Our intuition suggests this cannot be the case. After all, YOU did not commit the crime. However, at least in Texas (and possibly some other states) our intuition would be wrong if the retirement savings were jointly possessed during the marriage. A recent Fifth Circuit Court of Appeals decision makes this point abundantly clear. United States v. Berry, No. 19-20050, 2020 U.S. App. LEXIS 6260 (Feb. 28, 2020)

In the Berry case, Gwendolyn Berry was convicted of wire fraud, mail fraud, and falsifying a tax return, all in connection with her ongoing theft of funds from her employers. As part of her sentence, she was ordered to pay restitution in excess of $2 million. To enforce this restitution order, the government sought to garnish funds in retirement accounts held in Gwendolyn’s name and in the name of her husband Michael. Gwendolyn agreed to release the funds in the accounts in her name, but the Government also wanted 50% of the retirement funds in the accounts in Michael’s name, approximately $1 million.. The district court issued a garnishment order requiring this amount be paid to the government. The Berrys appealed.

In considering whether the funds in the accounts in Michael’s name could be garnished, the Court of Appeals explained that, under the federal Mandatory Victims Restitution Act, a lien for restitution to victims of federal crimes attaches to the defendants’ property and rights to property. But the Berrys had argued that Gwendolyn had no rights to the property in Michael’s accounts and, therefore, the government could not garnishee those accounts. The Court of Appeals disagreed. It explained that the law of the state where a debtor is domiciled defines the property interests to which a judgment lien may attach. Gwendolyn was domiciled in Texas and, under Texas law, she had a 50% interest in property possessed by Michael during their marriage. Therefore, the Court of Appeals ruled that the district court properly ordered that 50% of the funds held in the accounts in Michael’s name, approximately $1 million, be paid to the government.

While the courts’ rulings might seem unfair to Michael, as he did not commit the crimes, they did not leave Michael destitute. His 50% portion of the retirement savings in the accounts in his name still equaled approximately $1 million. Under the Court’s rulings, the government could not touch that amount.

To read more of my pension and retirement posts, go to my Pension Justice 4 You Facebook page. Click the Like and Following tabs just below the picture at the top of the page to receive automatic notifications when I have published a new post. Have a pension problem? Call me Eva Cantarella at 248-335-5000, or email me at [email protected] or [email protected]