U.S. Supreme Court rules on military-retirement division in divorce case
Issues of federal pre-emption arise in divorces in which at least one spouse has served in the U.S. military.
On May 15, 2017, the U.S. Supreme Court unanimously issued an opinion in Howell v. Howell that decided a complicated issue related to the division between divorcing spouses of future military retirement benefits. The court looked at a complex intersection of federal military law and state family law, and the holding has important ramifications for California military divorces.
The Howell military divorce
In 1991, the Arizona state court divorce decree of Sandra and John Howell granted Sandra half of John’s future Air Force retirement payments as part of the division of their community property. This state court order was in accord with the 1982 federal Uniformed Services Former Spouses’ Protection Act that allows states to treat military retirement pay as divisible between divorcing spouses as community property.
John’s military retirement benefits began paying out in 1992, with 50 percent going to Sandra according to the divorce decree. Years later, John was found to have a service-related shoulder injury that made him eligible for veterans’ disability benefits, which he elected to receive.
Federal law requires that a veteran who elects to receive disability pay must waive a proportional amount of military retirement pay. Even though the reduction in retirement pay equals the increase in disability pay, this is actually financially beneficial to the veteran because the retirement pay is taxable, but the disability benefits are not.
In the Howells’ situation, John’s waiver of retirement pay in lieu of disability pay caused John and Sandra’s monthly retirement payment to be reduced by approximately $125 each. In response, Sandra asked the Arizona state court to order that John reimburse her for this reduction in retirement pay because the waiver happened after the divorce.
The family court agreed with Sandra and ordered John to reimburse Sandra for the decrease in military pay. The Arizona Supreme Court affirmed, finding that her interest in the full, original amount of retirement pay had vested before the waiver reduction.
The U.S. Supreme Court’s holding
The U.S. Supreme Court disagreed with the Arizona courts and reversed. The court looked at another provision of the Uniform Act that excludes from divisible community property the amount of reduction in retirement pay from a waiver elected to receive veterans’ disability benefits.
The court also considered its previous interpretations of the Uniform Act and held that whether a veteran waives a portion of retirement benefits before or after the divorce, the state court because of the pre-emption of federal law is still without power to divide as community property any portion of the waived amount in a divorce.
In effect, the amount of Sandra’s property interest in half of John’s retirement pay was always subject to reduction if he at any later time elected to waive part of it to instead receive nontaxable disability pay.
Impact on future divorces
The U.S. Supreme Court recognized the hardship of its holding on spouses like Sandra. It noted that state family courts are free to take into account the “contingency that some military retirement pay might be waived” when evaluating assets for division in a military divorce. The court also said that a state family court when setting or modifying spousal support could consider the reduction in retirement pay from a waiver.
Anyone in a military divorce – whether a service person or a nonmilitary spouse – should consult a lawyer with significant military divorce experience regarding this complex issue.
Attorney Victor Mordey of the Law Office of Victor Mordey in Chula Vista represents clients in military divorces in the San Diego area and across Southern California.