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I was talking with a colleague the other day about divorce in the military and he referenced the “Pat Schroeder Rule.” While I remembered the Representative from Colorado, I had no idea what her “rule” was as it related to military divorces. After some research, I decided that he must have been referencing the law, The Uniformed Services Formers Spouses Protection Act. However, his understanding, based on that mythical rule, was that 10 years of marriage during military service mandated a split of military retirement benefits, was one of many misconceptions regarding military divorce I’ve run into over the years.
Here are several more prevalent myths:
#1 It happens more frequently for military couples. Hmmm. I wrote the headline before I did any substantive research. However, after scouring the internet, there doesn’t seem like there is an apples-to-apples answer to the question, so we’ll call it a myth. However, there’s no doubt that the military lifestyle is fraught with unique challenges to any marriage including frequent and lengthy separations, frequent moves and the fact that the non-military spouse’s career aspirations are often relegated to the back seat of the station wagon.
#2 It’s cheaper to go it alone The laws are complex and there’s a lot on the line. Spending money on quality counsel and advice during a divorce could save you a lot of headaches and, perhaps, a lot of money. Like so many aspects of military service, divorce has its own nuances and the stakes are high. The Department of Defense pegs the lifetime value of military retirement of an O-5 with 20 years of service at over $1.3M. I still remember reviewing a division of asset spreadsheet with horror after seeing the value of military retirement labeled “$0.” In that case, the retirement benefits had been earned, but the service member was a gray area reservist and wouldn’t be receiving any benefits for another 15 years. A solid six-figure asset went undivided. Speaking of help, you may also want to consult with an accountant or a financial planner to truly understand the financial and tax consequences of this life event.
#3 There’s a formula for who gets what.
The Uniformed Services Former Spouses Protection Act allows state courts to divide military retirement as property. But calculating the value of this inflation adjusted stream of income is tricky. Quality legal and financial counsel can help you accurately assess the value and negotiate an equitable settlement. Most state laws aim to see assets divided “fairly,” but fair doesn’t always look the same and there’s no mandatory formula.
#4 The divorce decree determines whether a former-spouse is covered under the Survivor Benefit Plan.
Regardless of what the divorce decree says, you must notify the Defense Finance and Accounting Services within a year after the divorce is final to be covered by former spouse SBP. Miss that deadline as a former spouse, and you will be out of luck when it comes to SBP. In a divorce, there are very specific rules and deadlines associated with what happens to this coverage. Knowing the rules, making the appropriate notifications and doing the survivorship planning in the context of the divorce will be part of you and your advisors’ job.
#5 Reserve retirement cannot be divided prior to receipt.
In contrast to the story I shared earlier, a reservist’s retirement can be divided, but it needs to be part of the divorce agreement. I’ve seen situations where reserve retirement, which typically begins at age 60, has not been properly accounted for during a divorce.
#6 The divorce decree determines if me or my former spouse maintains an ID card and health care.
The rules regarding TRICARE, ID cards and installation access among other military benefits are governed by Federal law, not a divorce decree. The court has no say in this. The 20-20-20 rule sums up eligibility for TRICARE and other benefits. It goes like this: If there is at least 20 years of creditable service towards determining retirement pay, at least 20 years of marriage and at least 20 years of marriage that overlap with that creditable service, the former spouse will be eligible for most military benefits including TRICARE. Remember, remarriage to a non-servicemember permanently eliminates eligibility for TRICARE.
#7 The marriage must last 10 years before military retirement can be split.
This, or some variation of it, is probably the most common military divorce misconception. As I noted earlier, there is no magic formula or required length of service. The court process will yield what it yields. However, for the non-military spouse to receive payments directly from the Defense Finance and Accounting Service, the marriage and retirement qualifying service must have overlapped for 10 years.
#8 $1,500 is equivalent to 50% of a $3,000/month military retirement check.
This myth may have you wondering if my calculator works. However, it’s another reason to engage the services of an attorney with experience in the military divorce arena is to ensure you get all your “i’s” dotted. Awards of military retirement as a percentage receive annual cost of living adjustments. If the division is stated as a dollar amount, it does not. So, while $1,500 is 50% of a $3,000 monthly retirement check in year one, if inflation runs at 2.5% it’s only 28% of the check in year 25.
Whether you’re the service member or the spouse, the one piece of advice that I’m very comfortable with in just about any military divorce situation is straight forward: Get help.
About the Author: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.
* Disclosures: "Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements."
The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.
No Department of Defense or government agency endorsement.
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What happens if no one, including DFAS, ever said anything about the need to notify DFAS within a year of the divorce for the spouse to receive SBP? We definitely wanted her to receive SBP had it been available, but it was cost-prohibitive! Is there always a fee involved?
Hi @Star Trek1,
Unfortunately, she’s probably out of luck. That’s why JJ mentioned the importance of getting good counsel that’s familiar with the nuances of Military divorce. While the cost of SBP can seem prohibitive, it is paid on a pretax basis and the program is subsidized by the government; that being said it generally represents a good value for the protection it provides.
Thank you for taking the time to comment in community. We look forward to more posts from you!
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