U.S. Supreme Court Prohibits Indemnity Waivers For VA Disability Payments

| Jun 28, 2017 | Military Divorce |

Military 25.jpg

On May 15, 2017, the U.S. Supreme Court issued a decision in Howell v. Howell, prohibiting states from ordering indemnity when a servicemember waived a portion of military retirement in return for VA disability payments.

Federal law has long prohibited states from dividing VA disability payments, and Massachusetts, like most states which have considered the issue, had held that this prohibition prevented a court from dividing a disability when the VA waiver was obtained prior to the dissolution. However, once a share of the retirement had been awarded to the spouse, states typically found that the spouse had a vested interest in the retirement. Accordingly, if a military member reduced the retirement available for division after the retirement was divided, he/she had to indemnify the other spouse for the reduction.

That is no longer the case. 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. 

Massachusetts is amongst the states holding 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.

The U.S. Supreme Court did offer two potential means by which state courts could take VA disability into consideration:

Property Division. “a family court, when it first determines the value of a family’s assets, remains free to take account of the contingency that some military retirement 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.

Spousal Support/Alimony. 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 Massachusetts has statutory factors for determining alimony and if the spouse who loses some retirement does not otherwise qualify for alimony, or has reached the end of the alimony term, then alimony is not a viable alternative to retirement. 

Should you be in the midst of a military divorce or contemplating divorce, contact the Law Offices of Renee Lazar either through email or telephone 978-844-4095 to schedule a FREE one hour no obligation consultation to discuss your unique situation.

Set Up A Free Initial Consultation