It used to be (from 1983 onward), military retirement pay was exempt from division as community property. This meant that the U.S. Armed Forces pension plan was treated from other pension plans in that a spouse could have no community interest in the plan. This changed with the 2005 passage of the Uniformed Services Former Spouses’ Protection Act (USFSPA), which empowers state courts to divide military retirement pay as community property.
But there are catches: a former spouse can receive no more than 50 percent of the member’s disposable retired pay. The key is the word “disposable,” which essentially means “net.” There are four subtractions from gross retired pay. The first three are:
- Debts owed the U.S.government
- National Service Life Insurance premiums
- Survivor benefit premiums for a former spouse receiving payments under USFSPA
The fourth is the amount of retired pay waived for receipt of disability compensation from the Veterans Affairs Department. A veteran entitled to disability pay can get anywhere from 10 to 100 percent of her/his retired pay in the form of disability pay. Where this becomes an issue is if a veteran agrees to divide retirement pay in a Judgment for dissolution and afterward requests the disability waiver.
Let’s say Mr. A is scheduled to get $2,000/mo. in retired pay. In the Judgment, Mr. and Mrs. A agree that they will each get $1,000/mo. Shortly after the divorce, Mr. A asks for a 50% disability waiver, which reduces what he gets to $1,000/mo. Only half of that is available for division, which means Mrs. A (now Ms. A, or perhaps Ms. X) only gets $500/mo. She’s been shorted $500 a month!
A good lawyer will anticipate this eventuality and accommodate for it in the Judgment. A common method is to include an indemnification clause. The clause would state that the veteran will take no action that will reduce the former spouse’s share and will indemnify the former spouse for any reduction. So a veteran is welcome to waive retirement for disability (and there are non-marriage related reasons, for instance, disability is non-taxable) and the spouse is covered. There should also be an express reservation of the Court’s jurisdiction to make orders regarding the retirement pay. If spousal support be an issue, there can be a provision in the Judgment that modifies support upward if the supported party’s share of the retirement decrease due to a disability waiver.
Disclaimer: The information provided in this blog is for general informational purposes and it should not be relied on as legal advice. An attorney-client relationship is not formed by reading the information on this site and can only be formed by a written agreement that sets forth the scope of the relationship and the fee arrangement. Whether you’re in San Diego, Imperial or Riverside County; Hemet to El Centro to Vista, there is no substitute for expert legal assistance. If you need representation, schedule a consultation with the Barefoot team.
Written by Gideon Marcus