How Are VA Benefits and Other Military Benefits Affected by Divorce?

A common question from service members and spouses facing a military divorce is which VA benefits and other military benefits get divided up, and how. Some benefits are subject to division in a divorce, and others are not. To understand what benefits you may be eligible for, and which are off limits, you first need to understand the categories of benefits available to military service members.

Benefits generally fall into two general “buckets:” those available to military retirees, and those available to military veterans. What’s the difference?

A military veteran is defined in federal law as “a person who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable.” A military retiree has either completed at least 20 years of active service, or has been medically discharged due to a disability. All military retirees are veterans, in other words, but not all veterans are retirees.

The Difference Between VA Benefits and Military Retired Benefits

Military retirees are eligible for pensions and other benefits through the Department of Defense (DOD). All veterans are eligible for certain benefits through the U.S. Department of Veterans’ Affairs, better known as the VA. These include health benefits, disability pay, pension, and burial benefits.

Marriage is a partnership, and a military marriage is a partnership in which both spouses typically sacrifice a great deal. By the time one spouse’s military career ends in retirement, at least one of two things has happened. Either the non-military spouse has supported the service member spouse through several years of military service, or the non-military spouse has helped the service member through a career-ending disability. It makes sense that, in divorce, that support would be acknowledged and rewarded. (Learn more about military pensions and the 10-Year Rule, which is often misunderstood.)

Depending on the length of the marriage and the overlap of the marriage with the service member’s active duty, the non-military spouse may be eligible for TRICARE coverage upon divorce. (However, this coverage terminates if the non-military ex-spouse later remarries).

VA benefits are a different animal from military retired benefits. Those financial benefits depend on the veteran’s qualifying military service. In other words, they simply have more to do with the veteran him- or herself than with a spouse. As a result, they are not divisible upon divorce. While a current spouse may receive health care benefits from CHAMPVA (Civilian Health and Medical Program of the VA), when the marriage ends, so do the benefits.

What the Law Says About Divorce and VA Benefits

When we talk about VA benefits, what is most often at issue is VA disability compensation. Under state law, only marital assets are subject to division at divorce. Federal law is very clear that VA disability benefits are not a marital asset. That legal guidance is found in the Uniformed Services Former Spouses’ Protection Act (USFSPA), which exempts VA disability benefits from being considered marital property.

VA disability benefits are intended to compensate the veteran for his or her diminished earning capacity as a result of the disability. But while they are intended to help a disabled veteran, and while the benefits themselves are not property to be divided in divorce, that doesn’t mean they are not relevant to the divorce.

VA benefits can be considered a source of income to the veteran. That means that they can be considered in calculations for alimony or child support. A 1987 U.S. Supreme Court case, Rose v. Rose, a veteran refused to make a child support payment, arguing that his VA disability benefit belonged to him alone.

The Supreme Court disagreed. It observed that while there is specific compensation available for the children of disabled veterans, the amount is so small that it does not make sense to conclude that Congress included that compensation to be all that the children of disabled veterans are entitled to. The Court concluded that one of the purposes of VA disability benefits was to enable the veteran to support his or her family.

If you are a veteran, the good news is that your estranged spouse is not entitled to a percentage of your VA benefits in property division. But if you are required to pay alimony or child support, those benefits may be considered part of your income in the child support or alimony calculation.

Military Retired Pay, the Survivor Benefit Plan, and Divorce

It makes sense that when a military retiree dies, their retirement pay ends. Unfortunately, a surviving spouse (or ex-spouse) may still need those benefits to make ends meet. The good news is that there is an option for military retirees to protect a survivor from the loss of those benefits: the Survivor Benefit Plan, or SBP. In addition to protecting survivors from the military retiree’s untimely death, the SBP can also protect against inflation or the survivor outliving the benefits. How can an ex-spouse benefit from the SBP?

A military retiree who chooses to enroll in the SBP can choose varying amounts of coverage; the more coverage, the higher the premium. The maximum SBP benefit upon the retired service member’s death is 55% of the “designated base amount” of their retirement pay. Upon retirement, the retiree can choose (designate) the base amount to be covered by the SBP. The designated base amount may not be greater than the full gross retired pay, nor may it be less than $300 per month.

The retiree may agree as part of a divorce settlement to designate a former spouse to receive coverage under the SBP. One important note: the retiree may only elect coverage for one spouse or former spouse. That means that a subsequent spouse could be left without coverage under the SBP. If a former spouse has been elected as beneficiary, the current spouse must be notified.

Servicemembers’ Group Life Insurance (SGLI) and Divorce

Servicemembers’ Group Life Insurance, or SGLI, is life insurance coverage available to individuals who meet certain criteria, such as being an active-duty member of the Army, Navy, Air Force, Marines, or Coast Guard. Qualifying service members are automatically enrolled through their service branch, and the monthly premium is automatically taken out of base pay.

The maximum coverage is $400,000. Covered individuals are free to reduce their coverage or eliminate it altogether. They are also able to change beneficiaries at will. Under state law, an ex-spouse named as a beneficiary of most life insurance policies is treated as if they had died before the insured; in other words, they do not receive the proceeds of the policy. However, SGLI is treated differently from other life insurance policies, a fact service members should note.

If a service member marries and designates their spouse as beneficiary under SGLI, that spouse will remain the beneficiary until the beneficiary is changed. That means if the couple subsequently divorces and the service member remarries, the new spouse will not receive the life insurance benefit if the service member dies UNLESS the service member changes the beneficiary designation using form SGLV 8286.

Failure to update SGLV 8286 could result in a huge windfall for an ex-spouse, and devastation for a current one. That’s enough money to make a lawsuit worthwhile, but a lawsuit will probably not have a favorable outcome for a surviving spouse who is not a named beneficiary.

If you are an active-duty member of the military or other qualifying insured, your best move is to revisit your beneficiary designation at least annually and in the event of any major life changes. If you are divorcing, you need not wait until your divorce is final to change your beneficiary. You can change your beneficiary to a child, sibling, parent, or anyone you choose.

Tricare Benefits in Divorce

If you are a service member or military spouse, you are already very familiar with Tricare, the military health insurance plan, and you may know something about the “20/20/20” rule. The rule is called that because military spouses who have been married for at least 20 years to a service member who has completed at least 20 years of service, with marriage and service overlapping by at least 20 years, get to keep the majority of Tricare benefits after divorce.

To be specific, you keep your Tricare health coverage, but not your dental coverage. No matter how long your marriage, your spouse’s service, or the overlap, your dental coverage terminates as of the last day of the month in which your divorce becomes final. However, you will retain insurance for medical care, prescription medication, and vision coverage

What about military spouses in long-term marriages where the overlap between the duration of the marriage and the length of service is not quite 20 years? It does seem unfair that spouses who do not quite meet the 20/20/20 criteria should lose all their health benefits in divorce. To avoid the abrupt cutoff, certain spouses are eligible for “transitional” benefits in divorce. If the marriage overlapped service by at least 15 years, the military spouse can receive one year of continued Tricare benefits after divorce.

Thrift Savings Plans and Divorce

The military equivalent of the 401(k) plan offered by private employers is the Thrift Savings Plan. Like a 401(k), the Thrift Savings Plan is a defined contribution plan. The service member contributes a regular amount, and the military may provide matching funds.

Like a 401(k) plan, the Thrift Savings Plan is considered an asset subject to division in a legal separation or divorce. As with a 401(k), the person who receives a portion of their former spouse’s Thrift Savings Plan may roll it over into an IRA or other qualifying rollover account. Unlike a 401(k), the Thrift Savings Plan does not need to be divided by a Qualified Domestic Relations Order (QDRO).

Post-9/11 GI Bill Benefits and Divorce

The traditional GI Bill was overhauled in 2008 through the Veterans’ Educational Assistance Act. This Act introduced the Post 9/11 GI Bill, which is very different from the traditional GI Bill. What they have in common is helping veterans further their education. The Post-9/11 GI bill provides benefits for up to 36 months and may cover tuition and fees, books and supplies, and offer a monthly stipend. All told, the benefit may offer value exceeding $150,000.

Benefits under the bill may be transferred to a child or spouse, so long as the transferee is not in college while the service member is still on active duty.

The service member may revoke a transfer of benefits at any time, but revocation is not automatic upon divorce. The service member may choose not to revoke a transfer of post-9/11 GI Bill benefits upon divorce. However, this benefit is not considered marital property subject to division upon divorce. That is to say, a military spouse has no legal right to the benefit in divorce unless the service member chooses to grant it.

If you are a service member or the spouse of a service member facing divorce, sorting out what happens to various military and veterans’ benefits can be confusing. We invite you to contact our South Carolina office to schedule a consultation to discuss your options.