Long-term disability (LTD) policies generally replace between 60 and 80 percent of their beneficiaries’ pre-disability income. While this often helps disabled workers cover necessary expenses, it often drastically limits household income and commonly leads to marital strain. In addition, a disability itself can put stress on a marriage, and all of these factors among others can lead one spouse to file a divorce case.
Questions frequently arise about how divorce may affect your monthly payments and the role that disability benefits can play in a divorce case.
Some common questions can include:
- Do you have to divide disability as part of the marital or community estate?
- What happens to a disability settlement in a divorce case?
- How do long-term disability payments affect alimony and child support calculations?
It is natural to want to protect your disability insurance benefits after all, you’re already living on limited benefits specifically designed to compensate for your medical inability to work. Divorce usually only increases financial strain, so you want to be in the best position possible to begin your post-divorce life.
On the other hand, if your spouse receives disability benefits or received a settlement, you want to make sure you get your fair share if that is anything at all. This is especially true if the disability benefits are substantial or were the primary source of income for your household.
Divorce laws differ by state, meaning each state has different rules for property division, as well as calculating alimony and child support. How divorce impacts long-term disability benefits depends on numerous factors, including state laws, the language and terms of your LTD insurance policy, child custody, and family income. Domestic relations lawyers frequently misunderstand the complexities of handling private long-term disability payments during divorce proceedings often mistaking them for SSDI benefits.
Discuss the potential impact of divorce on your long-term disability benefits and eligibility with an experienced LTD and ERISA attorney.
Categorizing Long-Term Disability Payments During Divorce Proceedings
Whether your spouse can obtain a portion of your LTD benefits following separation or divorce depends on various factors, including relevant marital property laws, eligibility for alimony (spousal support), and local child support guidelines. Your ex-spouse might even recover a portion of your monthly long-term disability payments in certain cases.
Consider each of the below questions that are common in divorce cases when disability benefits are a factor.
Do you have to divide disability benefits as part of the marital or community estate?
Divorce requires spouses to categorize and split their previously shared property, including bank accounts and joint assets. Some states equitably divide all marital property, while community property states aim to split shared property and assets as evenly as possible. For example, both Louisiana and Texas are community property states regarding divorce.
The income that each spouse earns and contributes to the household is generally community property, and divorcing spouses should consider all sources of income when it comes to property division. Does this include disability insurance benefits?
State laws generally dictate how to treat disability benefits in divorce. For instance, Texas law states that:
- Any disability insurance payment that aims to replace earnings the disabled recipient lost during a marriage is community property, and
- Any disability insurance payment that aims to replace earnings the disabled recipient lost while they are not married is not community property.
Different state courts rule in different ways when it comes to categorizing disability benefits, and these rulings can vary even within the same jurisdiction due to the specific circumstances at hand.
Even if benefits are community property, you might not feel any effect on your benefits post-divorce. If the disability benefits are somewhat equal to the non-disabled spouse’s income, each spouse might simply retain their income, so you can continue retaining your full benefits. On the other hand, it can become significantly more complicated if the non-disabled spouse does not work and relies on your disability benefits as household income. The same is true if your disability benefits are substantially higher than your spouse’s income.
- You used to work as a surgeon, and due to a hand disability, you now receive $9,800 per month in disability insurance benefits.
- Your spouse works and earns $3,600 per month.
- Due to the discrepancy in your monthly income, your spouse might have a right to a portion of the income you earned during the marriage as community property, especially if you transferred some of that income to savings or investment accounts.
Community property principles, however, do not entitle ex-spouses to a continued share of monthly benefits following divorce.
Each state is different, and some consider disability benefits as income (for the purposes of support calculations) but not as marital property to divide. You always want to consult with a divorce attorney in your area who can advise you on the applicable property division laws and how they apply to your disability benefits.
You should also consult with an ERISA disability benefits lawyer who can advise you how ERISA and the terms of your policy will affect your benefits.
What happens to a disability settlement in a divorce case?
Again, the answer to this question will depend on different factors of your situation, including:
- The applicable state laws
- Whether you used your settlement for the household, such as by depositing the funds into a joint bank account
- Whether you invested the funds and earned investment income on them (any increase in value is likely property you will need to divide
What will happen to your disability settlement is extremely fact-specific, and the best way to know what will happen is to have the right disability lawyer review your case.
How do long-term disability payments affect alimony and child support calculations?
This question is a little more clear-cut, as disability benefits will usually be a factor in calculations to determine child support and spousal support post-divorce. This is true whether you are seeking support or your spouse is seeking support from you.
For spousal support, the first consideration is whether your spouse can support themselves or not. If they have the earning capacity to support themselves, the court will likely not award any spousal support unless there are extenuating circumstances.
If your spouse cannot support themselves for example, when they relied on your disability benefits they might request support. In this situation, your disability benefits will factor into your gross income calculation to determine how much support the court might award.
If your spouse is the higher earner and you relied on their income due to the lower amount of your disability benefits, you might seek spousal support for yourself. You must discuss this with your divorce attorney.
If you have a minor child, and you will have primary possession of them, your spouse will likely have to pay child support. If your spouse has primary possession of your child, you might have to pay child support. Child support calculations take into account most sources of income, including disability benefits.
Generally speaking, your long-term disability insurance payments will play a role in support calculations as part of your divorce.
Always Have an ERISA Long-Term Disability Attorney Review Your Situation
The Employee Retirement Income Security Act (ERISA) is a highly complex federal law that generally preempts state laws and this might come into play in some divorce situations. In addition, the specific language of your disability insurance policy might play a role in how you need to treat your benefits in your divorce.
Because applying ERISA to your disability benefits in divorce can be challenging, you do not want to simply rely on your divorce attorney’s opinion and advice regarding ERISA insurance benefits.
Instead, never hesitate to consult with an ERISA long-term disability lawyer who can assess how divorce might affect your long-term disability benefits. A lawyer with ERISA-specific experience can advise you what to expect post-divorce, which can help you plan financially.
A divorce is a stressful event, and so is suffering a disability. The best thing you can do to protect your future and financial interests is to prepare for what might happen to your benefits. You should also know when your disability qualifies you to request support or seek other relief as part of your divorce case.
Maximize Your Benefits From The Start
Divorce and other life events can occur whether you expect them or not. When you have a disability and cannot work for the long term, you need to protect your financial well-being more than ever. This can start from the moment you file your initial long-term disability insurance claim.
Making sure you receive the full benefits you deserve from your disability insurer is essential when you file your claim. Insurance companies like to try to deny claims or limit benefits so they can make profits, and these companies do not usually have your future best interests in mind. Falling for insurance company tactics can often result in inadequate benefits or even no benefits at all.
Instead of leaving your future financial position up to your insurance company, a better idea is to enlist the help of an ERISA disability claims attorney from the very start. The right lawyer will know how to help in a variety of ways.
Presenting the Strongest Possible Claim and Evidence
Disability insurance companies are ready to deny claims from the get-go. This is because many claims that disabled individuals file do not have the necessary information or evidence to support a qualified disability. You might know that you have a disability that prevents you from working and earning a living, but convincing the insurance company of this fact is quite another story.
Having an ERISA long-term disability handling your claim from the start can only improve your chances of claim approval. A lawyer with experience with the claims process will know how to prepare the most persuasive claim possible from the start. If the insurance company requests additional evidence, your lawyer will know how to respond to such requests.
Appealing a Disability Claim Denial
If you already filed your claim and the disability insurance company denied your benefits, your first call should be to an ERISA disability attorney. The process of appealing a claim denial is quite complex, as ERISA limits the steps you can take. This is not like any other type of insurance appeal, so you want the right professional on board to assist with every step of the appeal process.
With ERISA claim denials, you must first exhaust all administrative remedies before you can take the insurance company to court. Your lawyer will know how to do this for the best chance at having the insurance company overturn the denial.
If your administrative appeal is unsuccessful, your attorney can file a court case seeking your benefits. This case must take place in federal court since ERISA is a federal law. To make matters more complicated, the court can only review the record compiled during your claim and administrative appeal you cannot present new evidence to the court.
All in all, an ERISA disability insurance claim is a challenging and often uphill battle, but you can set yourself up in the best position to start receiving benefits with the right legal help from an ERISA lawyer.
Negotiating A Settlement
If you are in talks regarding a possible long-term disability settlement, you should certainly have the counsel of an LTD lawyer.
Once again, insurance companies want to limit their outlays, so they want you to accept as little as possible for your settlement. But this lump-sum settlement is a final resolution to your disability claim, and you cannot go back and ask for more if you accept lower than you deserve.
Never risk this situation let an experienced long-term disability attorney review any settlement offers before you ever sign anything. This can help set you up in the best financial position, so you can be prepared for the unexpected in your future, which might even involve a divorce.
Following graduation from Loyola Law School in New Orleans in 1990, Price McNamara served as a Federal Judicial Law Clerk to the Honorable John M Shaw, Chief Judge, United States District Court Western District of Louisiana.
Mr. McNamara founded the Law Offices of J. Price McNamara, and began putting his past experience to work for the injured and disabled clients he now represents against the insurance companies in personal injury and long term disability and other insurance disputes in both federal and state courts