Protecting your military retirement in divorce
Federal law prevents a court from considering a veteran’s disability award when dividing property in a divorce. Conversely, courts are authorized to treat military retirement pay as community property and divide it between the spouses. How can a veteran protect his or her retirement pay from being divided in a divorce?
Veterans receiving military retirement pay with combat related disabilities can waive a portion of their retirement pay for an equal amount of tax-free combat-related special compensation (CRSC). In a divorce, CRSC is treated the same as disability compensation under federal law; court’s may not consider it when dividing the property of the spouses. Additionally, Arizona law prohibits courts from providing the non-military ex-spouse with additional funds or assets to make up for the reduced share of the military spouses retirement pay. Therefore, a veteran receiving military retirement pay who is eligible for CRSC can waive a portion of their retirement for CRSC to protect it from being divided in divorce.
To qualify for CRSC the veteran must: 1) be entitled to and/or receiving military retirement pay; 2) have a disability rating of at least 10% with the Department of Veteran’s Affairs; 3) Waive Veteran’s Affairs pay for retired pay, and; 4) file a CRSC application with the veteran’s branch of service. Disabilities that are considered combat related include injuries suffered as a direct result of armed conflict, hazardous duty, an instrumentality of war, or simulated war.
If a retired veteran qualifies for CRSC, the veteran can waive retirement pay for CRSC and protect their pay even if the waiver is post judgment. A.R.S. §25-318.01 provides:
In making a disposition of property… a court shall not do any of the following:
- Consider any federal disability benefits awarded to a veteran for service-connected disabilities pursuant to 10 United States Code section 1413a or 38 United States Code chapter 11.
- Indemnify the veteran’s spouse or former spouse for any prejudgment or postjudgment waiver or reduction in military retired or retainer pay related to the receipt of the disability benefits.
- Award any other income or property of the veteran to the veteran’s spouse or former spouse for any prejudgment or postjudgment waiver or reduction in military retired or retainer pay related to the receipt of the disability benefits.
Thus, under A.R.S. §25-318.01, a veteran may waive retirement pay for CRSC to protect his or her interest even after the decree of dissolution is entered. Although retirement pay can be protected after the judgment, it cannot be protected by a postjudgment waiver when the judgment was entered before the effective date of A.R.S. §25-318.01. The effective date of the Statute is July 28, 2010.
In a 2015 Arizona case, Merrill v. Merrill, the Supreme Court of Arizona was tasked with deciding whether the Court could require a retired veteran to indemnify his ex-spouse for a reduction in military retirement pay that he waived to receive CRSC. In Merrill, the veteran had previously divorced his ex spouse when he decided to waive a portion of his retirement pay for CRSC. The husband was injured while serving in Vietnam. At the time of his divorce, the court awarded his ex spouse a portion of his military retirement pay. Subsequently, the husband waived a portion of his retirement for CRSC, which drastically reduced his ex-spouse’s share of retirement pay. The ex-wife filed a petition with the court to award her arrearages and to compensate her for the reduction in military retirement pay that she was receiving. The courts went back and forth with the issue until the case reached the Supreme Court of Arizona. The Arizona Supreme Court, following the precedent set in another case dealing with a waiver of retirement for VA disability pay, held that A.R.S. §25-318.01 did not prevent the court from ordering the husband to make up the difference to his ex-wife for her losses in retirement pay because his waiver was after the judgment and the judgment was before the statute’s effective date. When the judgment was entered, prior to the statute, the ex-wife had a vested property interest in her portion of the retirement pay. Therefore, application of a subsequent statute to divest the ex-wife of her share of military retirement pay violated the due process clause found in article 2, section 4 of the Arizona Constitution.
Veteran’s legal issues can be complex with both state and federal law combining to protect veteran’s rights. At Phelps & Moore PLC we have a team of experienced attorneys who are licensed in state and federal court to serve your needs for all types of veteran’s issues relating to divorce. Additionally, we offer military and veteran discounts.