Source: https://ohfamilyattorney.com/lawyer/2013/04/27/Divorce/Practical-Tips-And-Pitfalls-In-Handling-Conversions-Of-Military-Retirement-Pay-To-VA-Disability-In-The-Divorce-Context_bl30403.htm
Timestamp: 2019-04-20 11:07:14+00:00

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A Military Qualifying Court Order issues, and Wife begins to receive her portion of Colonel’s military retired pay (50%) directly on April 1, 2012. In September, 2012, the Veteran’s Administration sends Colonel an award letter, informing him that he is 25% disabled due to service-related injuries, and that he will begin receiving VA disability benefits in the amount of $500 per month. In order to receive these benefits, the law required Colonel to waive an equal amount of his retirement benefits, which he does. Now, from the Air Force, the gross monthly retirement pay is reduced $500 because the remainder has been waived for Colonel to receive a like sum of $500 in veterans’ benefits which are not divisible and not subject to attachment. This means that the Air Force now sends Mrs. Smith $250 less in military retirement. Mrs. Smith wants the $250 back. Will she get it? Well, despite a federal law that has preempted state law in this particular area, the answer ultimately depends on the jurisdiction in which the parties divorced.
A split in authority, and a trap for the unwary, has existed for two decades in the area of spousal division of military retirement pay. Despite repeated appeals to Congress and the United States Supreme Court to provide a unifying solution to the problem, the states remain divided, frustrating practitioner’s who thought they had received a final binding judgment of divorce or dissolution.
The issue now confronting, and confounding, the state courts – how to account in a divorce for that portion of a military member’s retirement that is waived to receive disability pay – has its genesis in the 1981 United States Supreme Court case of McCarty v. McCarty. In McCarty, a state domestic relations court ordered the military member, over his objections, to pay half of his military retirement pay to his ex-wife as part of the property division in a community property state. The Supreme Court reversed.
The court also recognized that, “[h]istorically, military retired pay has been a personal entitlement payable to the retired member himself as long as he lives.” Further, Congress enacted a military retirement system both to provide for the retired service member and to meet the personnel management of the armed forces; permitting the division of retirement pay in a divorce could frustrate these objectives.
In deciding as it did, this Court specifically called upon Congress to act, and Congress did.
In sum, in enacting the USFSPA, Congress permitted the division of retirement pay in a divorce or dissolution, but specifically exempted from division that portion of retirement pay waived to receive disability benefits.
Despite the (admittedly unclear) language of the USFSPA, one state domestic relations court blatantly acted contrary to that law when it ordered in a divorce action the division of both the retirement pay and disability benefits of a veteran. In Mansell v. Mansell, the Supreme Court confronted the USFSPA when it addressed whether state courts could treat as property divisible upon divorce military retirement pay waived to receive veterans’ disability benefits. This Court held that the state courts may not do so.
In Mansell, the military member and his spouse divorced in California at a time when he was receiving both military retirement pay and disability pay. The parties entered into a property settlement which provided, in part, that the military member would pay his wife 50% of his total military retirement pay, including that portion of retirement pay waived so that he could receive disability benefits. In 1983, the military member asked the trial court to modify the divorce decree by removing the provision that required him to share his total retirement pay with his former spouse. When the lower court denied this request without opinion, the military member appealed and, eventually, petitioned the Supreme Court for certiorari, which the Court granted.
The factual situation facing the Court in this case was not difficult; indeed, the state court had explicitly divided both military retirement pay and the disability pay that the military member was already receiving. Therefore, noting that the language of the USFSPA was “plain and precise,” the Supreme Court held that “state courts have been granted the authority to treat disposable retired pay as community property; they have not been granted the authority to treat total retired pay [including disability pay] as community property.” The Court prohibited the lower court from making this explicit division.
Rejecting the former spouse’s arguments to the contrary, the Court concluded that the USFSPA’s legislative history, “read as a whole, indicates that Congress intended both to create new benefits for former spouses and to place limits on state courts designed to protect military retirees. Our task is to interpret the statute as best we can, not to second-guess the wisdom of the congressional policy choice.” Expanding on that notion, the Court held that its job was not “to misread the statute in order to reach a sympathetic result when such a reading requires us to do violence to the plain language of the statute and to ignore much of the legislative history.” The Court ended with yet another call to Congress to correct this holding.
After Mansell, and as it still stands today, a state domestic relations court may not divide any part of a military member’s disability pay received prior to a divorce. The state courts uniformly apply Mansell in such circumstances. The courts differ, however, in those cases where the military member divorces before receiving disability pay. The courts are struggling to decide how (or if) that portion of the retirement pay waived to receive disability benefits after a divorce can (or should) be divided.
Some state courts have simply applied the holding of Mansell and its interpretation of the USFSPA, ruling that such any attempt to divide or otherwise account for retirement pay waived to received disability pay is not permissible. Most recently, the Vermont Supreme Court, in Youngbluth v. Youngbluth, held that, when the original property division order states an exact percentage and contains no indemnity clause, a former spouse cannot use an enforcement proceeding to receive an increased percentage to offset the military service member’s subsequent application and receipt of disability benefits.
In Youngbluth, Husband was forced to retire from the military during divorce proceedings with his wife. The final judgment and decree of divorce granted the wife “35% of the marital portion of the retirement plan,” which equated to 19.81% of the Husband’s retirement. Following the filing of the final judgment and decree of divorce, Husband applied for and was granted a 30% disability rating from the Veterans Administration. As a result, wife’s percentage of Husband’s retirement was reduced. Wife filed a motion to modify or amend the original order, and the trial court agreed that she should receive 22.4% of Husband’s disposable retired pay to equalize the roughly $700 per month she would have received under the original order of 19.81%.
The Vermont Supreme Court suggested that, had an indemnification clause been included in the decree, or had Wife attempted another procedural avenue to an enforcement proceeding, the result may have been different. In restrictive states, such as Vermont, an indemnification clause, as well as a reservation of jurisdiction for the court to effectuate the intent of the parties in dividing the retirement, may provide some support for an award for an aggrieved spouse.
Unlike the contract-law theory, the logic employed in Clauson by the Alaska Supreme Court is useful to courts not only when the waiver of retirement pay postdates the divorce decree (if the court has retained jurisdiction over the matter), but also when the waiver predates the divorce decree and the court is making an initial property distribution or alimony award. In jurisdictions employing this reasoning, reservation of jurisdiction over spousal support is crucial so that a spousal support award can be used as compensation for the aggrieved spouse. For example, even if spousal support is not awarded in the decree, the attorney for the non-member should work to include a clause that reserves the court’s jurisdiction; in the event the former member waives portions of his military retirement, the court retains jurisdiction to determine whether equity requires a spousal support award.
Other state courts have simply declared Mansell and the USFSPA inapplicable, and instead rely on a contract theory to retain the authority to enforce marital settlement agreements. These courts hold, generally, that when a property-settlement agreement in a divorce proceeding divides military-retirement benefits, the non-military spouse has a vested interest in his or her portion of those benefits as of the date of the court’s decree and that the vested interest cannot thereafter be unilaterally diminished by an act of the military spouse.
Recently, the Ohio Court of Appeals for the Second District adopted this philosophy in ruling in Bagley v. Bagley. On September 13, 1995, a Decree of Dissolution ended the Bagleys’ 24-year marriage. In the Separation Agreement incorporated into the decree, the parties waived spousal support and divided property. At the time of the Decree of Dissolution, Husband had just retired from the United States Air Force and was receiving military retirement pay, had applied for disability benefits, but was not yet receiving them. The Separation Agreement noted that Wife was entitled to “the marital portion” of Husband’s retirement pay, “one-half (1/2) of the amount available to the Husband under the 20/20/20 Rule of Former Spouse benefits. . .” The Separation Agreement contained a clause prohibiting Husband from reducing Wife’s share of retirement pay by taking civil service employment, but did not address waiver of disposable pay to receive VA disability.
Husband began receiving VA Disability benefits in January 1996, with a disability rating of 30%. An amended Military Qualifying Court Order was submitted in 2009, which granted Wife an amount equal to the reduction of her portion of the retirement caused by his election to receive partial veteran’s disability benefits and the corresponding waiver of a portion of his retirement.
Practitioners confronting the morass of conflicting state court decisions have attempted to address them through calls for legislative reformation and petitions to the United States Supreme Court. Neither solution has ameliorated the problem.
Effective January 1, 2004, Congress passed legislation to allow concurrent receipt of military pay for those former service members who have a VA disability rating of at least 50 percent, known as Concurrent Retirement and Disability Pay (“CRDP”), that would be phased in over the course of ten years. As noted by Mark E. Sullivan, the “CDRP will go a long way toward ameliorating the unfairness of unilateral changes in military pension division orders by retirees who, after the fact, obtain VA disability compensation and thus reduce the share of the former spouse,” at least for those former service members receiving a disability rating of 50 percent or more.
Since Mansell v. Mansell, the Supreme Court has declined to hear cases that present this confounding and divisive issue among the states, including the California court’s decision in Mansell after remand. On remand, the state appellate court ruled against the veteran on the ground that state law precluded the reopening of the settlement agreement that had divided his VA disability as well as his military retired pay. The Supreme Court denied certiorari. Since Mansell, petitions have been filed in at least three separate cases, requesting that the Court confront the more difficult post-decree waiver of retirement. Given the Court’s repeated denial of petitions on this issue, it is unlikely that a petition for certiorari would be granted in the near future.
Given the complexity and expense of bringing an action subsequent to the filing of a decree that divides military retirement, the best offense seems to be a good defense of drafting the decree to meet the needs of your clients.
For practitioners representing the service member in a divorce or dissolution, the following practice points may be useful.
Retirement clauses should include a provision that divides only the “disposable retired pay” as defined by 10 U.S.C 1408.
VA disability benefits should be specifically excluded from division, whether elected prior to or after the filing of the final decree.
Any indemnity for a waiver of military retired pay should be clearly excluded.
Use percentages of disposable retired pay rather than specific dollar amounts.
For practitioners representing the spouse in a divorce or dissolution, the following practice points may be useful.
Insure that a clause is included for the court to retain jurisdiction over the retirement so as to effectuate the intentions of the parties in dividing the pension.
Include an indemnity clause that protects the former spouse should military retired pay be waived to receive VA disability benefits.
Specifically reserve the court’s jurisdiction regarding an award of spousal support should the former spouse be deprived of military retirement benefit through a future waiver.
Despite the uniformity that a federal statute should bring in its application, the state courts have rendered an assortment of rulings in their interpretations of the USFSPA. Practitioners handling a divorce or dissolution involving a member of the armed forces should fully understand the relevant decisions in the jurisdictions in which they practice, to address these issues early in the proceedings and to prepare adequately to assist their clients when circumstances surrounding the division of military retirement pay change.
 453 U.S. 210, 101 S.Ct. 2728 (1981).
 Id. at 210, 101 S.Ct. at 2730.
 Id. at 232, 101 S.Ct. at 2741.
 Id. at 231-232, 101 S.Ct. at 2740-41.
 Id. at 224, 101 S.Ct. at 2737 (emphasis in original).
 Id. at 233, 101 S.Ct. at 2741.
 Id. at 235-36, 101 S.Ct. at 2742-2743.
 490 U.S. 581, 109 S.Ct. 2023 (1989).
 Id. at 585, 109 S.Ct. at 2027.
 Id. at 585-586, 109 S.Ct. at 2027.
 Id. at 586, 109 S.Ct. at 2027.
 Id. at 590, 592, 109 S.Ct. at 2029, 2030.
 Id. at 594, 109 S.Ct. at 2031.
 Id. at 594, 109 S.Ct. at 2032.
 Id. at 595, 109 S.Ct. at 2032 (O’Connor, J., dissenting).
 Id. at 595-596, 109 S.Ct. at 2032.
 Id. at 596, 109 S.Ct. at 2032.
 Chart A at the end of this article provides a list of these cases.
 6 A.3d 677, 2010 VT 40 (2010).
 See Youngbluth, 2010 VT 40, ¶ 28; Ex Parte Billeck, 777 So.2d 105 (Ala. 2000).
 See Clauson v. Clauson, 831 P.2d 1257 (Alas. 1992). Chart B at the end of this article provides a list of these cases.
 Chart C at the end of this article provides a list of these cases.
 Bagley v. Bagley, 2011-Ohio-1272, ¶ 1.
 Bagley, citing 2 Turner, Equitable Distribution of Property (3 Ed.) Section 6:10.
 AAML Response to Request for Comments as to P.L. 105-85 Review of the USFSPA, September 5, 2001.
 P.L. 108-136, Sections 641 and 642. 10 U.S.C. 1414. See The Military Divorce Handbook, Mark E. Sullivan, Second Edition, Section 8.10 for a discussion of these provisions.
 Seddio v. Michaels, 529 U.S. 1068 (2000); Padot v. Padot, 548 U.S. 902 (2006); Bagley v. Bagley, U.S. Supreme Court Case No. 11-650, (2012).
 Although this is a controversial clause, courts have been inclined to approve such division if the parties reach this language through agreement.

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