Depending upon the area of the country in which you live, your family law practice likely includes clients who are serving in the military. As you therefore know, military divorces entail a different set of considerations, rules and laws than nonmilitary divorces. As you also know, your CFL Designation for Divorce Practitioners gives you the advanced financial knowledge and skills to competently handle the most complex property settlement situations in either type of divorce.
What you may not be aware of, however, is that the Uniformed Services Former Spouses’ Protection Act, 10 U. S. C. Section 1408, authorizes all states to treat a veteran’s “disposable retired pay” as divisible community property when married spouses divorce. This same Act, however, in Section 1408(a)(4)(B), expressly excludes the portion of a veteran’s “disposable retired pay” that is deducted “as a result of a waiver … required by law in order to receive” disability benefits.
Occasionally, the Act and its exclusion may come into conflict with state law. Such was the situation in the 2017 U.S. Supreme Court case of Howell v. Howell.
John and Sandra Howell, an Arizona couple, divorced in 1991 while John was serving in the Air Force. As part of the property settlement agreement, the family court awarded Sandra 50 percent of John’s future Air Force retirement pay, which she began receiving in 1992 when John retired. Thirteen years later, the Department of Veterans Affairs determined that John was partially disabled from a previously suffered service-related injury. To receive his disability payments, however, he had to give up an equivalent amount of his retirement pay, per 38 U.S.C. Section 5305. He consequently waived approximately $250 of his monthly retirement pay, thereby reducing Sandra’s 50 percent share as well.
Sandra filed a petition in family court requesting reinstatement of her full 50 percent share of John’s full retirement benefits. The family court granted her petition, and ultimately the Arizona Supreme Court affirmed, holding that the federal law did not preempt Arizona law and the family court’s order under it. John appealed to the U.S. Supreme Court.
Writing for the majority, Justice Breyer reversed the Arizona Supreme Court, holding that a state court may not order a veteran to indemnify a divorced spouse for the loss in the divorced spouse’s portion of the veteran’s retirement pay caused by the veteran’s waiver of retirement pay so as to receive service-related disability benefits.
In other words, federal law completely preempts any and all state laws treating waived military retirement pay as divisible community property. All such military pay, at the time a family court makes a property award, is subject to a future contingency; i.e, that the value of the percentage award given could decrease over time, ultimately becoming worth less than at the time of the award. SCOTUS did, however, reserve the right to take into account this potential event when calculating property settlement and/or spousal support awards.
For more information on how gaining your CFL Designation for Divorce Practitioners gives you the financial knowledge and skills you need to attract additional high-asset clients, plus other benefits of AACFL membership, please visit this page of our website.