U.S. Supreme Court case will have major impact on some military divorces

The ruling impacts important issues about the division of retirement pay in divorce negotiations and trials.

The U.S. Supreme Court recently handed down an opinion concerning military retirement and disability benefits that will have significance for many military divorces. The issues are complex, underscoring the importance of having experienced legal counsel with specific knowledge and skill in the intersection of military and veterans' benefits with state family law.

In May 2017, the unanimous opinion in Howell v. Howell clarified a legal issue that had previously been interpreted differently among various states' courts. The facts of the case clarify its real-life impact.

The Howell divorce

In 1991, John, who served in the Air Force, and Sandra Howell divorced in Arizona. Their divorce decree awarded Sandra half of John's future military pay. About a year later John retired and the ex-spouses split his monthly retirement pay 50-50 for 13 years, at which time John was found 20 percent disabled from a service-related shoulder injury.

Retirement waiver

In some situations, federal law requires that when a veteran is found to have a service-related disability, he or she must waive the same amount of military retirement to receive the disability payments. It is financially advantageous to do so because while retirement pay is taxable, disability pay is not.

John chose the waiver and began receiving disability pay with a corresponding reduction from his retirement, reducing monthly retirement pay by $250 and giving John and Sandra each $125 less per month. Sandra went back to state court to ask for the amount of the reduction back and the court ordered that John reimburse her for the monthly reduction because the full amount had "vested" in her.

John appealed the ruling and the Arizona Supreme Court said that because the waiver occurred after the divorce in which the military pay had been divided, federal law did not control and the reimbursement order was valid.

Timing of waiver irrelevant

The U.S. Supreme Court disagreed. Federal statute says that while military retirement pay may be divided by a state court as part of community property in a divorce, any amount waived as a condition of receiving disability pay is not subject to division in divorce. A previous U.S. Supreme Court case had held that this federal law pre-empts state courts from dividing waived retirement pay in divorces under state property division laws.

In that case, the waiver took place before the divorce, but Sandra was not successful in arguing that because the waiver took place years later in her case, it should be treated differently. The U.S. Supreme Court said that federal law pre-empts state law no matter when the waiver is taken.

Impact on military divorces

The court clarified that when a divorce order awards a future interest in military retirement pay, that interest is contingent upon a possible future reduction from a disability waiver, impacting the ultimate value of the retirement pay.

The court notes that parties and courts in divorces will have to account for this contingency in valuation of future rights to retirement as well as in alimony provisions. For divorces that have already occurred, it may be possible to get an adjustment in alimony (if it is being received) based on changed circumstances.

The attorneys at the Catonsville, Maryland, Law Office of Kevin L. Beard, P.A., represent active and retired military personnel as well as current and former spouses of people affiliated with the armed forces in matters related to divorce, including the division of military retirement pay. Military clients in greater Baltimore include those associated with Fort Meade and Aberdeen Proving Ground.