Social Security Update as Judge Rules About Benefits Being Income

A court ruled for the first time that Social Security payments can be used as alimony between divorced partners.

The Colorado Court of Appeals ruled this month that federal law allows Social Security money to be used in payments from one ex-spouse to another. Alimony is typically paid to an ex-spouse after a divorce if one partner has a significantly lower or no income.

At issue in the case was a provision of a federal law that states Social Security benefits cannot be “transferable” or “assignable.” However, another legal provision mandates that Social Security benefits are subject to alimony payments as income.

Judge David H. Yun wrote that judges may “consider Social Security retirement benefits, as well as other non-assignable federal benefits, in awarding maintenance or child support, even in circumstances where the order effectively results in an indirect assignment of those benefits.”

Alimony has historically applied only to ex-partners with a wide income disparity so that the higher earner can support the lower earner after the divorce. Many times, the lower earners sacrificed their career to take care of children or otherwise support the home in a less monetary way.

In the specific Colorado case, Riley McClure paid his ex-wife monthly alimony of $2,500. Once McClure reached retirement and started receiving Social Security, he hoped to lower his alimony requirements and was then required to use his benefits to go toward his spousal maintenance fees.

McClure argued this was against federal law, but the Court of Appeals has decided it’s permissible and that Social Security income can be included when calculating what one spouse financially owes another after a divorce.

“While it may be surprising to some, past legal decisions have at least partially supported the idea of Social Security being used as a means for making alimony payments,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. “This is especially true in situations where a Judge feels an ex-spouse should continue to make payments, but because they qualify for Social Security, the amount of those payments is reduced.”

Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, said that for most seniors, the alimony ruling is a non-issue. If you were married for at least 10 years before your divorce, your ex-spouse may qualify to receive benefits on your record, according to the Social Security Administration.

“Most seniors have likely been with their spouses longer than 10 years and their Social Security spousal benefit may offset any demands on their retirement benefits,” Thompson told Newsweek. “This may impact seniors, possibly in the sense of separation versus actual divorce. I could foresee seniors where this may impact, actually filing for separations versus outright divorce, to attain the number of years necessary as to not impact their Social Security benefits.”

If there’s a large income gap between former spouses and there’s a significant shift in monthly income, including Social Security, there would still likely be a reduction in the alimony payment, Beene said.

“At the same point, rulings like this will more than likely be challenged,” Beene said. “As seniors deal with the rising costs of inflation, a case could be made to protect Social Security benefits in full, regardless of alimony or similar payments.”