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SOCIAL SECURITY BENEFITS AND DIVORCE
© 1997 National Legal Research Group, Inc.
NEVADA: Wolff v. Wolff, ___ Nev. ___, 929 P.2d 916 (1996).
Social Security benefits cannot be divided or given any consideration when dividing property upon divorce.
NEVADA: Boulter v. Boulter, ___ Nev. ___, 930 P.2d 112 (1997).
An agreement to share future Social Security benefits with a spouse is invalid and unenforceable.
In these two decisions, the Nevada Supreme Court comes down squarely against any consideration of Social Security benefits in a property division upon divorce. Together, the opinions provide strong ammunition to resist any request for sharing Social Security benefits. Since these decisions turn on federal law, they should be of interest to family law practitioners in all states.
During the marriage in Wolff v. Wolff, the wife earned substantial amounts as a mortgage broker and contributed to Social Security, while the husband was a state trooper with a state pension who did not contribute to Social Security. To account for the difference in Social Security participation, the trial court reduced the wife's community property share of the husband's pension, although it denied that the reduction constituted an offset for the wife's Social Security.
The Nevada Supreme Court held that it was error for the trial court to consider the wife's payments to Social Security as a basis for reducing the wife's share of the husband's pension. Social Security benefits are not deferred compensation and therefore are not community property subject to division between divorcing spouses, the court held, citing Flemming v. Nestor, 363 U.S. 603 (1960), as well as an annotation and two California cases.
The court decided, moreover, that federal law precludes any award to offset a spouse's Social Security benefits. It cited as controlling Hisquierdo v. Hisquierdo, 439 U.S. 572, 588-89 (1978), where the United States Supreme Court stated with regard to railroad retirement benefits that "[a]n offsetting award, however, would upset the statutory balance and impair petitioner's economic security just as surely as would a regular deduction from his benefit check. . . . Any such anticipation threatens harm to the employee, and corresponding frustration to federal policy, over and above the mere loss of wealth caused by the offset." The Nevada court also cited Olson v. Olson, 445 N.W.2d 1, 7 (N.D. 1989), and In re Marriage of Swan, 301 Or. 167, 720 P.2d 747 (1986), as prohibiting offsetting awards.
The trial court here specifically denied making an offsetting award, but it did consider the wife's Social Security benefits in the decree, the court observed. "Calling a duck a horse does not change the fact it is still a duck." Wolff v. Wolff, 929 P.2d at 921. "Considering" the Social Security benefits amounted to an offset, and therefore constituted error, the court concluded.
In a dissenting opinion, one judge agreed that a "dollar for dollar" offset of anticipated Social Security benefits would violate federal law, but insisted that federal law does not preclude a court from merely considering the fact that one spouse is likely to receive federal retirement benefits. Trial courts are not required to close their eyes to economic circumstances that may make the property division patently unfair, the dissent argued. Id. at 922 (Rose, J., dissenting). In Boulter v. Boulter, a husband invoked the doctrine of federal preemption to avoid sharing Social Security benefits as he had promised in the parties' property settlement agreement. In the agreement, which was incorporated into the parties' divorce decree, the husband and wife agreed to divide their Social Security payments equally, by arranging direct deposit of their Social Security checks and automatic transfer of the other party's share. When the husband turned 65, he refused to comply with the agreement, and the wife filed a motion for enforcement.
The Nevada Supreme Court held that the merger of the property settlement agreement that equalized Social Security benefits into the divorce decree constituted state action that was preempted by the federal Social Security Act. 42 U.S.C. 20407(a) provides that the right to future Social Security payments is not transferable or assignable, and is not subject to legal process, the court observed. Congress has construed the Act to impose a broad bar against the use of any legal process to reach Social Security benefits, and state courts have interpreted the Act to prohibit distribution of Social Security benefits between spouses at the time of divorce, the court noted, citing cases from Illinois, Oklahoma, and Texas as well as Olson v. Olson and In re Marriage of Swan. Because divorce courts may not take any action regarding Social Security benefits, the order incorporating the parties' agreement could not be enforced against the husband, the court decided.
The court also held that a trial court may not order enforcement of a private agreement dividing future payments of Social Security. Like a court order dividing future Social Security benefits, enforcement of a private agreement to divide future benefits would run afoul of 42 U.S.C. 20407, the court decided. The voluntary nature of a private agreement is irrelevant, the court said. If voluntary assignments and transfers of future benefits were allowed, the "security" aspect of the Social Security program would be jeopardized, the court reasoned. Boulter v. Boulter, 930 P.2d at 115.
The wife cited Owens v. Owens, 591 S.W.2d 57, 58 (Mo. Ct. App. 1980), which held that "once social security funds have been paid to the recipient, the funds are his personal property and no longer exempt from execution on the sole ground that the government was the source of those payments." Owens was followed in Fraser v. Deppe, 770 S.W.2d 479 (Mo. Ct. App. 1989).
The court declined to follow Owens and Fraser, however. It noted that in Collins, Webster & Rouse v. Coleman, 776 S.W.2d 930 (Mo. Ct. App. 1989), the same court held that Social Security benefits deposited in a bank account were exempt from process by a creditor under Philpott v. Essex County Welfare Bd., 409 U.S. 413 (1973). The court in Collins held that Philpott was controlling and noted that Philpott was apparently not considered in Owens or Fraser, the Boulter court commented.
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