Practice Area
Preemptive Federal Law
Federal Law may supersede state property law where congressional intent to preempt is clear. In federal preemption cases, property held in the name of one spouse alone is immune from community property claims.
The following are subject to federal law:
- Federal Savings Bonds -
- Military Insurance Policies – Military insurance policies under the NSLIA or SGLIA programs are the veteran insured’s separate property regardless of the source of funds for the premium payments. The veteran has the sole discretion to designate the beneficiary of the policy proceeds. That member’s beneficiary designation controls the disposition of the insurance policy proceeds. However, if the military group policy has been converted to a civilian individual property, federal preemption does not apply, state law applies.
- Federal Employee Benefits – State community property law claims against federal employee deferred compensation benefits are preempted by federal law, only to the extent conflicting community property law would do major damage to clear and substantial federal interests. Thus, California Courts may apply community property principals to federally created benefits so long as the result does not frustrate the objectives of the federal legislation.
- Social Security Benefits – Social security benefits are prevented by the Social Security Act and must be treated as the employee’s separate property.
- Veteran’s Disability Benefits – Veterans disability benefits are not divisible as community property in state court dissolution proceedings. However, once they are paid, the disability benefits are subject to state community property laws.
- Copyrights – The Federal Copyright Act does not preempt state court jurisdiction to recognize, divide and enforce community property interests in a spouse’s copyright.
- ERISA Pensions – The Employee Retirement Income Security Act of 1974 regulates and preempts the are of employee benefit plan law. However, ERISA does not preempt the application of state community property law to the extent that state law simply creates or recognizes the existence of community interests in ERISA governed benefits, it only bars enforcement. Federal savings bonds must be treated as the separate property of the person whose name the bonds are registered even if they were purchased during marriage with community funds. However, if a spouse transfers community property into savings bonds registered in their name without their spouses consent, it is a breach of fiduciary duty owed between the spouses and they must account to the other spouse for the monies spent.
Military retirement pay and civil service pensions are subject to governing federal statutes. However, Effective February 1, 1983, the historical preemption of state law community property treatment of military retirement pay is nullified. Therefore, state courts are fully empowered to divide military retirement pay as community property; and state court domestic relations community property division orders are fully enforceable against the military.
