But that’s not fair…Social Security Benefits and Pensions

retirement-social-security-benefits

There is a saying I use when talking to clients about difficult issues in Family Law Case; “The word ‘fair” only appears in the Family Code in a discussion about attorney fees.” The stark reality is this…Family Law is not fair. It can be equitable and it can be reasonable, but fair it is not. Case in point:

Imagine for a minute that you work for the federal government. This was your first and only job, and your first day was on the exact day you were married (You are a very dedicated employee.) You also separated from your spouse on the exact day you retired 30 years later. During your 30 years working for the federal government you contributed to a pension plan each month. This was mandatory and automatic. Each pay period you saw your pay reduced for this contribution. This was okay, because you knew the pension plan would provide for a very healthy retirement pay during the remainder of your life. Also, the mandatory contribution each month was offset since you did not have to pay into Social Security. That meant you were not eligible for Social Security Benefits, but you felt your pension payments would be more than enough to cover you in retirement.

Your spouse on the other hand worked in the private sector during the marriage. He made no contributions to retirement other than the Social Security that was automatically taken by the government. Between the two of you, you were sure that his Social Security payments and your pension payments would be enough to pay all of your bills during retirement.

Have you seen the problem yet? Probably not, since most people are not aware that Social Security Benefits are separate property. See the problem now? If not, here it is: Your pension is 100% community property and will be divided equally between you and your spouse. The spouse’s Social Security Benefits are separate property and will be confirmed 100% to that spouse. Doesn’t seem fair does it? Here is an illustration:

Let’s imagine that your benefit after 30 years is monthly payments of $7,000. Your spouse’s Social Security Benefit is $3,000 per month. That is a total of $10,000 per month. That is more than enough to live on comfortably. Except you’re getting a divorce. The fair way to resolve this would be to allow each of you to receive $5,000, except that is not how it will work out. The chart below will show you what I mean:

Account Payment Fair Split (Each) Actual for Husband Actual for Wife
Wife’s Pension $7,000 $3,500 $3,500 $3,500
Husband Social Security $3,000 $1,500 $3,000 $0
Total $10,000 $5,000 $6,500 $3,500

 

Out of the total $10,000, Husband will receive $6,500 and Wife will receive $3,500, or only 35% of the total retirement. It’s not fair, but it is the law; only community property is divided and it must be divided equally. The California Court of Appeals recently took up this exact issue in the case Marriage of Peterson, and unfortunately there hands were tied no matter how “unfair” the result was.

In the Court’s opinion, they said, “(w)e sympathize with Wife’s situation, and recognize that the result of California’s strict policies on the division of property, intended to protect spouses (see § 2580), did not produce an equitable result in the situation before us. But it is not our role to change or defy California law.” The Court also said that “(i)t is within the parties’ power to create a more equitable solution — even if the court may not do so.”

What the court was telling attorneys and litigants was, until the law is changed by the legislature, in situations such as these, the parties can agree to a more equitable solution. They are suggesting the parties reach an agreement that provides a more equitable result. In the case above, the parties were within their rights to reduce Husband’s interest in the monthly pension in order to equalize the total monthly payment. This was the only option, since you cannot divide a Social Security Benefit.

Sometimes that is easier said than done, that is why it is so important that you discuss your case with a qualified Family Law Attorney.

Please contact us if you are considering a divorce from your spouse, a legal separation, or have questions regarding pension or retirement issues in your divorce. Nancy J. Bickford is the only Certified Family Law Specialist (CFLS) in San Diego County who is also a licensed Certified Public Accountant (CPA) with a Master of Business Administration (MBA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.

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www.bickfordlaw.com