Property Division - Social Security Offset

In Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979), the U.S. Supreme Court firmly placed Social Security outside the marital estate for purposes of property division. Yet in at least eight states -- Iowa, Kansas, Maine, Massachusetts, Missouri, Ohio, Pennsylvania and Washington -- Social Security has entered the domestic relations area as courts, struggling to achieve an equitable distribution of property, consider the disparate income streams of older divorcing couples.

A spouseís Social Security benefits are that personís separate, indivisible property. Courts, however, sometimes consider a husbandís or wifeís Social Security when dividing a coupleís respective pensions.

Social Security benefits are not a vested right, and they are not transferable. They may not be garnished, attached or levied (except to permit spousal and child support). They are the separate property of the recipient spouse and are not divisible in a divorce as either marital or community property.

While the benefits themselves are not divisible marital or community property, courts consider their receipt for equitable distribution purposes, that is, to achieve an "equitable, but not necessarily equal, division of marital property..." Some courts consider Social Security as a "relevant factor" in spousal support. Moreover, an agreement "that merely uses Social Security as a measure of a spouseís payment obligation, without subjecting the benefits to legal process or transferring the receipt or control of the benefits to the other spouse "... does not violate the antiassignment provision of Social Security. A spouse can share his benefits by calling it alimony.

At issue is the perceived inequality of the lower benefits going to the spouse of the Social Security participant, which usually means the worker husband and his stay-at-home wife and mother (who often does not have enough of the 40 required quarters for a Social Security account based on her own covered employment). This same stay-at-home wife and mother may also be eligible for the 50 percent spousal benefit and the 100 percent widow(er)ís benefit, which may be higher than any earned benefits going to the lower wage earner in her own right.

Under certain conditions, however, a divorcing spouse (very often the woman) may receive spousal Social Security based on the work history of her spouse. Spousal Social Security benefits are monthly cash payments to which a spouse, or former spouse, is entitled under the Social Security Act on account of the work history of the other spouse, and in the case of marital dissolution, the duration of the marriage. Very often in a divorce, one party (usually the woman) overlooks the fact that she may have the right to collect Social Security benefits premised on her former spouseís income. This happens if 1) the couple were married at least ten years, 2) the divorce ended the marriage two years earlier and 3) the former spouse is eligible to receive benefits (which means that he is at least 62). However, a woman who remarries before the age of 60 loses her spousal Social Security benefits.

For purposes of spousal and child support, Social Security benefits are income to the obligor spouse or parent, and the courts treat this income as such. However, these benefits are income only when they are received.

Some courts, trying to achieve an equitable result, consider differing Social Security entitlements "under spousal support conditions if not in a property division," and as such consider benefits this way:

1) The earned Social Security benefit of the higher wage worker (usually the husband) versus

2) The earned Social Security of the lower wage worker "under covered compensation"; or

3) The Independent 50 percent spousal benefit, or

4) The Independent 50 percent spousal benefit, and the potential 100 percent widow(er)ís benefit.

In valuing Social Security for divorce, at least seven concerns normally may be considered. They are as follows:

1) The Frozen Social Security Benefit v. Preretirement Cost of Living Adjustment Benefit: Should the benefit at the time of the divorce be valued, "or the likely benefit at retirement, assuming an increase due to the yearly reindexing of benefits"?

2) The "Coattail" v. Frozen Benefit: Should the projected "coattail benefit," which is the projected increase accruing to the lower wage wife because the high wage husband continues to work, be valued or the frozen benefit that accrued up to the time of divorce?

3) Remarriage Penalty: Should the probability of remarriage be considered because the spousal benefit is lost upon remarriage?

4) Marital Portion: Is a coverture fraction by time satisfactory to determine the amount of Social Security earned during the marriage, or should the fraction be computed by the average indexed earnings?

5) Actuarial Expertise: While the calculation of Social Security benefits are straight forward, the widow(er)ís benefit is often the most troublesome, because it is based on the probability of the worker (usually the husband) being deceased and the lower wage spouse (usually the wife) being alive. This makes this component speculative, and lawyers may dispute its place in the argument.

6) Offset to Social Security: Numerous offsets to Social Security exist.

7) Future of Social Security: Should the valuations consider the fiscal soundness of Social Security and possible changes in the system and its payouts?

Resources: The Department of Health and Human Services, Social Security Administration (SSA), Baltimore, MD 21235. Call 1 800-772-1213.

Authored By: Theodore K. Long, Jr., President, Pension Appraisers Online, Inc.

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