Social Security Retirement Benefits: Marital Property Subject to Division Between Spouses?

G e n e r a l l y i n Florida, all vested and non-vested retirement monies that accrued during the marriage constitute marital assets subject to equitable distribution.  Social Security, a social insurance program created in 1935 by President Franklin D. Roosevelt, consists of retirement benefits which accrued as a result of workers paying Social Security taxes on their earnings.  Applying the plain language of Florida’s general rule concerning retirement benefits, are Social Security benefits negotiable in a divorce settlement? Are there any benefits afforded to an ex-spouse who did not work and pay into the Social Security program? Can a spouse who will not receive Social Security benefits receive an offset to counterbalance the recipient spouse’s income? This article explores these equitable distribution issues regarding Social Security benefits and provides a postdivorce Social Security hack for those ex-spouses seeking a bigger piece of the pie.

Although the United States Supreme Court has not directly addressed whether the federal provisions of the Social Security Act preempts state courts from distributing Social Security benefits upon marriage dissolution, similar antiassignment provisions have characterized such property as non-marital property not subject to division. Subsequent legislative action has enforced those positions that Social Security benefits are not subject to equitable distribution. In perhaps the most influential case discussing the characterization of Social Security benefits as non-marital property, Hisquierdo v. Hisquerdo,  the U.S. Supreme Court interpreted the anti-assignment provision of the Social Security Act to preempt states from treating railroad retirement benefits as community property. In correlating the lower tier of railroad retirement benefits to those an employee would expect to receive if he were covered under the Social Security Act, the Court reasoned that that property claims against such retirement benefits could not subject such benefits to garnishment. Subsequently, when Congress amended the anti-assignment clause of the Railroad Retirement Act to permit distribution of some benefits in divorce cases, Congress made sure to add a caveat to the Social Security Act that no other modifications were to be interpreted from such amendment unless so expressly provided for in the Act. Congress’ actions thus enforces the Hisquerdo commentary on Social Security benefits whereby state courts are precluded from distributing Social Security benefits in a dissolution of marriage. Keep in mind though, that Congress reserves the right to amend the Social Security system at any point, even if vested rights are affected.  For the time being, it appears that Social Security Retirement benefits are an exception to the general rule that a spouse’s retirement benefits earned during a marriage are marital assets.

Florida courts, citing federal law, have held that Social Security benefits are not marital assets subject to equitable distribution. The Social Security Acts thus preempts Florida courts from distributing a spouse’s Social Security benefits in the equitable distribution scheme. Pensions plans which deduct an equivalent amount from a worker’s salary and placing them in replacement plans in lieu of making federal Social Security contributions, however, are not preempted by the Social Security Act and thus, not precluded from the equitable distribution scheme. This is so even if the replacement plan is one that is ran by a municipality and the spouse would not receive any federal Social Security benefits as a result of his employment. The out-of-state courts upon which Florida has relied seem to differentiate Social Security benefits, a system of “social insurance for working citizens nationally,” to a locally-managed plan. Knowledge in this nuanced area of equitable distribution law is key for practitioners as a spouse can find themselves indebted to directly pay their ex-spouse a portion of their Social Security benefits towards property distribution in the absence of a timely objection!

What about an offset in equitable distribution as a result of one spouse’s receipt of Social Security benefits? The Hisquierdo Court rejected the Wife’s argument that the court could nonetheless offset assets of equal value for the spouse’s Social Security benefit. Florida’s holdings are consistent with Hisquerdo in that a spouse’s social security benefits cannot be used as an offset to counterbalance the participating spouse’s Social Security benefits. The policy being that a spouse cannot receive an offset because it would result in an inequitable windfall because since the spouse would also receive their own Social Security benefits.

What if the Social Security benefits were deposited and commingled into a joint account? Does that convert the social security benefit payments to marital property? Although Florida has yet to publish an opinion on this issue, a New York court decision may prove persuasive with its holding that a spouse’s Social Security benefits became marital property when they were placed in the spouse’s joint account. However, the United States Supreme Court has previously held that Sec. 407(a) applies broadly to benefits already received and deposited into a savings account.

In any event, even if not included within the equitable distribution scheme, some ex-spouses may still benefit from the Social Security benefits accumulated by their former partner. Pursuant to the Social Security Act, if you are divorced, and regardless of whether you are remarried, your ex-spouse is entitled to receive benefits based on your record if the following conditions are met:

1. Your marriage lasted 10 years or longer;
2. your ex-spouse is not currently married;
3. your ex-spouse is at least 62 years of age;
4. the benefit that your ex-spouse would receive based on their own income is less than the benefit they would receive based upon your work record; and
5. you are entitled to receive social security retirement or disability benefits;
6. you have been divorced from your ex-spouse for at least two (2) years.

The benefit your ex-spouse is entitled to receive is one-half of what you would receive based on your income, or disability record. However, your death would result to your ex-spouse being entitled to 100% of your benefit. Note: this article is not advocating for such action.

A quick note on Social Security disability benefits: a Court cannot equitably distribute a spouse’s compensation received for disability. This is so because a disability pension ‘by its very nature replaces future lost income, and thus is not a marital asset subject to equitable distribution.’ However, when a “disability pension” (as opposed to the receipt of Social Security disability benefits) is involved, the trial court must determine ‘what portion of the pension represents compensation for pain and suffering, disability and disfigurement, and what portion, if any, represents retirement pay. Only the retirement portion is subject to equitable distribution.

Knowledge regarding this nuanced area of matrimonial law is helpful for a practitioner to navigate the issue of Social Security retirement benefits in a dissolution of marriage and even in post-divorce planning. Spouses also appreciate more certainty regarding the outcome of what is sometimes the largest asset a person accumulates throughout their working life span.

Anya Cintron Stern, Esq. focuses her practice on all aspects of marital and family law. She began her legal career as an Assistant Public Defender at the Miami-Dade Public Defender’s Office where she gained valuable litigation experience handling over 50 jury and bench trials.