Social Security Benefits Strategies for Divorcing Spouses, 0320 COBJ, SC Lawyer, March 2020, #44

AuthorBy Miles Mason Sr.
PositionVol. 31 Issue 5 Pg. 44

Social Security Benefits Strategies for Divorcing Spouses

Vol. 31 Issue 5 Pg. 44

South Carolina BAR Journal

March, 2020

By Miles Mason Sr.

Family law attorneys should anticipate and plan for the impact that divorce will have on their clients’ Social Security benefits, a key source of retirement income for most people. Although more retirement options are available to married couples, important choices are also available to single and divorced individuals.

For a client to get the most from Social Security, the attorney needs to know what retirement, survivor, and disability options are applicable to them, and then develop a benefits strategy before alimony and property settlement negotiations ensue in earnest.

What do you say when a divorce client asks: “How much will I get in Social Security?”

“When is the earliest I can begin receiving benefits?” “What happens if I remarry?”

And the kicker, “You’re a smart lawyer. Shouldn’t you know this?” The right answer is both “Yes” and “No.”

While it matters in divorce negotiations, Social Security benefits strategies are more in the nature of financial advisory services.1 Nevertheless, all lawyers should have a basic understanding of what’s what. A quick disclaimer before getting started — this discussion is intended to be a general overview of the state of Social Security benefits and retirement as of the date of publications, and exceptions may apply.

Dancing around federal benefits

In Tennessee divorce law, Social Security benefits are very much an enigma. From one perspective, Tennessee courts have no authority to divide or impair Social Security benefits. The benefits are what they are. The U.S. Supreme Court has found that the Social Security Act imposes a “broad bar against the use of legal process to reach all Social Security benefits,” yet child support and alimony payments are exempt from this prohibition under the act.[2] While South Carolina courts are without power to take any action dividing or assigning future Social Security payments, state courts must struggle with the task of equitably dividing marital property in cases involving Social Security, beyond the consideration of alimony or child support, by ensuring equity for the parties under state law without violating federal law. 3 From another perspective, these benefits are terribly important for alimony analysis. The eligibility for retirement benefits and their payout both increase the supporting spouse’s ability to pay and reduce the supported spouse’s need. Benefits are often substantial.

Negotiating alimony and property division from a position of strength requires a benefits strategy that encompasses Social Security, a nonnegotiable federal program. Spouses may include settlement terms in their Marital Dissolution Agreement (MDA)4 to optimize those federal benefits. Yet there is nothing spouses might agree to, attorneys might draft, or a judge might order that can alter either spouse’s individual right to Social Security benefits. This makes planning for the client’s future benefit alternatives absolutely crucial.

Social Security benefits for divorced spouse and current spouse

Whether for a divorced or a current spouse, Social Security benefits are a key component of retirement. What is the benefit at full retirement age (FRA)? Will the earnings cap result in forfeited benefits? How much will annual cost-of-living adjustments (COLA) help? As a marital strategy, spouses coordinate their benefit claims. As a divorce strategy, an economically dependent spouse should seek support and property resources that complement benefits for a comfortable post-divorce lifestyle.

The supporting spouse is better off with a strategy that builds on the supported spouse’s optimized benefit. It is the duty of the counsel representing the supporting spouse to assist the client in negotiating favorable divorce terms that recognize both spouses’ need to optimize benefits and ease the financial burden of support obligations and marital asset and debt division.

Spouses negotiate and methate alimony, equitable distribution of marital property, and parenting plan issues. The divorce attorney is in a position to guide the client toward a settlement that considers both parties’ Social Security benefits. Before negotiating financial issues for the parties’ MDA, it is crucial to obtain and review the client’s official schedule of benefits from the Social Security Administration (SSA).

Social Security planning for aging spouses

We have been warned for two decades about the phenomenal number of Baby Boomers heading into retirement. Boomers are now retiring at a rate of about 10,000 per day, and many are divorced or will be. Social Security benefits make up half or more of most people’s retirement income at age 65 and older. Clearly, clients who are Gen-Xers, Millennials and same-sex spouses also require strategies for optimizing benefits.

Various divorce strategies build on Social Security retirement, survivor, disability and children’s benefits. For general retirement planning, get information directly from the Social Security Administration ( website. Utilize the online Retirement Estimator.5 Certain rules and exceptions apply to public employees and important exceptions may apply to the client’s particular situation. Family lawyers don’t know everything about Social Security benefits, so be willing to refer technical retirement benefits questions to a Social Security benefits lawyer, financial advisor, or tax attorney, especially if related to income taxes. For additional reference, Mary Beth Franklin, CFP, contributing editor of InvestmentNews, has a book on the topic, Maximizing Social Security Retirement Benefits, available at InvestmentNews. com/MBFebook.

Benefits based on other spouse’s work record

A benefit strategy should strive to obtain the maximum allowable benefit after divorce...

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