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Retirement or Disability Pay? Divorced Veterans Should Know

As a veteran with 20 or more years of military service, you understand the definition of personal sacrifice. Performing your duties required an immense amount of time and energy, and for some, came at the price of physical or mental wellbeing. According to the U.S. Census Bureau, 3.8 million veterans have a service-related disability, including nearly one-third who have a disability rating of 70 percent or higher.

Retired veterans who are eligible to receive disability have a choice between drawing from retirement pay or disability pay. The choice has significant tax implications. Some veterans prefer to replace retirement pay with disability benefits because, unlike retirement, the disability payments are not taxable.

Can a Divorced Spouse Get Veterans Benefits?

According to the Uniformed Services Former Spouses Protection Act (USFPA), military ex-spouses are entitled to a portion of a service member's pension based on the length of the marriage. However, the U.S. Supreme Court case of Howell v. Howell, determined that ex-spouses of military service members are not entitled to a portion of disability payments.

This decision means that ex-spouses could see a reduction in pension payouts from a divorce decree when the service member elects to take disability instead.

More money for service members?

The Supreme Court's ruling favors the pocketbooks of retired service members, but the story may not end there. Instead, the justices believe that state courts may still have the power to adjust an ex-spouse's entitlements to account for the disability payments.

Careful considerations for divorce

For retired military couples seeking a divorce, the divisions of property and retirement assets usually bring the toughest battle. The Supreme Court's ruling in Howell v. Howell adds another consideration for service members and their spouses during a split.

According to the USFPA, the pension split is generally 50/50, but spouses can negotiate for more or less. If the ex-spouse of a service member is entitled to more than 50 percent of the pension, the service member may be required to make the payments themselves separately from the finance office's automatic deductions.

The Supreme Court's ruling in Howell v. Howell gives state courts potentially new discretion in determining spousal entitlements. Veterans and spouses considering divorce or a decree amendment can enlist the help of a trusted family law attorney to best account for disability and retirement benefits.