Treatment of Social Security Benefits in Family Law Act Matters

Family law practitioners are well aware that they must incorporate knowledge of federal law regarding taxation and retirement benefits into their daily practice. However, those same knowledgeable attorneys often overlook another significant area of federal law which has a recurring and pervasive impact on domestic relations issues. That area is Federal Old Age, Survivors and Disability Insurance benefits (OASDI, commonly known as “Social Security”).

Issues pertaining to Social Security benefits arise for family law practitioners in connection with characterization and division of property, bifurcation and early termination of marital status, calculation of child and spousal support and determination of child support arrears.

There are two categories of OASDI retirement benefits — direct or “primary” and derivative or “family.”

Primary benefits are payable to a retired, fully insured worker are 62 or older.

Under federal law, the primary Social Security benefits earned by the employee spouse during marriage are the employee’s separate property. Thus, the state court has no jurisdiction to divide or award offsetting property for the benefits.

In In re Marriage of Kelley (1976) 64 Cal.App.3d 82, the Court of Appeal held that the right to future Social Security benefits is not subject to division as community property in the course of a dissolution of marriage action. Characterization of Social Security benefits as divisible community assets would seriously interfere with the express statutory scheme of the Social Security Act, and would run afoul of the supremacy clause of the United States Constitution, held the court in In re Marriage of Nizenkoff (1976) 65 Cal.App.3d 138, relying in large part on Flemming v. Nestor (1960) 363 U.S. 603. The Kelley court reasoned that the statutory scheme underlying Social Security benefits is “one of social insurance designed to provide financial security to covered workers and their families rather than one of deferred compensation for past labor.”  64 Cal.App.3d at 268.

Derivative benefits are payable to a spouse or ex-spouse after retirement following a marriage of at least 10 years’ duration, measured from date of marriage to the date the marital status is dissolved. The spouse or ex-spouse must be 62 years of age or greater. The ex-spouse must satisfy a two-year waiting period if the employee was not actually receiving benefits before the divorce. The benefits are based on the working spouse’s contributions to the Social Security system.

Additionally, a widow, widower or surviving ex-spouse of an employee who remarries after age 60 is entitled to receive derivative benefits.

Just as is the case with primary benefits, derivative benefits are the separate property of the ex-spouse. In re Marriage of Hillerman (1980) 109 Cal.App.3d 334. Since an ex-spouse becomes entitled to such benefits only if the marriage lasts 10 years or longer, if the marriage is close to 10 years’ duration, counsel should attempt to delay termination of marital status until after ten years’ duration.

Counsel should be particularly alert to this issue where the opposing party has requested bifurcation as to marital status and early termination of the marital status. Family Code § 2337 provides some protection in the form of a condition that may be imposed on party requesting bifurcation:

(c)  The court may impose upon a party any of the following conditions on granting a severance of the issue of the dissolution of the status of the marriage, and in case of that party’s death, an order of any of the following conditions continues to be binding upon that party’s estate [until entry of judgment on remaining issues]:

(7) [H]old the other party harmless from any adverse consequences if the bifurcation results in the loss of rights to social security benefits or elections to the extent the other party would have been entitled to those benefits or elections as the surviving spouse of the party.

(8) Any other condition the court determines is just and equitable.

One condition which might be requested is delay in entry of judgment until following the tenth anniversary of the marriage.

Social Security benefits, whether primary or derivative, are includible in income for purposes of determining spousal support. In re Marriage of Nizenkoff (1976) 65 Cal.App.3d 136.

Upon the retirement or disability of a parent, the children of that parent are entitled to receive secondary benefits under the Social Security Act. 42 U.S.C. § 402(d). Those benefits may be included in the custodial parent’s income for purposes of calculating child support pursuant to Family Code § 4058(a)(1).

However, if the benefits are not considered in the child support calculation, they offset the payor parent’s child support obligation in the manner set forth in Family Code § 4504, which provides:

If the court has ordered a noncustodial parent to pay for the support of a child, payments for the support of the child made by the federal government pursuant to the Social Security Act or Railroad Retirement Act because of the retirement or disability of the noncustodial parent and transmitted to the custodial parent or other child support obligee each month shall be credited toward the amount ordered by the court to be paid for that month by the noncustodial parent for support of the child unless the payments made by the federal government were taken into consideration by the court in determining the amount of support to be paid. If a lump-sum payment which represents payments for more than one month is transmitted to the custodial parent or other child support obligee, credit shall be given for each month for which the lump-sum payment was made.

In contrast, Social Security death benefits received by a child in connection with the death of the supporting parent do not offset the child support obligation of the deceased parent, since Family Code § 4504 specifically refers to retirement and disability benefits, but not to death benefits. In re Marriage of Bertrand (1995) 33 Cal.App.4th 437. The child support obligation continues beyond the death of the supporting parent [Stein v. Hubbard (1972) 25 Cal.App.3d 603] or the recipient parent [In re Marriage of Gregory (1991) 230 Cal.App.3d 112].

Where the child’s parents were not married, the child will not be entitled to Social Security survivor benefits arising out of the death of the father unless a judgment of paternity is entered before the father’s death [Casserino v. Sullivan (9th Cir. 1990) 921 F.2d 862] or the father was living with or contributing to the support of the child at time of death

In In re Marriage of Robinson (1998) 65 Cal.App.4th 93, the Court of Appeal held that Social Security retirement or disability payments which fall within the purview of Family Code § 4504 are credited only against the amount of child support “ordered by the court to be paid for that month” and are not to be credit toward amounts due for prior months or to accrued interest on arrearages. The appellate panel relied in part on Sullivan v. Stroop (1990) 496 U.S. 478, in which the United States Supreme Court held that although a child’s Social Security insurance benefits are “child support” in the generic sense, they are not child support payments from obligor parents, but rather are insurance benefits.

The Robinson holding is entirely consistent with the last sentence of section 4504, which was added to the statute by 1996 amendment. The holding further clarifies certain ambiguities in the holdings of In re Marriage of Denney (1981) 155 Cal.App.3d 543, and County of Napa v. Combs (1990) 222 Cal.App.3d 1077.

Denney had held that the noncustodial parent was entitled to credit against his child support obligation for disability payments made on his behalf for his minor children, and upheld the predecessor statute to section 4504 against constitutional challenges based on both the supremacy clause and the prohibition of taking of property without due process. However, Denney, did not reach the issue of credit against arrearages.

Combs clarified that the predecessor statute to section 4504 did not apply to Social Security survivor benefits received on behalf of the child with respect to the death of the custodial parent.

Thus, in any dissolution of marriage action in which one or both parties have paid into the Social Security system — which encompasses almost every marriage — and in any child or spousal support action in which Social Security disability, retirement, or survivor benefits are being paid or have been applied for, counsel should be cognizant of the interplay between state and federal law governing Social Security benefits.

Contact Us for a consultation