The Colorado Court of Appeals ruled in mid-2024 that federal law allows Social Security money to be used for payments from one former spouse to another, such as alimony. Recall that this is typically paid when, after a divorce, one partner has significantly less or no income. The case discussed the provision of federal regulations, which states that the main features of Social Security benefits cannot be “transferable” or “assignable”. However, another statutory provision states that Social Security benefits are subject to alimony payments as income.
Ruling on Social Security benefits and alimony payments
Judge David H. Yun wrote that judges may consider retirement benefits, as well as other non-assignable federal benefits, when awarding alimony or child support. Even this could apply in circumstances where the order would effectively result in an indirect award of such benefits.
Historically, alimony was applied only to former spouses with a large disparity in income. This served to allow the higher earner to assist the lower earner after the divorce. Many times, those with lower incomes sacrificed their careers to care for children or help the household financially.
The Riley MacClure Case
In Colorado, there was a specific case worth investigating. It was the story of Riley MacClure, who paid his ex-wife monthly alimony of $2,500. Once he retired and began receiving Social Security, he expected to be able to reduce his alimony requirements. However, he was required to use his benefits to cover his spousal support expenses.
MacClure argued that this was a decision that was against federal law. However, the Court of Appeals decided that it is permissible and that such income can be included when calculating what one spouse owes financially to another after divorce.
A financial literacy expert’s take on the case
Alex Beene, a financial literacy instructor at the University of Tennessee, spoke about this and made an important clarification. As he explained, previous court decisions have at least partially supported the idea of Social Security being used to make alimony payments. However, he argued that because he qualifies for Social Security, the amount of those payments is reduced.
Kevin Thompson, a financial expert and founder and CEO of 9i Capital Group, also expressed his opinion on the matter. According to his words, for most seniors, the decision about alimony is not a problem. He also reminded that, if you were married for at least two years before your divorce, your ex-spouse qualifies for benefits on your record. This is confirmed by the Social Security Administration on its web platform.
In conversation with Newsweek, he stressed that this may affect seniors, in the sense of separation versus actual divorce. “I can foresee that the older people that this may affect will apply for separations rather than outright divorces, in order to reach the number of years necessary to not affect their Social Security benefits,” he said.
Finally, he said that it is very likely that, in the future, many judgments like this one will be contested. This is due to the increasing costs of inflation faced by the elderly. Thus, alternatives would be sought to protect Social Security benefits in their entirety, regardless of alimony or similar payments.
