California Divorce Dictionary: Epstein Credit

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Epstein credits are rights to reimbursement to which a party may be entitled as a result of the payment of community obligations since the date of separation. (In re Marriage of Epstein (1979) 24 Cal.3d 76)

Epstein Credits are most commonly incurred when one party pays community debts using their spearate property income.

If you are claiming the credit. – Keep your receipts, bank statements and other records. It is common to see divorce proceedings last years and create a long trail of records. Large bills pile up quickly for financial experts if they must recreate the paper trail.

Seek professional advice if you believe you need to consider this during your divorce.

Social Security, Retirement Benefits, and Divorce

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Social Security, Retirement Benefits, and Divorce

Social Security in the United States refers directly to a lesser known federal Old Age, Survivors and Disability Insurance program or OASDI. The program was originally rolled out in the 1930’s in an attempt to limit what were seen as dangers to the American way of life such as increased life expectancy, poverty, and fatherless children. So the Social Security Act, signed in 1935, created social insurance programs to provide benefits to retirees, the unemployed, and as well as a lump sum benefit to the family at death. Many amendments have been made since the original Social Security Act of 1935. Most importantly; Medicare was added in 1965. The Social Security Act of 1965 also recognized for the first time that divorce was becoming a common cause for the end of marriages and added divorcees to the beneficiary list.

When Can I Collect Benefits?

The earliest age at which reduced benefits are payable is 62. The age at which full retirement benefits are available is dependent upon the taxpayers age. An increase of regular retirement age was enacted to reduce the amount of benefits payable. For those currently over age 70 the normal age was 65. Anyone born after will fall somewhere on increasing scale which climbs incrementally to age 67 depending upon birth date. Anyone born after 1960 must reach age 67 for normal retirement benefits. Delaying receipt of benefits will increase a taxpayer’s benefit until age 70.

As A Divorced Spouse What Do I Get?

Divorced spouses are eligible for benefits equal to one half of the worker’s benefit if they were married for 10 years have not remarried and are at least 62 years old. This is called a derivative benefit. A spousal applicant must wait until the worker has reached retirement age, 62, in order to apply for benefits. The worker is not required to have applied for benefits in order for the ex-spouse to apply for spousal benefits. They are not entitled to increases for benefits taken after normal retirement age. If a worker has died and the ex-spouse has reached full retirement age they can receive 100% of the worker’s benefit as survivor benefits.

If an applicant is between age 62 and their normal retirement age; the application for benefits will be based on the applicant’s earnings record. If one half of an ex-spouse’s benefit is greater than the applicant’s benefit on their own record; the applicant can choose to take whichever is greater. If you wait until your normal retirement age and file for spousal benefits you can continue to accrue benefits and enhancements for delaying your own retirement up until your age 70.

An ex-spouse’s receipt of derivative benefits on the worker’s record does not reduce the worker’s benefits. It is even possible for more than one ex-spouse to collect on the worker’s derivative benefits. This could lead to as much as 500% of the original benefit being claimed by the five ex-spouses.

Justin A. Reckers CFP®, CDFA™, AIF®
858.509.2329
jreckers@wellspringdivorce.com

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Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.

Planning for Post Divorce College Funding and Taxes

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2009 and 2010 bring a slew of changes to the structure of tax credits and deductions in the Federal Income Tax system. Today I would like to draw attention to the American Opportunity Tax Credit. The American Opportunity Credit expanded and renamed the Hope Credit for tax years 2009 and 2010. The expanded credit increases the total available credit to $2,500 per year for the first four years of post secondary education. This is an increase of $700 over the old Hope Credit. The Hope Credit was also only applicable to the first two years of school. Adding $700 per year and an additional two years to eligibility make the new credit worth up to an additional Read more →

Life After Divorce: Beneficiary Designations

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Have You Changed all Your Beneficiary Designations?

In January 2009; the U.S. Supreme Court ruled (Kennedy v. DuPont Plan Administrator) against a woman suing her late father’s pension plan for money her mother received, even thought the mother had forfeited her rights to the pension in their 1994 divorce. The Supreme Court determined the beneficiary designation form and the procedures set under the plan were sole determinants of benefit distribution.

Employers are required to pay benefits as stated in the original beneficiary designation form, in spite of a divorce decree.

It is important for all divorcing individuals to revisit their estate planning, including beneficiary designations, wills and trusts.  Changes must be made to retirement plans in accordance with the rules set forth by respective employers.  Otherwise, children and/or new spouses may not be eligible to receive benefits.

Remember the following points: Read more →