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Disability Insurance Benefits and the Division of Property After Divorce

disability insurance plan quotes after divorceDivision of property is one of the most complicated aspects of divorce. Disability benefits are one of the many things that couples have issues about in the division of property. However, differing state laws affect how such benefits are treated. Those who receive disability benefits do so in lieu of earned income because they are ill or injured. In the case of divorce, the division of such benefits depends on a variety of factors. Some states consider such benefits to be marital property while others consider it separate property. How is it considered by the courts will help to determine the way it is dealt with during the divorce. What helps to determine this is when the payments began and the findings of a purpose analysis concerning the benefits.  

The Timing of Benefits 

In many states, anything acquired during the marriage is considered to be marital property, including disability benefits. Certain states like Montana, New Jersey, Louisiana, Illinois, Arkansas and Delaware, even consider disability payments after the marriage is over to be marital property if they were based on work during the marriage. In such cases, the date that eligibility for disability benefits was determined is important for the divorce and division of property.  

In other states, only income that originates during the marriage is considered to be marital property. In this case, if the person was eligible for benefits prior to the marriage and they continued during it, the spouse is not entitled to claim such benefits as marital property. New Mexico, Minnesota, Arkansas, Idaho, Maryland, Delaware, Minnesota and in some circumstances Texas, subscribe to this theory.  

States including Florida, Alaska, Idaho, Indiana, Colorado, Louisiana, North Carolina, Maine, Missouri, Maryland, Pennsylvania, Oregon, Washington and Rhode Island take the replacement approach when it comes to the subject of disability income. This means that the disability benefits are only marital property because they replace income. Such benefits are therefore limited to the duration of the marriage only. Benefits received following divorce are considered separate property even if the qualifying disability occurred during the marriage.  

The Analysis of the Purpose of Benefits 

In many situations, a court will analyze the exact nature of the disability payments and determine if they are to be considered marital property or separate property. If they are deemed to be deferred payments based on work done during the marriage, they will be considered to be marital property.  

Anyone who has a private disability insurance pension is subject to even more scrutiny concerning the purpose of the benefits he or she is receiving. Often they will be deemed to be a combination of both separate property and marital property. The percentage will depend on how long the marriage lasted, how long the contributing employment lasted and what the pension is intended for. If it is for pain and suffering and as a replacement for the lost ability to earn income, it is separate property. If it is in lieu of a retirement package, it is more likely to be deemed marital property.  

If you are embroiled in a divorce it is important to understand the role of disability benefits in it. Ask your lawyer if you are eligible to receive some of your spouse's disability income following divorce. Ask about the state laws concerning the divisibility of such benefits. Ask if private disability benefits are considered marital or separate property. It is important to be forearmed with knowledge prior to working on a divorce settlement.  

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