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How does the VA offset factor in divorce settlements?

If you are a Virginia veteran with a former spouse, a recent ruling by the US Supreme Court with regard to retirement benefits and divorce settlements may be welcome indeed. This ruling overturned an older decision by a state court and shined a light on some of the issues with the VA offset.

Military Times reports that in 2005, John Howell learned that he was eligible to receive disability benefits. Like many veterans, he elected to waive a portion of his taxable retirement check for a nontaxable VA disability payment. (The choice to accept this so-called VA offset is necessary if you wish to receive disability payments but have a disability rating of less than 50 percent; however, if you have a disability rating of 50 percent or greater, you may receive disability and retirement payments at the same time.)

With the reduction in John’s retirement payment came a reduction in the monthly divorce settlement his ex-wife, Sandra, received. She went to court with the aim to seek a higher payment calculated not based on John’s existing retirement pay but on what his retirement pay would be if he had declined disability pay. The state court initially found in Sandra’s favor, but the US Supreme Court reversed that ruling last week to the benefit of veterans around the country, of whom more than half must cope with the VA offset.

This recent ruling was in line with an earlier decision dictating that waived retirement pay cannot be considered a distributable asset under the Uniformed Services Former Spouses’ Protection Act. This decision provides important protection for you if you are receiving disability pay, which can help to fill an existing or future pay gap. It also points to some issues inherent in the VA offset, which activists consider to be unfair considering the differing aims of retirement and disability pay. Specifically, the former results from your career in the military, whereas the latter provides compensation for disability related to your military service.

This information is intended for educational purposes and is not intended as legal advice.

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