Divorce proceedings, specifically the process of equitable distribution, can be more complex when they involve active members of the military. Divorcing couples when one or both spouses are members of the military often involves some unique issues surrounding the classification and equitable distribution of military marital assets.
In a recent case, the Circuit Court for the City of Newport News determined whether or not a former wife was entitled to a share of her former husband’s military retirement pay. The court ultimately determined that, based on the specific type of military pay and property settlement agreement the couple entered into, the wife was entitled to a share of the pay.
Lott v. Lott
In Lott v. Lott, Maria Lott (“Wife”) and William Lott (“Husband”) were married on December 31, 1996 in Virginia and separated with the intent to terminate their marriage in May 2013. While they were married, Husband was a member of the U.S. Navy. He entered active duty on December 12, 1994 and received an honorable discharge on December 31, 2014. On September 27, 2014, Husband and Wife entered into a property settlement agreement (“PSA”), which stated that Wife was entitled to 41% of Husband’s disposable military retirement pay. The PSA contained multiple sections reinforcing the idea of indemnification or reimbursement, such as a provision that stated that “Husband hereby guarantees to the wife that he shall not take any action . . . so as to defeat or reduce the Wife’s right to the fractional interest in monthly retirement benefits . . . and agrees to indemnify and hold the Wife harmless in the event of such action.” At some point, the military determined Husband was disabled and Husband began receiving service-related disability pay (categorized as Concurrent Retirement Disability Pay “CRDP”). Wife filed suit against Husband for arrears and violating the divorce decree.
Service members who become disabled due to serving in the military are eligible for disability pay. To prevent “double dipping,” a military retiree can receive disability benefits only if he waives a corresponding amount of military retirement pay. Under the Uniformed Services Former Spouses’ Protection Act (“USFSPA”), state courts are permitted to use “disposable retired pay” as community property in a divorce. In Virginia, military retirement pay is typically considered marital property if it was earned while the couple is married.
The court here noted that the U.S. Supreme Court previously determined that while Congress wrote that a State may treat veterans’ “disposable retired pay” as divisible property, it expressly excluded amounts deducted from that pay “as a result of a waiver . . . required by law in order to receive” disability benefits. The first step in such a discussion is to classify what type of pay a service member is receiving according to federal law: VA Disability Compensation, Combat Related Special Compensation (“CRSC”), or Concurrent Retirement Disability Pay (“CRDP”). Under the Howell standard, waived military retirement pay is not divisible community property, but this standard doesn’t apply to all types of military pay.
VA Disability Compensation “is a tax-free monetary benefit paid to Veterans with disabilities that are the result of disease or injury incurred or aggravated during active military service” and is considered disability pay. CRSC and CRDP were “created by Congress to allow eligible military retirees to receive monthly entitlements in addition to retired pay.” CRSC is “a special compensation for combat-related disabilities and is not retired pay. CRDP is for service-related disabilities and is not disability pay, but is instead “a restoration of retired pay, subject to division with a former spouse.”
Since, here, the Husband’s retirement pay at issue is CRDP, which is considered military retirement pay and not disability pay, the court determined it “is clearly divisible with a former spouse as military retirement pay.” Since the pay isn’t disability pay, the Howell standard doesn’t apply and Husband’s CRDP is divisible under the PSA.
One of the main takeaways here is that not all military pay is treated the same. Specifically in cases of military retirement and disability pay, the specific type of pay the military spouse receives can be treated very differently. The three types of retirement pay discussed here, VA Disability Compensation, CRSC, and CRDP, have very diverse outcomes for military divorces. The first step in determining a former spouse’s rights is to determine the exact type of pay the military spouse is receiving. This added complexity regarding military assets as part of a divorce proceeding makes it especially important for individuals involved in military divorces to consult with counsel knowledgeable about military assets.
It is always a good idea to consult with a family law attorney when involved in divorce proceedings. However, especially for couples with at least one military spouse, it’s important to consult a family law attorney experienced in military divorces and familiar with the types of issues that may arise.
Family law attorneys at General Counsel, P.C. have experience working with servicemembers and military spouses and can help you navigate the process. Call us today at 703-991-7973 and see how we can help you.