A veteran’s disability pension cannot be divided in a divorce because it is not considered a marital asset. In fact, Federal law expressly prohibits state courts from dividing a veteran’s disability pension as part of the divorce decree, so a state divorce court cannot decide that a portion of each month’s disability pay belongs to the civilian divorcing spouse, nor can the court treat the disability pay as a marital asset or community property.
In Mansell v. Mansell, the United States Supreme Court ruled that even if a servicemember voluntarily opts for disability in lieu of retired pay, the Uniformed Services Former Spouse Protection Act (USFSPA) prohibits state courts from treating disability as property divisible in a divorce.
Veterans’ disability pensions, much like Social Security disability benefits, compensate disabled individuals who can no longer work. However, veterans’ disability pensions are only for those who served in the U.S. military. Veterans who receive disability pension money are entitled to receive additional amounts each month if they are married, but this entitlement ends in the event of divorce.
A disabled veteran may opt for disability benefits in lieu of military pay for tax reasons. Military retirement pay based on age or length of service is considered taxable income for federal income taxes. However, military disability retirement pay and veterans’ benefits, including service-connected disability pension payments, may be partially or fully excluded from taxable income. Soldiers with service-connected disabilities may be eligible for federal income tax exclusions of veterans’ benefits and disability pension payments.
Moreover, an angry spouse may use the disability route as a way circumventing marital entitlements to the other spouse.
In the Mansell decision, the high court read USFSPA very closely. USFSPA gives state courts express authority to treat military retired pay as community property. The court held that other compensation, even those received by a servicemember in lieu of retired pay, should not be divisible.
While federal law governs a veteran’s eligibility for a disability pension, as well as the amount of the pension, state law varies with regard to what happens to that pension in the event of a divorce. While federal law governs the treatment of the disability pay during the division of the marital estate, state law governs how a veteran’s disability pay affects orders for spousal support.
Many people mistakenly believe that because veterans’ disability pay cannot be directly awarded to a divorcing spouse, it also cannot be considered when awarding or setting the amount of spousal support. Most states allow or require a judge to consider all sources of income when determining spousal support — including veterans’ disability even if the disability pay is the only income the veteran has that can be used to comply with the order of spousal support. A very few states, such as Arizona, Texas and Vermont, prohibit judges from using this income in setting spousal support.
Until the Concurrent Retirement and Disability Pay (CRDP) program began in January of 2004, military retirees were prohibited from receiving both military retired pay and Veterans Affairs (VA) compensation. This is applicable to all retirees who have a VA service connected disability of 50 percent or higher with the exception of disability retirees with less than 20 years of service and retirees who have combined their military and civil service time to qualify for a civil service retirement.