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In a unanimous 2017 decision, Howell v. Howell, ___ U.S. _____ (2017), the U.S. Supreme Court makes clear that a state court cannot divide VA disability directly, or indirectly by ordering dollar-for-dollar indemnity, regardless of whether the VA waiver was pre-decree or post-decree.

Pre-Decree VA Waiver

Prior to Howell, federal law clearly prevented states from dividing VA disability payments.  Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 104 L.Ed.2d 657 (1989). Colorado has similarly ruled that divorce courts cannot divide VA disability payments, nor require the servicemember to indemnity the spouse for a VA waiver of retired pay that happened prior to dissolution.  In re the Marriage of Franz, 831 P.2d 917 (Colo. App. 1992).

Post-Decree VA Waiver

The majority rule amongst the states had been that the federal prohibition on dividing VA disability did not preclude ordering indemnity for a post-decree waiver of retired pay, under the theory that once the retired pay has been awarded, the spouse has a vested interest in it, and the military spouse cannot unilaterally reduce the other spouse's share by applying for VA disability.

Colorado was in that majority of states finding a distinction between a pre-decree vs. post-decree receipt of VA disability payments.  In re the Marriage of Warkocz, 141 P.3d 926 (Colo. App. 2006).

Howell: Pre-Decree vs. Post-Decree is "Semantic"

The facts in Howell are straightforward:

1991 – Dissolution, Wife awarded share of the military retirement

1992 – Husband retired, Wife began receiving her share

2005 – Husband received 20% VA disability rating, resulting in VA waiver of $250/mo retirement, and Wife losing $125/mo

The trial court in Arizona ordered Husband to indemnify Wife for her $125/mo reduction in retirement, and the Arizona Supreme Court affirmed. The U.S. Supreme Court reversed, calling "semantic" the distinction between a pre-decree and post-decree conversion of retired pay to disability.

The basis of state court decisions requiring indemnity for a post-decree conversion was that the spouse had a vested interest in the retirement. SCOTUS was dismissive of that: "State courts cannot 'vest' that which (under governing federal law) they lack the authority to give."

And the issue of pre-decree vs. post-decree? "[T]he temporal difference highlights only that John’s military retirement pay at the time it came to Sandra was subject to later reduction (should John exercise a waiver to receive disability benefits to which he is entitled). The state court did not extinguish (and most likely would not have had the legal power to extinguish) that future contingency. The existence of that contingency meant that the value of Sandra’s share of military retirement pay was possibly worth less—perhaps less than Sandra and others thought—at the time of the divorce."

Alternatives to Indemnity

It will take some time for this decision to be analyzed and interpreted, but SCOTUS did offer two potential means by which state courts could take VA disability into consideration:

  • Property Divsion. "a family court, when it first determines the value of a family's assets, remains free to take account of the contingency that some miltiary retiremetn pay might be waived." So a court could award a spouse more of other assets to make up for the possibility that some retirement may be lost. This is not helpful to the spouse if the military retirement is the single largest or only asset, however.
  • Maintenance. A state court could "take account of reductions in value when it calculates or recalculates the need for spousal support." The viability of this option is limited, however, by the fact that states typically have statutory factors for maintenance, and if the spouse who loses some retirement does not otherwise qualify for maintenance, or has reached the end of the maintenance term, then maintenance is not a viable alternative to retirement.

Have a military divorce case? Deployed? Black & Graham can help.

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