Matt Higgins is an Air Force veteran with empathy for service members and their families. He understands the interplay between federal and Nebraska state law in the military divorces of active or retired service members and their spouses.
Military pension benefit allocation between divorcing spouses when one or both are service members or veterans can be legally complicated. Broadly, federal law creates and governs military retirement accounts. When a service member divorces, federal law says that the division of those accounts is determined under state property division laws applicable to divorces.
As we discussed in an earlier post, Nebraska law requires the equitable division of property in divorce. This standard is based in fairness, which may not always mean that assets are divided 50-50. Equitable division considers the unique circumstances and needs of each spouse.
Many couples negotiate settlement agreements that set out how they will allocate military retirement benefits between them. However, there have been two recent developments that may create complex legal issues when military pensions are divided in divorce, whether by agreement or by judges in contested cases.
Waiver of pension benefits for disability
The first major recent development was a 2017 U.S. Supreme Court decision called Howell v. Howell, concerning divorced spouses who had, for 13 years, each received one-half the ex-husband’s monthly Air Force pension payments pursuant to their divorce decree. The ex-husband then developed a service-related partial disability that made him eligible for military disability pay, but to accept it, he had to waive the same amount of monthly pension payout.
He agreed to this waiver, which made economic sense because disability payments are not taxable, while pension payments are. The pension payments accordingly decreased by the waiver amount, so each ex-spouse received smaller monthly pension payments. Arizona state courts ordered that the ex-husband reimburse or indemnify the ex-wife monthly for the reduced amount, since the original divorce order did not account for this unforeseen reduction to her.
The U.S. Supreme Court disagreed, saying that federal law only allows state courts to divide military pensions, but not disability payments, in state divorces.
Many divorced military couples have divorce decrees that did not account for reduction of pension payments in cases of future military disability findings. Any Nebraskan in this situation, whether the service member or the military spouse, should seek legal advice as soon as possible to understand what legal remedies may be available.
It is also important to discuss this issue at the time of a military divorce to understand whether there are options to include in a negotiated agreement, or to suggest to the judge, which could be helpful.