Does My Divorce Affect My Disability Settlement?

Divorce can be a complex and emotionally challenging process, often involving the division of assets, child custody arrangements, and spousal support. If you are receiving disability settlements, you may ask: how will divorce impact my benefits or settlement? 

The effect of your divorce on your disability payments will depend on many factors, including what state you lived in at the time of divorce, what kind of disability payment you are receiving, and how your divorce affects your overall income. 

Each individual divorce settlement is different. To protect your financial well-being, you may want to contact an experienced attorney who understands the intersection of divorce law and disability benefits.

Types of Disability Benefits and Divorce

Disability settlements can arise from various sources, such as Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), or private disability insurance. How these benefits are treated during a divorce depends on the type of disability income you receive and the laws of your state.

Social Security Disability Insurance (SSDI)

• Impact of Divorce: SSDI benefits are generally not considered marital property, meaning they are not subject to division during divorce proceedings. These benefits are based on your work history and are intended to replace lost wages due to disability.
• Spousal Benefits: If your former spouse was receiving benefits based on your SSDI record, they may still be eligible after the divorce if they meet certain criteria, such as being over 62 and not remarried.

Supplemental Security Income (SSI)

• Impact of Divorce: SSI is a need-based program that provides financial assistance to individuals with disabilities. Because it is not based on work history, it is generally excluded from marital property division. However, your eligibility for SSI could be affected if your financial situation changes post-divorce.

Private Disability Insurance

• Impact of Divorce: Private disability settlements are often treated differently. Courts may classify these settlements as marital property if the payments are intended to compensate for lost wages during the marriage. This could make them subject to division during divorce proceedings.

How Courts Determine Division of Disability Settlements

Whether or not your disability settlement will be divided in a divorce depends on how the court views the settlement. Courts typically categorize settlements as marital property, separate property, or a combination of both.

Marital Property

If the disability settlement was received during the marriage and intended to replace wages lost during that time, it may be classified as marital property. In this case, the settlement could be subject to division.

Separate Property

Disability settlements awarded for injuries or losses that occurred before the marriage are generally considered separate property and are not divided during a divorce.

Mixed Classification

Some courts may divide a settlement into portions based on its purpose. For example, compensation for lost wages during the marriage might be marital property, while compensation for future losses could be considered separate.

Child Support, Alimony, and Disability Settlements

Divorce settlements often involve ongoing financial obligations, such as child support or alimony. Disability settlements can play a significant role in determining these payments.

Child Support

• SSDI Benefits: SSDI payments may be counted as income when calculating child support. If your child receives auxiliary benefits from your SSDI, these payments could offset your child support obligation.
• SSI Benefits: SSI is not counted as income for child support purposes, as it is considered supplemental financial assistance.

Alimony (Spousal Support)

Courts may consider disability settlements when determining alimony. If the settlement includes compensation for lost wages, it could be factored into the calculation. However, if the settlement is meant to cover future medical expenses or other personal needs, it may be excluded.

Steps to Protect Your Disability Settlement During Divorce

Navigating a divorce while receiving disability benefits requires careful planning and legal guidance. Here are steps to protect your settlement:

Understand State Laws

Each state has its own rules regarding property division and the treatment of disability settlements. Consult with a family law attorney who understands your state's laws to determine how your settlement may be affected.

Gather Documentation

Keep detailed records of your disability settlement, including when it was awarded, the purpose of the payments, and how the funds have been used. This information can be crucial in court.

Work With Morgan & Morgan

Having a skilled attorney who specializes in both disability and family law can help you build a strong case for protecting your settlement.

Consider a Pre- or Postnuptial Agreement

If you’re receiving disability benefits before getting married, a prenuptial agreement can clarify how these funds will be treated in the event of a divorce. Similarly, a postnuptial agreement can address these issues if you are already married.

What Happens to Disability Payments After Divorce?

In most cases, your eligibility for disability benefits is not directly affected by divorce. However, certain benefits may be influenced:

SSDI Payments

Your monthly SSDI payments will remain the same after divorce unless you also receive spousal benefits based on your former spouse’s work history.

SSI Payments

Since SSI is a need-based program, your eligibility may change if your financial situation improves after divorce, such as receiving spousal support or a significant property settlement.

Private Disability Settlements

The division of private disability settlements can vary, so it’s important to understand how your specific settlement agreement will be impacted.

Impact of Divorce on Dependents Receiving Benefits

If your child or other dependents receive auxiliary benefits based on your SSDI, these payments will typically continue after divorce. However, changes in custody arrangements could impact who receives the payments.

Frequently Asked Questions

What factors determine whether a disability settlement is divided in a divorce?

the division of a disability settlement in a divorce depends on several factors, including:

Purpose of the Settlement

Courts typically examine the reason for the settlement:

• Compensation for Lost Wages: If the settlement compensates for wages lost during the marriage, it may be considered marital property and subject to division.
• Future Losses or Personal Injuries: Settlements intended to cover future losses or personal injury damages (e.g., pain and suffering, medical expenses) may be classified as separate property, which is not divided.

Timing of the Settlement

• Before Marriage: If the settlement was received before the marriage, it is generally considered separate property and not subject to division.
• During Marriage: Settlements received during the marriage are more likely to be deemed marital property, especially if used to support the household.

State Laws

• Community Property States: In these states, most assets acquired during the marriage are divided equally. Disability settlements may be included if classified as marital property.
• Equitable Distribution States: Courts divide property fairly but not necessarily equally. They will consider factors like the settlement’s purpose and the financial needs of both spouses.

How the Funds Were Used

If the settlement funds were commingled with marital assets (e.g., deposited into a joint account or used to pay household expenses), they might lose their separate property status and be considered marital property.

Settlement Agreement Terms

The terms of the settlement may specify whether it is intended for lost wages, personal injuries, or future needs. This can influence how it is classified during the divorce.

Jurisdictional Precedents

Past court decisions in your jurisdiction may influence how disability settlements are treated. Judges often look to similar cases for guidance.

Can my ex-spouse claim part of my SSDI payments after divorce?

No, SSDI payments are generally not considered marital property and are not subject to division. However, spousal benefits tied to SSDI may be affected.

Will my disability settlement be used to calculate alimony or child support?

Yes, disability settlements intended to replace lost wages may be included as income when determining alimony or child support obligations.

Can I protect my disability settlement from being divided during divorce?

Yes, you can protect your settlement by gathering documentation, working with an experienced attorney, and potentially drafting a prenuptial or postnuptial agreement.

How does a change in financial circumstances after divorce affect my SSI eligibility?

SSI eligibility may change if your financial circumstances improve after divorce, such as receiving alimony or property settlements.

Does my state’s property division law affect my disability settlement?

Yes, states have different approaches to dividing property in divorce, and this includes disability settlements. Some states follow community property rules, while others use equitable distribution.

How Can Morgan & Morgan Help?

Divorce can be a challenging process, especially when disability settlements are involved. Understanding how these settlements are treated in divorce proceedings is important for protecting your financial stability. By working with the experienced legal professionals at Morgan & Morgan, you can navigate the complexities of divorce while safeguarding your disability benefits.

At Morgan & Morgan, we understand the unique challenges faced by individuals going through a divorce while receiving disability settlements. Our team of experienced attorneys is here to provide guidance and advocate for your rights. Contact us today for a free case evaluation to discuss your case.