Family Law Case Review: SSDI Lump Sum Payment Not Asset of Marriage

Family Law Case Review
Case: John Luttrell v. Melinda Luttrell
by Mike Kohlhaas, Bingham Greenebaum Doll

HELD: Trial court properly excluded from the marital estate a lump sum Social Security Disability Insurance payment, even though the payment arose from a period prior to the filing of the divorce.

HELD: Trial court erred when it did not include in the marital estate student loans of the parties’ children for which the parties had co-signed.

FACTS AND PROCEDURAL HISTORY:
Husband and Wife married in 1987. In 2008, Wife filed for Social Security Disability Insurance (“SSDI”). In 2009, Wife filed for legal separation which Husband subsequently converted to a dissolution of marriage.

In 2010, while the divorce was pending, an ALJ made findings of Wife’s numerous health conditions, and awarded Wife a lump sum SSDI payment of over $14,000. This lump sum payment represented the period of January 2008 until April 2010, a portion of which was attributable to a period prior to the filing of the divorce. Wife also began receiving prospective SSDI payments of $915/mo.

Also, during the marriage, both parties co-signed one student loan with one of their children ($14,137), and Husband alone co-signed on a student loan with another of their children ($31,837). Neither loan was in default at the time of the divorce.

In its 2012 Decree, the trial court concluded that the lump sum SSDI payment received by Wife was not an asset of the marriage. The trial court also concluded that the student loans were not part of the marital estate. Husband appealed both determinations.

SSDI Lump Sum Payment
The Court of Appeals first studied relevant Indiana law and, based upon state law only, indicated that it would be inclined to find that the lump sum payment, to the extent attributable to the marital period, was an asset of the marriage. However, the Court also analyzed federal law. The Social Security Act includes language that payments made under the applicable chapter are not subject to execution, levy, attachment, garnishment, “or other legal process….” The Court concluded that, including the SSDI payment in the divorce proceeds would be subjecting it to “other legal process,” which was not permitted under federal law.

The Court also noted that this provision of the Act included an express exception for child support and alimony. However, in the Act’s definition of “alimony,” the Act specifically excludes from the alimony definition “any payment or transfer of property or its value by an individual to the spouse or former spouse of the individual in compliance with . . . equitable distribution of property, or other division of property between spouses or former spouses.” Thus, the Court concluded the Act prohibits inclusion of Wife’s SSDI lump sum payment in the marital estate, and the trial court correctly declined to do so. [In an interesting footnote, the Court also observed: “Some courts have held that, while SSDI payments may not be divided in divorce proceedings, they may be considered as part of the total picture as a court decides how to equitably divide up those items that are divisible…. We do not reach that question here.”]

Student Loans
Reviewing the trial court’s exclusion of the children’s student loans, the Court of Appeals concluded that it was improper for the trial court to disregard them as though they did not exist. The liability arising from co-signing is, in fact, a real and “vested” liability of the parties. The issue was remanded to the trial court “for consideration of [the parties’] liability under the children’s student loans.” [The Court of Appeals did not volunteer any advice on if or how these contingent liabilities should be valued on remand.]

The trial court’s decree was affirmed in part, and reversed in part, and remanded on the issue of the student loans.

To view the text of this opinion in its entirety, click here: John Luttrell v. Melinda Luttrell

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While significant efforts are made to ensure an accurate summary and reproduction of each opinion, readers are advised to verify all content and analysis with a traditional case law reporter before relying on the content and analysis offered here.
The Matrimonial Law Group of Bingham Greenebaum Doll, LLP is one of the largest full-service matrimonial and family law practices in the State of Indiana. We represent clients in a wide spectrum of family law matters, including premarital agreements, cohabitation, separation, divorce (especially involving high net worth individuals and/or complex asset issues), custody, parenting arrangements, adoption, and domestic partnerships. Bingham Greenebaum Doll, a multidisciplinary law firm serving regional, national, and international clients, is the fourth-largest law firm in Indiana. The firm’s main practices include corporate, property, litigation, labor, government law, and personal services law. Visit the firm’s website at www.bgdlegal.com.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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