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Social Security & Determination of Monetary Award

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In a case of first impression, a point of law never before presented to a Maryland Court, the Court of Appeals has now provided guidance on how social security benefits shall be considered when dividing marital property in divorce cases.   In the case Jackson v. Jackson, Maryland’s highest court ruled that trial courts are now required to take into consideration the parties’ actual or anticipated social security benefits as a relevant factor under the Marital Property Act when determining whether to grant a monetary award to adjust the equities and rights of the parties in marital property.

The basic facts in the Jackson case help explain the issue.  In essence, the parties wished to divide their assets equally and were able to do so with the significant exception of their retirement assets in the form of their pensions.  During the marriage, Husband was employed for the majority of his career as a federal worker and was eligible for the Civil Service Retirement System (CSRS) pension.  Federal workers who receive retirement benefits from the CSRS are ineligible by law to receive social security benefits.  Wife was also employed during the marriage and was eligible to receive retirement benefits and social security benefits.  The dispute between them related to the accounting of Wife’s social security benefits when calculating the division of their marital property.

In form, a social security benefit is a monthly payment to a beneficiary much like any other pension payment.  Social security benefits may certainly accrue during the time of a marriage, but because social security is a federal program created by Congress, states are prohibited by the Supremacy Clause of the U.S. Constitution from considering social security benefits as marital property.  State courts are precluded from intervening in the allocation of social security benefits and cannot assign a portion of one spouse’s social security benefits directly to the other spouse except in very narrow circumstances related to alimony or child support.

With the holding in the Jackson case, Maryland’s divorce courts still cannot divide a social security benefit or transfer any part of the benefit from one spouse to another.  In addition, Maryland’s divorce courts cannot subject social security benefits to valuation for the purposes of a direct or indirect offset of these benefits.  However, Maryland courts are now required to consider generally social security benefits as another factor in evaluating the entire financial condition of the parties before determining an equitable monetary award.  In an age where social security benefits constitute a significant part of planning for retirement, the ruling in Jackson represents a step forward.