Fox Family Lawyers
Cynthia Moseley Fox
Attorney at Law
7751 Carondelet Avenue,
Suite 700
Clayton, Missouri 63105
(St. Louis)
314.727.4880

Military Retirement Benefits Awarded in a Divorce Don’t Always Get to the Former Spouse

A very interesting case was recently handed down by the Missouri Court of Appeals.

 

It involved a Karen Morgan, who was awarded 50% of the marital portion of her ex-husband’s military pension, only to later learn that her former spouse opted to accept tax-free disability benefits in lieu of part of the pension, which were not subject to the 50% division. Naturally, Karen, and not her former husband, David, raised the appeal.

 

David and Karen’s marriage ended June 1997 in the Circuit Court of Johnson County. At the time, David served in the U.S. Air Force and the divorce decree provided for the 50/50 allocation of the portion of David’s military pension earned during the marriage as part of the overall division of property.

 

8 years later, in 2005, David retired from the Air Force. He was to receive $2,358 a month in retirement pay, but the Veteran’s Administration determined that he was also eligible for disability benefits totaling $406/month. However, to prevent “double dipping”, if David accepted the disability benefits, he would have to forego an equal amount of retirement pay. Since the disability payments were tax-free, while the retirement benefits were not, David’s choice was clear. He substituted the disability pay for the same amount in pension.

 

Good for David, but not for Karen, as she was to find out when she applied to the military for her portion of David’s retirement pay. The Defense Department rejected her request, saying that the language of her dissolution judgment was not specific enough. Payment would only be made upon receipt of a court order identifying a fixed amount or a percentage of the retiree’s “actual disposable military retired pay”. Make note of the word “disposable” in that response because that is where the issue is joined.

 

Karen went back to court, and the court issued a restated judgment that provided Karen with 50% of the marital portion of her ex-husband’s “disposable military retirement pay”. Karen then reapplied to the military only to learn that her ex-husband’s decision to forego some of his pension in favor of tax-free disability pay, and the term “disposable retirement pay”, were closely intertwined.

 

According to federal law, “disposable retirement pay” is defined as excluding retiree disability benefits (as well as certain other items that can also can be deducted from retiree pay). Further, based on a case decided by the U.S. Supreme Court, it is well-settled Missouri case law that military retirement pay waived in favor of disability benefits is not property divisible in a divorce and, further, that both the disability benefits and the pension waived to receive them are non-marital property.

 

Karen was not a happy camper and took her displeasure to the Court of Appeals. She claimed that the lower court erred when it added to word “disposable” in restating its judgment because it then meant that neither the $406 David  accepted in disability benefits, nor the same amount in pension that he waived, would be shared with her. This, Karen asserted, “constituted an impermissible, de facto re-division of a marital asset”.

 

In issuing its opinion, the Court of Appeals quoted an earlier Missouri case as follows: “Missouri courts cannot re-divide the marital portion of a retiree’s disposable retired pay after the dissolution decree, (yet) a retiree can thereafter alter the amount designated as disposable retired pay.” In doing so, it corroborated Karen’s point that a post-dissolution re-division was not allowed, while seeming to be sympathetic to the injustice of her situation. Nevertheless, would it sustain her appeal?

 

You will have to come back next week to learn the answer as well as the remedy available to future Karen’s on how the judgement should be written to avoid being ensnared in the same trap.