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Military divorce: interplay of retirement and disability benefits

Monday, July 16, 2018

Here at the El Paso, Texas, Law Office of Douglas C. Smith, we regularly represent people involved in divorces where one or both spouses are affiliated with the U.S. military such as those connected with Fort Bliss. For clients like this, it is important to engage a lawyer experienced specifically in military divorces because these cases involve a unique and complex intersection of federal military law and state family law.

New U.S. Supreme Court holding impacting military divorces 

Earlier this summer, the U.S. Supreme Court handed down an opinion that has the potential to affect many past and future military divorces. The Howell v. Howell case settles an issue that state courts have interpreted different ways in the past. 

Sandra and John Howell’s 1991 Arizona divorce decree said that they would split John’s future Air Force retirement benefits in half. The payments started shortly after the divorce, and they split them every month for 13 years, at which point John was found 20 percent disabled from a service-connected injury to his shoulder. 

As a condition of receiving disability in his particular situation, he had to waive the same amount of retirement. This was to his advantage, because disability is not taxable and retirement is, so he chose the waiver. The waiver resulted in both John and Sandra receiving about $125 less each month. 

In response, Sandra went back to Arizona state court and asked for the money back. That case ended up before the state Supreme Court, which said that the money had vested in her and that John must reimburse her the reduced monthly amount. 

Federal pre-emption 

John asked the U.S. Supreme Court to review this decision and in May the highest court held for him instead, finding that under federal statute, the amount of retirement waived to get disability could not be property subject to the state court’s power to distribute in divorce, even when the waiver happened years after the divorce itself. 

The court looked at a past decision in which it had held that the amount of retirement waived to get disability could not be part of a state court property division order in divorce because of the federal law that says that the waived amount is not within the definition of retirement benefits that are allowed to be divided as part of a couple’s community property under state law. In that case though, the waiver happened before the divorce instead of after. 

The U.S. Supreme Court in Howell said that the timing of the waiver did not matter, the federal law was clear that the waived amount cannot be part of the property divided, even if the waiver is after the divorce instead of before. 

What now? 

Clearly, in a situation like the Howells’ there seems to be inequity for Sandra. The Supreme Court said that going forward, possible future retirement benefits will need to be seen as having a contingency that could lessen their value in the future and that will need to be considered in negotiating a settlement or when a judge divides property or decides on alimony payments. The court also said that in some states, if the recipient also gets alimony in a situation like Sandra’s, he or she could ask for an increase in alimony facing this kind of reduction based on a change in circumstances. 

An attorney for John said in a recent interview that another question that remains unanswered is what will happen if parties go back to state court to try to reopen earlier decisions that held that veterans opting for waiver of retirement benefits because of disability must be reimbursed if their spouses suffered a reduction in payments. He felt that it would vary from state to state depending on “state law governing the finality of judgments.”









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