Key U.S. Supreme Court case about military retirement pay in divorce

Howell v. Howell clarifies a point of law that had been interpreted in different ways by various states’ courts.

Last month, the United States Supreme Court handed down a unanimous opinion that could have significant impact on property division in divorce when at least one spouse is or was a military service member eligible for retirement pay. The ruling impacts the division of retirement payments when they are impacted by disability payment eligibility.

Community property

Federal law says that states are allowed to divide military retirement benefits - which are taxable income to the recipient - as community property in divorce. However, the law does not allow any portion of retirement benefits to be community property if waived in lieu of disability benefits in the same amount. Disability benefits, by contrast, are not taxable income.

The Howell example

This provision of federal law hit home in the divorce of John and Sandra Howell of Arizona. When they divorced in 1991, they agreed to split John's future military retirement payments in half. They did so when the pay began about a year later, until John became eligible for disability pay about 13 years later.

John chose to waive an equal amount of retirement pay as a condition of receiving disability, which caused both John and Sandra to lose around $125 per month each because of the reduction from the waiver. While John's decision made sense from a tax standpoint, Sandra asked the state court to order John to reimburse her for the reduction in benefits from John's decision.

The Arizona courts agreed with Sandra all the way to the state supreme court. John asked the U.S. Supreme Court to consider the matter and the high court agreed with him, and reversing the Arizona Supreme Court.

The U.S. Supreme Court in Howell v. Howell said that a state court has no power to order reimbursement in these scenarios because the federal law is clear that the waived amount of retirement is not community property. Looking at its previous holdings, the court said that it does not matter whether the waiver to get disability happens at the time of divorce or years later.

Seek experienced counsel

This has huge ramifications for service members and military spouses who have been receiving divided retirement benefits for years, like the Howells. If the service member eventually develops a service-related disability eligible for disability benefits, it is entirely within the rights of the service member to waive a portion of retirement to get disability, also reducing the ex-spouse's monthly benefit.

In such situations, it may be possible to ask for an increase in alimony for changed circumstances, if alimony is being paid and if the particular state's law allows it.

For anyone in a future military divorce, it will be important to involve an experienced family lawyer to carefully advise and advocate for a fair settlement or court decision concerning retirement benefits. As the Supreme Court said in Howell, divorcing parties and courts could adjust the valuation of future retirement pay to account for the contingency that disability payments could result in a partial waiver.

Another way to account for the possible future reduction in retirement pay is to recognize it in the alimony or property-division decisions made in the initial divorce.

Attorney James L. English of Colorado Springs serves clients in El Paso County and nearby military installations in military divorces. He represents both service members and military spouses, including in military retirement benefit issues. His clients may be affiliated with Fort Carson, Peterson Air Force Base, Shriever Air Force Base, U.S. Air Force Academy and Air and Space Command.