Not every spouse receives $5.5 million in a divorce settlement, but this case has a number of interesting factors for divorce practitioners… though it seems from the facts that part of this case was a “Hail Mary.”

The ex-husband (Georgiou)  a lawyer, had a case representing the Regents of the University of California against Enron. There was the potential for a large settlement a portion of which was to go to Leslie. When her ex-spouse received the payment in 2009, he deposited the money into a joint account, but never notified Leslie that he (1) had done so (2) provided her with the name of the bank and the account information and (3) the ability to withdraw the funds.

Georgiou deducted the transfer as alimony on his 2009 income tax return. Leslie countered that the payment to her was a property settlement and that even if it was alimony, she did not receive the payment until 2010 after petitioning the court to have the money distributed to her.

The main question was whether the obligation to pay Leslie the settlement disappeared on her death. The separation agreement was silent on this. As discussed in previous cases, when the separation agreement is silent, state law prevails. In this case, California law ruled and the obligation of Georgiou to make the payments were found to cease in the event of Leslie’s death. Therefore, the payments were alimony.

The next question was did Leslie have constructive receipt in 2009? The Tax Court found that even though Georgiou transferred the money to a joint account: Leslie had no knowledge of the account and no ability to withdraw the money even if she did know about the account. Therefore, there was no constructive receipt in 2009. Leslie did receive the monies in 2010.

One takeaway for divorce practitioners is that when a separation agreement is silent on certain aspects of alimony – look to your state law. The second is constructive receipt requires knowledge that the funds are available and the ability to access the funds.