When does federal law take precedence over state law in terms of equitable distribution? In a limited number of instances, federal law may preempt a State’s right to make a party’s property the subject of equitable distribution. For example, one case has held that social security benefits are not distributable by North Carolina courts, as such distribution is precluded by the anti-assignment and the other comprehensive provisions in federal social security law.
In another case, the U.S. Supreme Court held that state courts may not distribute, as marital or community property, any retirement pay that has been waived by a serviceman in favor of receiving veteran’s disability benefits. Our Court of Appeals has more recently recognized that military disability payments are not included within the definition under federal law of “disposable retired or retainer pay,” and hence may not be classified as marital property and may not be distributed under state equitable distribution law.
The Court had earlier held, consistent with the holding in the U.S. Supreme Court case, that disposable serviceman’s retirement pay, as defined by federal law, is distributable under the explicit language of the Uniformed Services Former Spouses’ Protection Act and G.S. 50-20(b)(1), which restricts distribution to “eligible” military pensions and therefore does not run afoul of preemption problems.
