Designed to Fail

February 12, 2015 § 3 Comments

The COA case Miles v. Miles, handed down January 27, 2015, is a study in how not to draft a PSA.

Carlos and Brenda Miles had gotten an irreconcilable-differences divorce in 2000. The PSA included the following language:

“[Carlos] shall place [Brenda’s] name on his Individual Retirement Account (IRA) Certificate of Deposit at [the] Bank of Mississippi, as joint tenants with full rights of survivorship.”

When Carlos went to do what the language required of him, he was spurned by the bank because an IRA (note that the I stands for Individual, not joint) can only be in the name of the owner; there is no such thing as a jointly-owned IRA.

A dozen years later, Brenda had to go back to court to get the chancellor to re-jigger the arrangement to get what she should have been entitled to in the first place. That’s a second trip to court, with a second set of attorney’s fees and separate time away from work and other lifely activities to set right what could have been addressed in 2000 with effective language in the PSA.

Aside from the glaring fact that the agreement required the parties to do the impossible, it also failed to set out the balance in the account, or to state that each party was to own one-half (or any other percentage), or to establish who would have the tax responsibility. No date was set to carry out the agreement.

When you draft a PSA, don’t just take your client’s notes and couch them in legalese sufficient to pass your judge’s scrutiny. Engage your brain and bring your training, background, and experience to bear for the benefit of your client.

Your responsibility, as a competent lawyer, is to draft an agreement in such a way that it will do everything it is supposed to do with the result that your client intended, without any court ever having to guess what the language meant. That is a lofty responsibility, and to do it right requires a thoughtful, careful approach. Slapping some words together on a page to satisfy a client today will only buy that client grief and resentment against you later (hopefully after the statute of limitations has run).

If you approach every agreement you draft with this responsibility in mind, you will not achieve the goal 100% of the time. No lawyer is perfect. But if you aim for 100%, your success rate will be considerably better than most other attorneys, and unquestionably better than that of the word-slappers.

The needless train wreck in this case could have been avoided if the agreement had said that the IRA would be divided, one-half each (or even better, stating specific amounts), and that hers would be deposited (or rolled over) into her own qualified account, and that each party would be responsible for the tax consequences associated with his or her own share of the account.

If you don’t understand how these things work, I suggest you refer these type clients to someone who can do a competent job.

§ 3 Responses to Designed to Fail

  • […] most recent object lesson in how not to handle a retirement division is in the case of Miles v. Miles, about which I posted at the link. You don’t want that to happen to you. As I said before, […]

  • Bob Wolford says:

    When drafting PSA’s that contemplate a division of the husband’s military retirement, reach out to DFAS for sample language to include in your PSA- they are quite specific about what they need in the PSA and how to say it. Simply having a basic recitation that “Wife shall be entitled to one-half of husband’s Air Force retirement upon husband retiring from the Air Force” is not going to get it. I’m in the process now of getting a PSA modified for this reason.

  • paul snow says:

    The last legal malpractice case that I handled involved a mistake in the wording of a property settlement agreement regarding monthly survivor benefits. The case was worth approximately $800,000 based on the life expectancy of the x-wife. One should do like Judge Primeaux suggests OR increase your malpractice coverage.

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