In the closing days of its September term, the Illinois Supreme Court agreed to decide an issue of potential importance to the domestic relations bar: how are Social Security benefits treated in a property settlement during a divorce? The Court allowed a petition for leave to appeal in In re Marriage of Mueller, a Rule 23 order from the Fourth District.

The husband and wife in Mueller were each employed at the time of their divorce – she in in the insurance industry, he as a police officer. The wife has Social Security tax withheld from her pay. The husband participated in the police pension fund in lieu of Social Security.

The Social Security Act imposes a broad ban on transfer or assignment, whether in law or equity, of benefits due and payable under the Act. 42 U.S.C. § 407(a). In In re Marriage of Crook, the Illinois Supreme Court held that this meant that courts were not permitted, in a property settlement, to award one party a greater share of marital pension benefits in order to offset the fact that Social Security benefits are sheltered. But in Crook, the Court specifically declined to consider how pension benefits which were in lieu of participation in Social Security should be treated.

Mueller presents the issue which was passed over in Crook. At trial, the husband presented expert testimony valuing his pension. The expert testified that she had included an offset to compensate for the fact that the wife’s Social Security benefits were sheltered. The wife objected to the testimony, citing the bar in the Social Security Act and the Crook decision. The trial court sustained the objection and excluded the testimony. The husband later submitted a revised valuation, omitting the Social Security offset, which increased the valuation of his pension by approximately 50%. After final judgment in the property case was entered, the husband appealed.

The Appellate Court affirmed. In rejecting a direct offset, the Crook court had relied primarily on Hisquierdo v. Hisquierdo, which held that retirement benefits under the Railroad Retirement Act could not be subject to an offset in state-law domestic relations property judgments. The husband in Mueller pointed out that a number of different jurisdictions had nevertheless held that courts may offset the value of pension intended to be in lieu of Social Security in order to place the participating spouse in a similar position to the spouse participating in the Social Security program. But the Appellate Court refused to follow those decisions, holding that allowing a spouse’s Social Security benefits to be taken into account in any way in the property settlement was inconsistent with Crook.

Justice Thomas Appleton dissented. The Illinois Marriage and Dissolution of Marriage Act is predicated on achieving equity between divorcing spouses, he wrote. “To completely ignore a substantial asset earned during the marriage is at cross-purposes with that mandate.” Justice Appleton wrote that he would have reversed the property division and remanded with instructions to reserve to the wife her Social Security benefits while reserving to the husband a corresponding share of his police pension benefits.

We expect Mueller to be decided in six to eight months.

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