The New Jersey Appellate Division just published what will likely be a seminal case on military divorce law in this State. The case dealt with a veteran who was collecting his military pension and then waived his entire pension to collect tax-free VA disability benefits. The spouse, who was supposed to collect part of the former service member’s pension, instead received nothing.
As many of us military folks know, when you are collecting a pension, under most circumstances, you cannot collect both VA and pension compensation at the same time. Essentially, you have to waive the portion of your taxable pension to collect the same amount in tax-free VA disability benefits.
You might recall from my previous article that in 2017 the United States Supreme Court in Howell v. Howell determined that a Court cannot force a retired service member to reimburse a former spouse for pension benefits not received due to a VA benefit disability pay waiver.
The Supreme Court there ruled that Congress was very explicit in defining what types of military benefits can be divided between divorced spouses. Military pensions can be divided. VA disability benefits cannot. The retired service member did not have to make-up the reduced pension payments to his ex-spouse because that would frustrate the purpose of federal law.
Now, the New Jersey Appellate Division has addressed this very same issue as well. In Fattore v. Fattore a retired service member appealed a decision of the trial court which awarded his ex-wife a sum to replace the income she lost from her ex-husband’s pension as a result of his waiver of pension benefits for tax-free VA benefits. The Appellate Division, citing Howell v. Howell, determined that a court could not replace pension benefits with some other asset. But then there is a twist . . . .
Although the Court could not replace the ex-wife’s lost pension benefits dollar-for-dollar, the loss of the ex-spouse’s pension benefits did serve as a “substantial change in circumstance.” Such a change in circumstance, the Court ruled, allowed for the issue of alimony to be reopened. In other words, courts are allowed to increase alimony based on a loss of pension benefits due to a VA disability benefit waiver – so long as it is not a dollar-for-dollar replacement of pension income.
Further, this ability to revisit the issue of alimony was allowed even though the parties’ settlement agreement had an express waiver of alimony between them. Thus, although the ex-service member believed he was not on the hook for alimony under their contract, the Court determined that such a waiver was inequitable under circumstances that were unforeseen and allowed alimony to be awarded.
However, the Court’s opinion leaves open the chance that if such a circumstance was foreseen as a possibility, then it is possible that a Court will uphold a current alimony arrangement despite a VA benefit waiver. The foreseeability of such a circumstance will need to be delineated in the parties’ divorce agreement.
What does this mean for you? Whether you are the service member or the spouse, it means you need to have a properly drafted settlement agreement negotiated by an attorney familiar with military divorces who will recognize these issues when they arise.
If you or your spouse is a member of the military and contemplating divorce, you deserve to be represented by a dedicated matrimonial attorney personally familiar with the unique situation that applies to military families. Contact Kevin J. Murphy, Esq., a life-long military dependent, former active duty service member, Afghanistan and Iraq veteran and a currently serving reservist at 856.428.8334 or firstname.lastname@example.org for a consultation.