During your career, you have meticulously saved for retirement. You have paid into the Social Security system. Then the unthinkable happens, and you separate from your spouse and divorce. What will happen to your retirement savings? Will divorce affect your Social Security benefits?
Usually, although not always, these questions have fairly clear-cut answers.
Social Security and Divorce
For the record, much of the best information about divorce and Social Security can be gleaned directly from the Social Security website at www.ssa.gov/planners/retire/divspouse.html.
One important rule is that if you are married for more than 10 years, and if you do not later re-marry, you can choose a Social Security benefit that is the greater of either (1) your Social Security benefit, or (2) an amount equal to 50% of your former spouse’s Social Security benefit.
Sounds simple enough, right? But here come the questions.
First, does that mean my former spouse only gets 50% of his or her Social Security benefit? No. That former spouse still gets 100% of the benefit, while you get an amount calculated as 50% of the benefit.
If you get divorced, will the judge look at Social Security? If so, how? If not, why not?
In Maryland, thanks to the recent case of Jackson v. Sollie, all judges are now required to consider the effect of Social Security at the time of a divorce trial. This also means that when you are considering a divorce, your divorce attorney must now be aware of all aspects and nuances of Social Security. It means your divorce mediator must understand how to fold Social Security benefits into a divorce asset distribution analysis.
In simple terms, the playing field has now changed.
While judges cannot actually re-assign Social Security benefits between divorcing spouses, as that is pre-empted by federal law, all judges must consider present or future Social Security benefits as a required factor in all monetary award cases from this point forward.
This will now change how all family law attorneys, family law mediators and family law judges approach dividing assets upon divorce.
So, what does all of this mean? Here are a few examples.
1. When you get divorced, the trial judge must look at the effect Social Security has or may have.
2. If you are getting a smaller percentage of Social Security than your spouse, it might open up the door for getting more assets at the time of divorce.
3. If you are already receiving Social Security at the time of your divorce, it may impact the division of retirement assets and other assets between you and your spouse.
Retirement Assets and Divorce
How are retirement assets divided upon divorce? This topic involves two smaller parts: defined retirement assets, such as IRAs, 401(k)s, 403(b)s, TSPs and similar plans where you have a specific dollar amount in them; and pensions, which could be ERISA or non-ERISA backed retirement streams of money you get on a monthly basis for life after you retire and reach a certain age (and often a number of years of service).
Contrary to what most people think, Maryland is not an equal division state. In other words, judges don’t always equally split all retirement assets. Maryland is an “equitable” state, whatever that is supposed to mean. The judge looks at several factors and then decides what division of assets is appropriate, on a case-by-case basis.
Here is a simple application. Suppose one spouse has $700,000 in retirement assets, all acquired during the marriage. That spouse also has both a $2 million inheritance and a house worth $600,000 from before the marriage titled only in that spouse’s name.
In Maryland, the court may distribute only marital assets, and the inheritance and house are not marital. Only the retirement is. Based on all of the other factors a judge must consider, a judge could transfer anywhere from 0–100% of the retirement to the other spouse as an equitable adjustment. Those factors might include, but not be limited to: what caused the breakup of the marriage, did the other spouse contribute “non-economic” benefits to the marriage (such as raising children), each of your ages, physical and mental health, as well as the length of your marriage.
It is not so simple. If you are thinking about separating and becoming divorced, planning is the key. This is “tough stuff,” and you only get one chance to protect your wealth or seek your fair share from your spouse. Protect yourself by obtaining the best knowledge you can, along with understanding your options and probable outcomes.
Harry Siegel is a divorce and family law attorney and the founding partner of SIEGELLAW in Howard County. He can be reached at 410-792-2300.