Divorce and Social Security Benefits: Navigating Complex Rules for Support

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Divorce and Social Security Benefits: Navigating Complex Rules for Support TUESDAY, SEPTEMBER 29, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Karen T. Kugler, Partner, McGee Kugler Family Law, Osseo, Minn. Seth D. Kramer, CFLS, Attorney, Law Office of Seth Kramer, Marina Del Rey, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Divorce & Social Security Benefits By: Karen Terese Kugler, Esq. and Seth D. Kramer, Esq.

6 Explanation of Social Security 6 Benefits There are two main types of social security benefits related to disability: Social security disability insurance (SSDI) For individuals with enough work credits Provides a greater amount of monthly income. Supplemental security income (SSI). For individuals without sufficient work credits Provides a much smaller amount of monthly income. Some individuals that are not fully eligible for SSDI may receive benefits under both the SSDI and SSI programs.

7 7 Explanation of Social Security Benefits This chart is a summary of the difference between the programs. SSDI is sometimes called RSDI, for retirement, survivors, and disability insurance. The terms RSDI and SSDI are used interchangeably. What is it? Work history? Approximate benefit amount Additional cash benefit for children Date benefits begin Asset Limit Reduced by earned income? Is It SSI or SSDI? SSI Disability benefits are based on financial need Party did not work very much and does not have enough work credits Maximum of $733 per month (for 2012) No The date the party made an application for benefits Individuals generally are not eligible for SSI if they have resources in excess of $2,000 (or $3,000 for a couple). Certain resources are excluded, most commonly a home, an automobile, and household goods and personal effects Yes For example, a person whose income consists of $500 in gross monthly earnings would receive $ in federal SSI payments (($500 - $85) / 2) = $ countable earnings FBR $733 - $ = $ federal SSI SSDI Disability benefits are based on prior work and work credits Party has worked 5 out of the last 10 years before application for benefits Varies based on work credits but higher than $733. The average benefit is $1,111 per month Yes The date the disability began No No However, if the earned income is too high this may trigger a termination of benefits

8 Explanation of Social Security Benefits: The Process of Obtaining Step 1: Initial Application Benefits The party applies for SSI, SSDI, or both, either in person at their local SSA office or via the web. A SSA worker will be assigned to the party s case and is supposed to obtain copies of the medical & vocational records for the party. The party may be asked to attend an Independent Medical Examination (IME) or Special Examination to determine if they are disabled under the rules. The worker reviews the record and determines if the party is eligible for benefits. It is extremely common for parties to be rejected at this stage. 8

9 Explanation of Social Security Benefits: The Process of Obtaining 9 Benefits Step 2: Request for Reconsideration If the worker rejects the party s claim, the party receives a notice and then has 60 days to make a Request for Reconsideration. A SSA worker will have the party update their information, will review the file with this additional information, and will determine if they believe the party is eligible for benefits. Just as with the initial application, it is extremely common for parties to be rejected at this stage despite severe disabilities.

10 Explanation of Social Security Benefits: The Process of Obtaining 10 Benefits Step 3: Hearing with Administrative Law Judge (ALJ) If the party is denied benefits at the Request for Reconsideration stage of the process they can request a hearing within 60 days of the denial. The party s best chance of receiving social security disabilities is likely at the hearing stage of the process. It is very beneficial if the party has a social security law attorney to represent him or her in this process. The hearing is held in front of an Administrative Law Judge (ALJ) and the hearings generally last 1 to 2 hours. The party will testify and be asked questions by his/her attorney and the ALJ. There may also be a medical expert and a vocational expert present who may testify.

11 Explanation of Social Security Benefits: The Process of Obtaining Benefits Step 4: Appeal to Appeals Counsel or Federal District Court. After the hearings level of the process, a party can appeal to the appeals counsel and then can file a case in Federal District court, but this is not especially common. 11

12 Explanation of Social Security Benefits You cannot obtain social security disability benefits for temporary disabilities In order to qualify for SSI or SSDI, an individual must be unable to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment expected to result in death or last at least 12 months. This means that in order to qualify for social security disability the impairment in question is usually a permanent and severe one. Five states (California, Hawaii, Rhode Island, New Jersey & New York), Puerto Rico, and the railroad industry have programs that partially compensate a party for the loss of wages caused by temporary, non-occupational disability or maternity. Those programs are known as temporary disability insurance (TDI) because the duration of the payments is limited. Federal law does not provide for a federal-state insurance system for short-term disability. 12

13 Explanation of Social Security Benefits: How Eligibility Is Determined Option 1: Meets the Listings 20 CFR Part 404, Subpart P, Appendix 1. Each listing describes in detail the level of medical impairment necessary for each medical condition 13

14 Explanation of Social Security Benefits: How Eligibility Is Determined Option 2: Equals the Listings Often parties have a number of different medical conditions that cause them to be disabled, or alternatively their condition is equal in severity to a similar listing but does not exactly meet the definition in the listings. In this situation, a party can receive benefits based on medically equaling the listing or combination of listings. 14

15 Explanation of Social Security Benefits: How Eligibility Is Determined Option 3: Vocational Impairment 20 CFR Part 404, Subpart P, Appendix 2 Often parties cannot meet or equal a medical listing, but they are unable to work due to the restrictions they have due to a disability. In this situation the Social Security Administration will analyze if the party is able to engage in substantial gainful employment (SGA). 15

16 Issues Specific to Divorce 16 Back Pay & Assets Attributable to Soc. Sec. Benefits A significant period of time may elapse between the application for benefits (or onset of disability) and the award of benefits. When benefits are finally awarded, the party will usually receive back pay for monthly benefits that accrued during this time period. The back pay amount can be substantial, especially in SSDI cases. Social Security benefits (including back pay) are generally treated as a spouse s separate (non-marital) property and generally will not be subject to division. However, this is not true in all jurisdictions. Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979). Marriage of Hillerman, 109 CA.3d 334 (CA 1980) (In California social security benefits are non-marital) Dinges v. Dinges, 16 Neb. App. 275 (Neb. Ct. App. 2008) (In Nebraska portion of asset acquired by using back pay is non-marital) In re Marriage of Zahm, 978 P.2d 498 (Wash. 1999) (In Washington social security benefits may be included as a part of an equitable distribution)

17 Issues Specific to Divorce 17 Overpayments Sometimes the social security administration makes a mistake, and pays the claimant too high a benefit amount. Even if this mistake is due to no fault of the claimant, the claimant will be required to pay the overpayment back. This could arguably be a marital debt. Lisa M.H. v. Gerald C.H., 35 A.D.3d 1188 (NY 2006) (In New York the overpayment is a marital debt) Unpublished: Johnson v. Johnson, No. 45A DR-94 (Ind. Ct. App. Jan. 29, 2013) (In Indiana overpayment was a marital debt).

18 Issues Specific to Divorce Derivative Benefits Due to retirement not disability Payable to a spouse or ex-spouse after the employee s retirement Ex-spouse does not need to be retired to collect benefit. Irrelevant if ex-spouse is remarried Must have been married to employee for at least 10 years Cannot currently be remarried. Must have been divorced for at least 2 years (unless the ex-spouse is already receiving benefits). 42 USC 402(b) & 416(d) 18

19 Issues Specific to Divorce 19 Derivative Benefits Children of retired person may receive social security benefits. A child will receive up to 50% of the parent s PIA (primary insurance amount base amount of the parent s benefit). However, the child s benefit is subject to a family maximum ( % of PIA for retirement benefit recipients).

20 Ways to Structure Alimony & Child Support Considering Social Security Issues Children can receive funds from social security for their own disability (through SSI) or due to their parent s disability (through their parent s SSDI). The funds a child receives for their own disability (child s SSI) should not be used to calculate a parent s income for child support. A child s income is not a parent s income. States base child support awards based on parental income and a parent s obligation to provide support exists despite a child s own income. 59 Am. Jur.2d, Parent and Child 77, p. 169 Armstrong v. Armstrong, 544 P.2d 941 (Cal. 1976) 20

21 Ways to Structure Alimony & Child Support Considering Social Security 21 Issues The funds a child receives based on a parent s disability (parent s SSDI) may be factored into child support. 42 U.S.C. 407 protects social security benefits from legal process is subject to an exception found in 42 U.S.C Jugovich v. Jugovich, No. A , 2008 WL (Minn. Ct. App. Nov. 4, 2008). Kimbrell v. Kimbrell, 884 S.W.2d 268 (Ark. 1994). Brown v. Brown, 849 N.E.2d 610 (Ind. 2006) CA Family Code 4058 & 4504 In Re Marriage of Daugherty, 232 Cal. App. 4th 463 (2014)

22 22 Ways to Structure Alimony & Child Support Considering Social Security Issues Depending on the state, a disabled person may want to request that child support be reduced while a social security case is pending. The majority of jurisdictions will treat back-pay as a child support payment to be credited towards the child support obligation (including future obligations). Wisconsin: Montana: In re Marriage of Cowan, 928 P.2d 214, 220 (Mont. 1996) South Dakota: Crago v. Donovan, 594 N.W.2d 726, 731 (S.D. 1999) However, some jurisdictions will not make this credit, so if an obligor pays the ongoing obligation while waiting to receive social security benefits the back-pay is given as a windfall to the obligee. Minnesota: Floding v. Gillespie, N.W.2d (Minn. 2015)

23 Ways to Structure Alimony & Child Support Considering Social Security Issues Since SSI is a need based program, it is treated as public assistance when determining a party s income for child support and is generally excluded as income for determining support. 42 U.S.C. 407 protects SSI benefits from legal process and SSI is generally not subject to the 42 U.S.C. 659 exception that applies to SSDI benefits. Minn. Stat. 518A.29(h) Davis v. Office of Child Support Enforcement, 20 S.W.3d 273 (Ark. 2000) 23

24 24 Ways to Structure Alimony & Child Support Considering Social Security Issues When there is a special needs child who receives SSI, the parents may want to carefully consider how child support is structured. Child support will reduce SSI. One third of the child support received is countable income which causes a dollar for dollar reduction in SSI. SSI is required to receive Medicaid in about 36 states. Option: Parents could have the divorce decree direct that the non-custodial parent pay support to a special needs trust. For requirements see 42 U.S.C. 1396p(d)(4)(A) Option: Obligor could pay child s expenses directly to provider.

25 Ways to Structure Alimony & Child Support Considering Social Security Issues While a party is in the process of attempting to obtain social security disability benefits they may need to find ways to prove that income should not be imputed to them in some states. Minnesota statute does not directly exempt a disabled person from having income imputed to them if they do not receive social security benefits. Engelking v. Engelking, No. A , 2010 WL (Minn. Ct. App. Sept. 21, 2010). 25

26 Ways to Structure Alimony & Child Support Considering Social Security Issues Spousal maintenance can reduce some disability payments. If an obligee is receiving SSDI, spousal maintenance will not reduce the social security benefits received. If an obligee is receiving SSI, spousal maintenance will reduce the benefits received. 26

27 Ways to Structure Alimony & Child Support Considering Social Security Issues 27 If an obligee is receiving SSI, spousal maintenance will reduce the benefits received. The first $20 of spousal maintenance will not reduce the SSI amount, but all spousal maintenance above that amount will reduce the SSI benefit dollar for dollar. I the party receives $400 in SSI, and the party then receives $300 in spousal maintenance, then SSI would be reduced to $120 per month. Further, spousal maintenance is taxable to the party, while SSI is not taxable. How to cope? Increase a property award and award property that is a non-countable asset Direct alimony to be paid to a special needs trust.

28 Discovering & Using Information Found on Social Security Forms 28 Social Security files can be a gold mine of information that is useful in family court cases. Here are some documents that may be found in an SSA file that may be relevant to family court proceedings Due to confidentiality concerns these documents should be provided under a Sealed Source Documents cover or a Protective Order should be obtained, so that they do not become public record. It is also important to analyze whether the party has waived privilege by placing his or her medical condition in issue

29 Possible Item in SSA File What is it? Potential Use(s) Mental Residual Functional Capacity Assessment Form OMB No Physical Residual Functional Capacity Assessment Form OMB No A letter written by their treating physician on the physician s own stationary. Request for Medical Opinion Form (this is a form used by DHS -- DHS ENG). 29 A form filled out by the party s doctor or by SSA s medical expert assessing the party s mental condition, and how it limits daily activities. A form filled out by the party s doctor or by SSA s medical expert assessing the party s physical condition, and how it limits daily activities. Medical opinion letter Used by social services to determine eligibility for programs such as GA, some parties will provide this to SSA in support of their case. To support or undermine a spousal maintenance claim. To support or undermine a parenting time or custody request. To undermine an imputation of potential income in a child support case. To support or undermine a spousal maintenance claim. To support or undermine a parenting time or custody request. To undermine an imputation of potential income in a child support case. To support or undermine a spousal maintenance claim. To support or undermine a parenting time or custody request. To undermine an imputation of potential income in a child support case. To support or undermine a spousal maintenance claim. To support or undermine a parenting time or custody request. To undermine an imputation of potential income in a child support case.

30 Possible Item in SSA File What is it? Potential Use(s) Special Medical Examination In determining eligibility for benefits, SSA may send a party to a special medical examination with a medical expert employed by the SSA. These reports are generally less favorable to a finding of disability. A medical expert may also testify at the hearing stage. To undermine a spousal maintenance claim. To support or undermine a parenting time or custody request. Party s Medical Records Medical Records To support or undermine a spousal maintenance claim. time or custody request. To undermine an imputation of potential income in a child support case. Vocational Assessment or Vocational Records 30 Some parties will have vocational assessments as a part of their file. There may also be records from day treatment programs, or other social services agency. A vocational expert may also testify at the hearing stage of the process. To support or undermine a spousal maintenance claim. To support or undermine a parenting time or custody request. To undermine an imputation of potential income in a child support case.

31 Structuring the Settlement Agreement SSDI benefits paid on behalf of the child of the disabled person are generally paid directly to the custodial parent (even if that is not the disabled party) by SSA. See CFR (c) A custodial parent of a child receiving SSDI benefits should contact the SSA and apply to be the minor child s representative payee. Benefits paid for children must be managed and used in a particular way, so the party should review the responsibilities of being a representative payee. 31

32 Social Security Legal Resources 32 Social security law is a form of administrative law and guidance is found primarily in the Code of Federal Regulations (CFR) specifically Title 20, Chapter III, of the CFR, Parts 404, 405 and 416. Additionally, the Program Operations Manual System (POMS) contains the information that SSA employees use when processing social security claims. I have found POMS helpful when SSA employees have wrongfully denied a claim or limited benefits, and have cited to POMS to convince them to change their decision. The Hearings, Appeals, and Litigation Law Manual (HALLEX) is helpful in understanding some of the procedures of the social security law process. All three of these sources can be found at

33 Questions? Karen Terese Kugler McGee Kugler Family Law 106 Central Avenue, Suite C Osseo, MN (763) karen_atty@yahoo.com Website: Seth D. Kramer Law Office of Seth Kramer 4223 Glencoe Ave., Suite A225 Marina Del Rey, CA (310) sdkramer2@aol.com Website: 33