I have previously written about different classes of property that most of the time will be considered to be separate property of the party during the divorce. Periodically, divorce lawyers have to deal with situations where one of the parties becomes disabled during the marriage and begins to receive disability payments, either social security disability or payments under a private disability insurance policy.
In a recent case, Masella v. Masella, 2009 N.Y. Slip. Op 08190 (2nd Dept. 2009), the Appellate Division, Second Department, held that the proceeds of the defendant’s disability insurance policies are his separate property. Similarly, the court held that the proceeds of the defendant’s Social Security disability benefits also are his separate property, and are not subject to equitable distribution. The reason that Social Security benefits are not subject to equitable distribution, is because Social Security benefits are not a pension. With respect to the disability insurance, any disability insurance payments constitute compensation for personal injury and would not be subject to equitable distribution.
In a situation where one of the parties is disabled and is receiving disability payments, the other party might not be able to obtain equitable distribution of such payment, regardless of the amount received. While some may argue that this may not be fair to the other party, the above principles are uniformly applied in New York divorces and are unlikely to be overturned in the future. When handling similar situations, divorce attorneys will need to investigate the source of payments, the reasons for them and try to figure out if the income can be reached in some other way, perhaps by a spousal maintenance claim.