In 1991, an Air Force veteran divorced his wife, with the court awarding the wife half of her ex's retirement pay. In 2005, the vet learned that he was eligible for a 20 percent disability rating. Since disability pay is not taxable, the vet decided to waive $250 of his monthly $1,500 retirement pay. His retirement pay is taxable.
His ex-wife's divorce settlement was reduced by $125. She returned to court, arguing that she should get half of his retirement pay without the $250 waiver. The Uniformed Services Former Spouses' Protection Act (USFSPA) lists how military retirement pay will be divided when a military couple divorces. The Supreme Court in Arizona agreed with her, but according to the USFSPA, a vet's retirement pay cannot be divided
Up until 2003, vets who were considered disabled had to choose either their disability benefit with a reduced retirement annuity or their full retirement compensation. this became known as the "VA offset." Since disability payments are tax free, most vets choose the offset.
The wife's lawyer argued that this divorce case was different because her ex-husband didn't waive his retirement pay until after the divorce settlement. She said that the state courts did not have the right to take the vet's disability benefits or to treat them as something that can be divided -- and it doesn't matter if the vet is eligible for disability before or after the divorce or if doing so would affect an ex-spouse.
Military divorces are different in many ways from civilian divorces, especially when it comes to dividing pensions or retirement benefits, or determining if the non-military spouse will be allowed to keep base exchange privileges or health care privileges. An attorney who is experienced in military divorces can help you understand more about how property division, child custody and more will work to help you during this difficult time.
Source: Military Times, "Supreme Court rules in veteran's favor in closely watched divorce settlement case," Shawn Snow, May 17, 2017