Divorce is never easy, and it gets even more complicated when one or both spouses are in the military. One of the trickiest parts? Understanding how VA disability benefits fit into the financial picture. Here is what every military spouse should know.
VA Disability Basics
VA disability pay is non-taxable and cannot be divided in a divorce. That means you can’t count on getting part of those payments in a divorce settlement, as a division of assets. Instead, only “Disposable Retired Pay” can be split.
Still, VA disability ratings can play a big role in how much a former spouse receives, especially if the service member’s disability rating changes over time.
Why the Initial Disability Rating Matters
When a service member leaves the military, they receive a physical exam that documents any injuries or health issues connected to their service. This leads to a disability rating between 0% and 100%.
Here is the catch – Disability Ratings are not set in stone. Many service members start with a low disability rating. Over time, they can request a medical review—and potentially get a higher rating. A higher rating can mean more money for the service member… but less for the former spouse if it reduces the portion of retirement pay that can be divided, that is the Disposable Retired Pay.
What the Courts Say
In 2017, the U.S. Supreme Court made it clear that you can’t force a veteran to make up lost money if their VA disability pay increases and their Disposable Retired Pay goes down. It is a tough reality, but one that must be factored into any divorce settlement.
That said, you and your Attorney can typically include indemnification language in your divorce agreement to help plan for possible changes down the road.
Tips for Protecting Your Financial Future
If you’re going through a divorce with a military spouse, here are a few smart steps:
- Get a copy of their original VA disability award letter.
- Know that the rating might go up later—which could change the money you receive.
- Work with a divorce financial professional who understands the nuances of military benefits and how they impact divorce.
Military divorces come with a unique set of financial rules. VA disability benefits are a key part of that puzzle. Make sure you are working with someone who knows how to navigate it, – so you can protect your future and avoid surprises later on.
