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When a servicemember retires with disabilities, the Department of Veterans Affairs may pay compensation, known as VA disability, depending upon the disability rating.

The advantage to the servicemember is that VA disability payments are not taxable. Furthermore, since they are excluded from the disposable retired pay, Colorado divorce courts cannot, strictly speaking, divide the disability payments (the reality may be different, however, as explained herein).

Note that the payments are not automatic - like everything else in the military, there is a process, and this one requires that the retiree affirmatively apply for disability payments.  38 U.S. Code §5101.  The specific form used is the VA Form 21-526, Veteran's Application for Compensation and/or Pension.  This is important on the issue of indemnity for the VA waiver, as it shows that any resulting waiver of retirement to receive the disability payments was voluntary.

And the VA disability election is revocable, per section 120205 of the DOD Financial Management Regulation.  Presumably a veteran would have little incentive to do this, unless to facilitate receipt of Combat-Related Special Compensation (CRSC) or per court order.  Doing so requires filling out the same VA Form 21-526.

VA Disability Payment Rates

The VA awards a disability rating, which, along with the number of family members, determines the amount of the servicemember's.  As an example, as of December 2013, a married servicemember with one child and a 70% rating receives $1505.66 per month in VA Disability payments.  See VA Compensation & Benefits Rate Tables to look up the disability payment amounts.

The disability rating is not connected to a servicemember's rank, or, contrary to popular misconception, to how much retirement a member receives.

The rating is used strictly to determine the dollar amount of the disability payment, and all veterans with the same rating and same number of family members will receive the same VA disability pay, regardless of their rank at retirement. A retired general officer with a 70% rating receives the same $1505.66/mo in disability as a retired E-6 with a 70% rating.

VA Disability & Child Support/Maintenance

The fact that a disability payment is tax-free does NOT make it invisible for other purposes.

In Rose v. Rose, 481 U.S. 619 (1987), the U.S. Supreme Court found that VA disability payments were intended not just for the veteran, but as the law stated, to "provide reasonable and adequate compensation for disabled veterans and their families." From this, the Court concluded: "Congress clearly intended veterans' disability benefits to be used, in part, for the support of veterans' dependents." Although the Rose case concerned garnishment of VA disability payments rather than including it in the calculation of income, in that case the disability benefits comprised most of the obligor's income considered by the state court. While the decision did not explicitly address whether that income determination was correct, it is logical to surmise that the Court would at least have questioned the calculation had that been a concern.

Colorado's definition of income for purposes of calculating child support and maintenance is expansive: "'Gross income' means income from any source and includes, but is not limited to..." C.R.S. 14-10-114(8)(c), pertaining to maintenance. The statute then sets out an exhaustive laundry list of items that include such potentially non-taxable receipts as trust income and monetary gifts. The child support statute contains virtually identical language. C.R.S. 14-10-115(5)(a)(I).

VA disability payments are included as income in Colorado for the purposes of maintenance and child support. In a 1991 decision, the Colorado Court of Appeals considered the argument that because federal law prohibited states from dividing VA disability payments, counting disability as income for maintenace purposes was tantamount to a backdoor division of hte maintenance itself. The obligor further argued that because disability was exempt from division, he could not be ordered to pay maintenance from his disability payments.

The court rejected both arguments: "The federal law relied upon by husband is limited to a consideration of the treatment of military disability as marital property, rather than as a resource to be considered in determining the propriety and amount of an award of spousal maintenance, and therefore, it is inapplicable to the issues presented here. In addition, because of the qualitative difference between a maintenance award and a division of property, we are not persuaded by husband's argument that by awarding maintenance to wife, the court is indirectly accomplishing what it may not do directly." In re: Marriage of Nevil, 809 P.2d 1122, 1123 (Colo. App. 1991).

More Information

Retiree and Annuitant Pay: Disability Benefits, on the DFAS web site.

Concurrent Receipt (CRDP) Pay Computation.  A chart to calculate the restoration of the VA Waiver during the phaseout period.

Denver, Colorado Military & Veterans Lawyer.  Michael L. Shea has a web site with useful information for veterans.

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

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