Can my disability income be taken in divorce?
Question: I’m facing divorce and my ex wants everything. I’m receiving disability income. Can that be touched or is it protected? I need it to pay for my related medical expenses. Can my disability income be taken in divorce?
Answer: If you are on a fixed disability income, nothing is scarier than the prospect of your former spousal or partner dipping into your limited disability pay. The good news is that under some circumstances there may be protections to safeguard your disability pay. Of course, determining whether those safeguards apply to your specific situation will likely require the assistance of an attorney. Below is a list of questions for you to answer before your initial consultation.
- Are your disability benefits state, federal, or private?
Explanation: This is an important question because certain federal benefits are afforded protection for spousal maintenance purposes whereas similar state or private benefits are not. For example, military disability benefits are exempt from consideration for spousal maintenance in Arizona, but a state-sponsored disability benefit program may not be.
- Do your disability benefits stem from a service-connected injury?
Explanation: This is important because the exemption for federal disability benefits considered in determining spousal maintenance only applies to benefits resulting from a service-connected disability.
- How long do your benefits last?
Explanation: To begin, whether the benefits are short-term or long-term may affect whether the Court will consider the disability income as part of your income for child support purposes. Generally speaking, all disability income is subject for inclusion for the purposes of child support. However, if your benefits are only temporary, you can make a compelling argument that they should not be included in the calculation of your income for child support purposes. Also, whether the benefits end at retirement age is a key fact in analyzing whether the benefits are subject to division for property purposes (see below).
- Is the amount of your disability benefit increased because you have minor children?
Explanation: If so, a strong argument can be made that the increase you receive for the dependents should not be included in the Court’s calculation of your income for child support purposes. For example, if you receive $1,500 per month, but your benefit would only be $1,200 per month if you did not have children, your income for child support purposes may be $1,200 per month. Of course, the Court’s final determination of income for child support purposes is usually discretionary.
- Are the disability benefits intended to compensate you for your loss of earning capacity, or are they part of a deferred compensation package?
Explanation: Benefits awarded for the purpose of compensating you for your personal loss of earning capacity are more likely to be viewed as your sole and separate property (not subject to division). However, benefits that derive from a deferred compensation package are more likely to be deemed community (subject to division). If your benefits stop when you reach retirement eligibility, a strong argument can be made that the benefits are intended to compensate you for loss of earning capacity.
However, if the amount of the benefit is tied to the amount you contributed to a deferred compensation plan, the opposite argument can be made. Finally, it is important to remember that some benefits involve a mixture of both types. For example, you might receive a total monthly benefit of $2,000 per month, but $1,500 of it is based on your loss of earning capacity and the remain $500 is based upon the amount you contributed to your retirement plan prior to the disability.
- When did you start receiving disability benefits?
Explanation: If your benefits are subject to property division because they come from a deferred compensation plan, a portion of your monthly benefit amount may result from contributions you made to the plan before you were married. If this the case, the Court can only divide the amount of your monthly benefit that comes from contributions you made during the marriage. For example, if you currently receive $1,200 per month based on the amount you contributed to your retirement plan, but your benefit level before you got married (based on your contributions before marriage) would have been $800, then only the $400 is subject to division by the Court.
- Are your benefits tax exempt?
Explanation: This is a trick question. Whether your benefits are tax exempt has no impact on the Court’s analysis of your benefits.