The treatment of military disability pay in divorce is a complicated issue, which is governed by federal and state laws. The information contained in this article covers only the basics, it does not constitute legal advice and cannot replace personalized advice from a divorce attorney. If you have questions about military disability pay and divorce, you should contact a family law attorney with experience in military divorces.
The Uniformed Services Former Spouses Protection Act (the "USFSPA") allows divorce courts in all states to award service members' former spouses a portion of "disposable retired pay," which is the amount of retired pay available (after necessary deductions) based on salary and years of service. The exact portion the former spouse receives is decided either by an agreement between spouses or by the state divorce court.
For a complete description of how disposable retired pay is divided in divorce, see Understanding the Division of Military Pensions in Divorce.
The Defense Finance and Accounting Service website is another great resource that contains useful information about military retirement and disability. The DFAS is also responsible for maintaining and distributing military retirement benefits.
Under the USFSPA, military disability pay is excluded from the definition of disposable retired pay, and therefore, disability pay is not subject to the same rules of division in divorce. So when a service member waives retired pay in exchange for disability pay, former military spouses may lose out on hundreds or thousands of dollars they might otherwise have received in the division of disposable retired pay.
There are two different types of military disability pay, both of which are excluded from the USFSPA definition of disposable retired pay: (1) military disability retired pay, and (2) VA disability compensation.
Military disability retired pay is available for service members who are sufficiently disabled that they can't perform their duties. Members that have enough creditable service (meaning years served) may be placed on the "disability retired list" and draw disability retired pay. Military disability benefits are not considered "disposable retired pay" and cannot be divided between spouses in divorce court.
The second type is disability compensation from the Department of Veteran's Affairs ("VA disability compensation"). This compensation system is meant to cover injuries or disabilities that occurred while on active duty, or which were made worse by active service, including mental or physical injuries that are service-connected: the injuries don't have to occur while in active combat. For example, VA disability compensation could cover something like a shoulder injury that is the result of routine physical training. The disability rating system used for VA compensation measures the extent of the disability and its effect on the service member's employability.
Service members must waive a certain amount of retired pay in order to receive VA disability compensation. As stated above, VA disability compensation cannot be divided between spouses in a state divorce court. If a service member waives any portion of military retired pay in exchange for VA disability, the amount waived is subtracted from the amount available to the former spouse.
Military spouses do have some protections and/or remedies for these types of reductions to retired pay.
First, military spouses may enter into agreements to help avoid these results. Divorcing couples often enter into "separation agreements" or "property settlement agreements" (PSAs), which are written contracts that resolve divorce-related issues (for example, property division, alimony, custody and child support). These agreements may include a provision that states if the service member waives any retired pay for disability pay, or is placed on the disability retired list, the service member would make a monthly payment to the non-military spouse in an amount that makes up for the lost retired pay.
Second, if the military spouse refuses to enter in such an agreement, the non-military spouse (or the spouse's attorney) could ask the divorce court to retain its jurisdiction (authority) to order the military member to pay spousal support in the future, or to modify an existing alimony order based on any change in the parties' circumstances. If the military retired pay is reduced as a result of the receipt of disability pay, the non-military spouse may ask the court to "make up the difference" by ordering the military member to pay spousal support (or increased support) in the amount of retired pay that's been lost.
In military divorces, it's essential to have a clear understanding of the issues surrounding military disability retired pay and VA disability compensation. Service members and military spouses going through a divorce should consult a knowledgeable family law attorney with experience in military divorces.