Marriage of DeBenedetti and Ensburg and Recovering Hidden Assets

A significant appellate decision was recently published that expands how Qualified Domestic Relations Orders (QDROs) can be used in California divorce cases. In In re the Marriage of DeBenedetti and Ensburg, the California Court of Appeal, Fourth District, Division 1 affirmed that QDROs can be used to recover marital property that one spouse has improperly taken, even from retirement accounts that are classified as separate property.

Case Background

Christina DeBenedetti and Morgan Ensburg divorced after a lengthy marriage. During their divorce proceedings, the court found that Ensburg had breached his fiduciary duty to DeBenedetti by mismanaging over $3.6 million of their community property. As a result, the court awarded DeBenedetti $1.83 million (representing her half of the mismanaged assets) plus $230,000 in attorney fees.

To enforce this judgment, DeBenedetti requested that the court issue QDROs giving her access to Ensburg's retirement accounts, including:

• Houston Astros 401(k) Savings Plan
• Major League Baseball Players Pension Plan
• Houston Astros Non-Uniform Pension Plan
• Tampa Bay Rays 401(k) Plan

Three of these plans had already been divided in previous proceedings, with Ensburg's portions declared his separate property. The fourth plan was acquired after separation.

The Court's Decision

The trial court granted DeBenedetti's request, issuing QDROs that assigned 100% of Ensburg's remaining interests in these retirement accounts to her. Ensburg appealed, arguing that:

1. QDROs could only address the division of community property interests in retirement plans, not enforce judgments
2. The orders violated ERISA's purpose of protecting retirement income
3. The QDROs violated California law
4. The retirement accounts were never properly valued

The appellate court rejected all of Ensburg's arguments and affirmed the trial court's decision.

Legal Findings

The court made several important legal determinations:

1. "Marital property rights" include recovery of misappropriated community property

The court held that reimbursement for community property improperly taken creates a marital property right that can be enforced through QDROs, even against separate property retirement accounts.

2. ERISA allows "all or a portion" of retirement benefits to be assigned

The court noted that QDROs can legally assign any amount of retirement benefits to a former spouse, even potentially the entire account.

3. Federal law preempts state protections of retirement accounts

California laws that would normally protect retirement accounts from judgment enforcement are preempted by ERISA's QDRO provisions.

4. Enforcement is not a redivision of property

The court clarified that using QDROs to enforce a judgment for breach of fiduciary duty is not a redivision of property, but simply enforcement of existing rights.

Why This Case Matters

This case expands the remedies available to divorcing spouses when one partner has hidden, mismanaged, or improperly spent community assets. Before this ruling, it was unclear whether QDROs could be used to enforce judgments against separate property retirement accounts for breach of fiduciary duty.

Now, the court has clearly established that retirement accounts are not untouchable when a spouse has breached their fiduciary duties to the community estate.

Tips for Divorcing Spouses

1. Document suspected financial misconduct: Keep detailed records if you suspect your spouse is hiding or mismanaging community assets.
2. Consider specialized discovery: Financial misconduct often requires forensic accounting and targeted discovery to uncover.
3. Be aware of fiduciary duties: Both spouses have legal obligations to manage community property with the highest good faith and fair dealing.
4. Don't assume retirement accounts are untouchable: As this case shows, even separate property retirement accounts can be reached to satisfy judgments for financial misconduct.
5. Consult with an experienced family law attorney: Cases involving breach of fiduciary duty and QDROs are complex and require specialized knowledge.
6. Act promptly: There are time limitations for bringing claims for breach of fiduciary duty in divorce cases.
7. Be transparent with your own finances: The fiduciary duty runs both ways - avoid actions that could be seen as concealing or mismanaging community assets.