                                                                            



factors in AS 25.24.160(a)(4) and "the presumption that an equal division of marital  

                                                                                                                                           

property is most equitable."23  

                              



                       In distributing the PERS medical benefit value in the present case, the  

                                                                                                                                                  



superior court began its analysis correctly, by characterizing the benefit as a marital  

                                                                                                                                           



asset.  The court did not calculate the coverture fraction, and there was no need for it to  

                                                                                                                                                    



do so:  Patricia's employment with the State occurred exclusively during her marriage  

                                                                                                                                        



to Gregory; she did not work for the State before or after the marriage, and there is  

                                                                                                                                                    



nothing in the record indicating she planned to resume working for the State. Therefore  

                                                                                                                                       



all of Patricia's PERS medical benefit was marital property.   Had the superior court  

                                                                                                                                              



calculated the coverture fraction, it would have equaled 100%.  

                                                                                                   



                       After characterizing the PERS medical benefit as marital property, the  

                                                                                                                                                  



superior court valued the benefit.  The court implicitly accepted Miller's testimony and  

                                                                                                                                                 



report and thus found that the benefit was worth $195,610. Neither party challenges this  

                                                                                                                                                  



valuation on appeal.  

                                     



            21         (...continued)  



                                                                                   

used to determine only the marital share of the pension.").  



            22  

                                                                                                                                           

                       Hansen, 119 P.3d at 1016; see also Grove v. Grove, 400 P.3d 109, 114-15  

                                                                                                                                                  

(Alaska 2017) (approving the use of premiums of "analogous plans" in estimating the  

"premium subsidy value").         



            23          Odom v. Odom, 141 P.3d 324, 339 (Alaska 2006)  (quoting Fortson v.  

                                                                                                                                                    

Fortson, 131 P.3d 451, 456 (Alaska 2006)).  

                                                                 



                                                                        -10-                                                                  7273
  


----------------------- Page 11-----------------------

                                                The   superior   court  then   proceeded   to   the   third   step   of   the   equitable  



distribution process, the division step. The court had concluded earlier in its analysis that                                                                                                                                                                                                            



it would be equitable to divide the marital estate 50/50, but the court determined that it                                                                                                                                                                                                                       



would not be fair to divide the value of the PERS medical benefit using this ratio.                                                                                                                                                                                                                   The  



court  determined   that   it   would   instead   be   equitable   to   divide   the   value   of   the  



PERS medical benefit by assigning 18% of the value to Gregory and 82% to Patricia.                                                                                                                                                                                                                                        



The court arrived at this ratio by calculating an adjusted coverture fraction as if Patricia                                                                                                                                                                                               



had continued working for the State until age 60 and then dividing the adjusted coverture                                                                                                                                                                                            



share (35%) in half.                                   



                                                The court erred when it applied this adjusted coverture fraction during the                                                                                                                                                                                



division   stage   of   the   equitable   distribution   process.     First,   as   explained  above,   the  



coverture fraction is used                                                                   during the characterization step of the equitable distribution                                                                                                                 



process, not the division step.                                                                               The coverture fraction depends on only two variables:                                                                                                                                                       



(1)   the number of years worked during the marriage for the employer providing the                                                                                                                                                                                                                       



benefit and (2) the total number of years (both during and outside the marriage) worked                                                                                                                                                                                                    

                                                                24        These variables are not among the equitable division factors listed  

for this employer.                                                                                                                                                                                                                                                                                 



in AS 25.24.160(a)(4) and they have no inherent relation to those factors. The coverture  

                                                                                                                                                                                                                                                                                    



fraction is thus not suited to the task of dividing marital property; it should only be used  

                                                                                                                                                                                                                                                                                                     



for characterizing property as marital or separate.  

                                                                                                                                                   



                                                Second,  the  court  arrived  at  its  adjusted  coverture  fraction  using  

                                                                                                                                                                                                                                                                                               



counterfactual data:   The court calculated the "coverture fraction as if [Patricia] had  

                                                                                                                                                                                                                                                                                                        



remained working for the State" until age 60 even though she had in fact quit her job  

                                                                                                                                                                                                                                                                                                          



with the State in 2013 (at age 39).  While the true coverture fraction was 100%, the  

                                                                                                                                                                                                                                                                                                          



court's adjusted coverture fraction was 35%, and the court then divided this fraction  

                                                                                                                                                                                                                                                                                         



                        24  

                                                                                                                                                                                                                                                          

                                                See Engstrom, 350 P.3d at 770-71; Hansen, 119 P.3d at 1015.  



                                                                                                                                                    -11-                                                                                                                                                            7273  


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by 2 to conclude that Gregory was entitled to 18% of the PERS medical benefit.                                                                                                                                                                                                                                                                                                                                                                                               The  



 court did not explain why calculating an adjusted coverture fraction in this manner and                                                                                                                                                                                                                                                                                                                                                                                          



 then dividing it by 2 would produce an equitable ratio for distributing the value of the                                                                                                                                                                                                                                                                                                                                                                                             



 medical benefit.   



                                                                            The superior court discussed various equitable factors in its analysis. First,                                                                                                                                                                                                                                                                                                               



 in determining that it was appropriate to divide most of the marital estate equally, the                                                                                                                                                                                                                                                                                                                                                                                            



 court considered each party'sage, health, work history, educational                                                                                                                                                                                                                                                                                                                background, earning  



 capacity, and financial condition.                                                                                                                                                          Second, in deciding how to divide the PERS medical                                                                                                                                                                                                            



benefit, the court considered "the financial condition of the parties, the conduct of the                                                                                                                                                                                                                                                                                                                                                                                            



parties, including any conduct causing the unreasonable depletion of assets, [and] the                                                                                                                                                                                                                                                                                                                                                                                               



 circumstances and necessities of the parties." In particular, the court expressed concern                                                                                                                                                                                                                                                                                                                                                                 



 about Patricia being left "with no retirement except for medical benefits," and it found                                                                                                                                                                                                                                                                                                                                                                             



 that various                                                     post-separation actions by Gregoryhad caused financial                                                                                                                                                                                                                                                                 hardship toPatricia.                                                                                                



 The court moreover found that Patricia had left her employment with the State to start                                                                                                                                                                                                                                                                                                                                         



 a daycare business with Gregory and that this plan was derailed following an incident in                                                                                                                                                                                                                                                                                                                                                                                                    



 which Gregory assaulted Patricia, resulting in the parties' separation.                                                                                                                                                                                                                                                                                                                                 



                                                                            It was appropriate for the superior court to consider these circumstances in                                                                                                                                                                                                                                                                                                                                     

                                                                                                                                                                        25 but the court failed to explain their relationship with the  

 its equitable division analysis,                                                                                                                                                                                                                                                                                                                                                                                                                                                     



 adjusted coverture fraction.   Indeed, most of these circumstances have no apparent  

                                                                                                                                                                                                                                                                                                                                                                                                                                                    



 relationship with the coverture fraction.  

                                                                                                                                                                                



                                                                            One of the circumstances - the fact that Patricia left her job with the State  

                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



 to start a daycare business - does have an arguable connection to the adjusted coverture  

                                                                                                                                                                                                                                                                                                                                                                                                                                                  



                                      25                                    In particular, although a trial court may not consider marital fault - that   



 is, fault for the breakdown of the marriage - in dividing the marital estate, the court may                                                                                                                                                                                                                                                                                                                                                                                    

 consider the parties' conduct and how that has affected their financial situations.                                                                                                                                                                                                                                                                                                                                                                                           See  

Jerry B. v. Sally B.                                                                                       , 377 P.3d 916, 935 (Alaska 2016).                                                                                                                                                                      



                                                                                                                                                                                                                                          -12-                                                                                                                                                                                                                               7273
  


----------------------- Page 13-----------------------

                                                                                                                       

fraction. Had Patricia not left her job with the State - and if Patricia had been projected  



                                                                                                          

to continue working for the State until retirement age - the court's coverture fraction  



                                                                                                                             

would have been legally accurate. By applying the adjusted coverture fraction, the court  



                                                                                                                                

arguably gave Patricia the benefit of the coverture fraction that she lost by quitting her  



                     

job with the State.  



                                                                                                                      

                     But this reasoning rests on a misunderstanding of the coverture fraction's  



                                                                                                                                

purpose. The coverture fraction is not a benefit or a right that Patricia forfeited when she  



                                                                                                                        

quit her job with the State.  Nor is the coverture fraction designed - in the superior  



                                                                                                                              

court's words - to prevent "marital retirement benefits that vest during a marriage from  



                                                                                                                      

becoming a windfall to the other spouse."  Rather, as explained above, the coverture  



                                                                                                                                      

fraction is a tool for determining what portion of a retirement benefit is marital property.  



                                                                                                                              

Moreover, Patricia did not lose any of her PERS medical benefit by quitting her job with  



                                                                            

the State because the benefit had already vested.  Application of an adjusted coverture  



                                                                                    

fraction thus did not compensate her for anything she lost.  



                                                                                                                         

                     It could be argued that by reducing Gregory's share of the PERS medical  



                                                                                                                            

benefit  value,  the  coverture  fraction  addressed  the  superior  court's  concerns  about  



                                                                                                                  

Patricia's finances and retirement needs.   But if the adjusted coverture fraction did  



                                                                                                                       

address these concerns, it did so on an entirely ad hoc basis.  Application of a coverture  



                                                                                                                                  

fraction less than 100% always reduces the share of the retirement benefit subject to  



                                                                                                                                

division - and thus, in a way, helps to protect the needs of the spouse who earned the  



                                                                                                                              

benefit - but the amount by which the coverture fraction reduces the marital share does  



                                                                                    

not have any inherent relation to that spouse's needs.  



                                                                                                                       

                     In sum, it was error for the superior court to apply the adjusted coverture  



                                                                                                                      

fraction during the division stage of the equitable distribution process:  The coverture  



                                                                                                                        

fraction was not designed - and is not suited - for this purpose, and the adjusted  



                                                                                                                           

coverture fraction in this case had no legitimate relation to the various equitable factors  



                                                               -13-                                                          7273
  


----------------------- Page 14-----------------------

that the superior court considered. Because the superior court exercised its discretion in                                                                                                                                                                    



light of an erroneous legal principle, we must reverse the court's distribution of the                                                                                                                                                                    



marital estate and remand for further consideration.                                                                                                               On remand, the superior court                                                   



should apply the actual coverture fraction and thus include the entire retirement medical                                                                                                                                                   



benefit in the marital estate.  Because application of the actual coverture fraction "will   



affect the marital estate's overall value," the court "may revisit the larger question of how                                                                                                                                                          

                                                                                                                                           26         The  court  should  divide  the  estate  

best   to   equitably   divide"   the   marital   estate.                                                                                                                                                                                        



according to the statutory equitable principles.  

                                                                                                            



V.                  CONCLUSION  

         



                                        We REVERSE the superior court's application of the adjusted coverture  

                                                                                                                                                                                                            



fraction to Patricia's retirement medical benefit. We REMANDso that thesuperior court  

                                                                                                                                                                                                                                                     



can apply the actual coverture fraction and equitably divide the marital estate.  

                                                                                                                                                                                                                       



                    26  

                                                                                                                                                                                                                                                         

                                         Grove, 400 P.3d at 115-16 (quoting Hanson v. Hanson, 125 P.3d 299, 306  

                                         

n.22 (Alaska 2005)).  



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