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Processing The Military Divorce Case; What You Must Know

Processing The Military Divorce Case; What You Must Know. Peter Cushing, Orlando, Florida. McCarty v. McCarty. Decided June 26, 1981 U.S. Supreme Court Federal law precluded California court from dividing military retirement FSPA overruled McCarty. McCarty Rationale.

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Processing The Military Divorce Case; What You Must Know

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  1. Processing The Military Divorce Case; What You Must Know Peter Cushing, Orlando, Florida

  2. McCarty v. McCarty • Decided June 26, 1981 • U.S. Supreme Court • Federal law precluded California court from dividing military retirement • FSPA overruled McCarty

  3. McCarty Rationale • Grave harm to clear and substantial federal interests, such as: • Providing for retired servicemember in old age • Encouraging enlistment and reenlistment • Orderly promotions • Encouragement of a youthful military • Dividing pensions would discourage purchase of an annuity for surviving spouse.

  4. Military vs. Civilian Pensions • Retired officer is subject to recall • Continues to be subject to UCMJ • Restricted in post-service activities, including employment • Military retirement historically considered reduced pay for reduced services, not a pension • No “property” concept ever existed in military compensation laws or case law

  5. FSPA • Overruled McCarty • USFSPA • Found at 10 USC 1408 • Effective February 1, 1983 • Retroactive to June 25, 1981, one day prior to McCarty decision • Sponsored by Patricia Schroeder (D-Co)

  6. To Whom FSPA Applies • “Uniformed Services”- Army, Navy, Air Force, Marines, Coast Guard • Commissioned Corps of the National Oceanic and Atmospheric Administration and Public Health Service • Active duty, retired, and Reserve/Guard (whether active duty, inactive status, or retired, pay and non-pay categories)

  7. WHAT FSPA DOES • Preempts state law • Allows state courts to treat military pension either as property solely of the member or as property of the member and spouse beginning June 25, 1981 • 1990 amendment prevents former spouses from returning to state court on “old” divorces unless decree divided pension or reserved jurisdiction to do so • Allows division of “disposable retired pay” • Ten-year rule • Special jurisdictional rules

  8. SPECIAL JURISDICTIONAL RULES • Residence in state, but not due to military assignment • Domicile in state • Consent to jurisdiction • Case law: request for affirm. relief = consent • * Practice Pointer: serve in state- jurisdiction for child support/alimony; availability of garnishment through DFAS • Ten-year rule

  9. “Disposable Retired Pay” • Subtract from gross retirement pay- • Debts owed U.S. Government • Survivor Benefit Plan premium • Court-martial fines and forfeitures • Amounts waived to obtain disability pay • Taxes of each retirement pay recipient are separately withheld, 1099’s issued to each party. • 50% maximum

  10. COVERTURE FRACTION • DEFERRED DISTRIBUTION METHOD:Months of marriageMonths of military service = % of future monthly retirement payments earned during the marriage X 1/2 of military member’s disposable retired or retainer pay as defined by law • Deloach v. Deloach 590 So. 2d at 964

  11. BETTER COVERTURE FRACTION • 50% of the following: • “Disposable Retired Pay” as a Major with 15 years of service times a fraction … • numerator = yrs of marital pension service • denominator = yrs of service at retirement

  12. BETTER COVERTURE FRACTION • Legal Malpractice Now….

  13. RESERVE / GUARD COVERTURE FRACTION • Marital years of service over total years of service • Marital retirement points over total retirement points • Discovery: need points record • Pre-marital active service? • Age 60: present value issue

  14. RESERVE / GUARD COVERTURE FRACTION • LEGAL MALPRACTICE NOW

  15. MILITARY PENSION DIVISION ORDER (not QDRO) • Certification of ten-year rule • Provide marriage license • Certification of compliance with Servicemember’s Civil Relief Act (active duty) • Payment of fixed dollar amount or % • Percentage includes COLA • Certain formula orders now accepted.

  16. IMMEDIATE OFFSET • Determines marital account balance • As of jurisdiction’s “cut-off date” • Reduced to present cash value • Immediate distribution by offsetting against other assets • Not “if, as, and when” • Preferred approach

  17. FLORIDA’S APPROACH • 61.076- All vested and non-vested pensions • Acquired during the marriage • Are marital assets • Subject to equitable distribution • Not disability pensions • Effective October 1, 1988 • Also case law

  18. FLORIDA CASE LAW • Diffenderfer (Fla. 1986) • Preferable to treat pension as asset • May be treated as source of support • Lengthy periods of separation? • Pension offset by other assets/liabilities? • 61.075 considerations always pertinent • Judicial discretion

  19. DEFENSES TO PENSION DISTRIBUTION • No jurisdiction • Disability • Merger post judgment Moved to Puerto Rico • “Early Out” defense • Immigration to foreign land • Death

  20. FOUR MISTAKES I DON’T MAKE ANY MORE • Omitting the pension as an asset • Including the pension as an asset in a 2-year marriage • Forgetting to insure the pension • (...and then the member dies) • (or insuring it with SGLI only) • Distributing the pension w/o jurisdiction

  21. FIVE MORE MISTAKES (& I don’t make them any more either!) • Forgetting to serve the “deemed election” letter • Forgetting to plan for disability retirement • Forgetting to plan for SSB or VSI • Forgetting to plan for merger of retirement • Forgetting to reserve jurisdiction

  22. LOCKING IN THE MILITARY PENSION • Survivor Benefit Plan elected? • Former spouse benefits • “Deemed election” provisions • SGLI or VGLI? (Ridgeway decision) • Who pays? • Malpractice pitfall

  23. ADVANTAGES OF SBP • Available without qualifying • Income for life • Tax-free • Guaranteed benefit • Cost-of-living adjustment • Cannot be cancelled

  24. DISADVANTAGES OF SBP • Inflexibility • Premiums are expensive; may increase • No cash value • VA offset • Social Security offset • “Deemed election” problems • Court’s discretion

  25. DRAW DOWN, DISABILITY, MEDICAL RETIREMENT • 10 USC 1408 • “Disposable Retirement Pay” • U.S. v. Mansell: no garnishment • Use of alimony? • Reservation of jurisdiction? • Modification of property? • ABA model clauses • SSB/VSI

  26. MILITARY MEDICAL BENEFITS • 20/20/20 marriage? Reserve Time Counts • 20/20/15 marriage? • Commissary, theater, exchange benefits • “Military COBRA plan” now available • Premium payment required • TRICARE benefits for kids • DEERS enrollment

  27. SOLVING THE SCRA (SERVICEMEMBER’S CIVIL RELIEF ACT) PROBLEM • Prejudice/material impairment to defend • By reason of active military service • Leave on books? • Current with family obligations? • Presumptive evidence of bad faith • No default/appointment of counsel • Certification of compliance- FJ

  28. COLLECT YOUR ATTORNEY’S FEES • From your client • From adversary; need income disparity • Magic Words to garnish • 42 USC 659 • Awarded as child support or alimony, per CFR language • Assign alimony arrearages to counsel as method of payment, then garnish

  29. GARNISHMENT OR INVOLUNTARY ALLOTMENT? • 42 USC 659- Waiver of sovereign immunity • Child support/alimony/DFAS • Remuneration for employment • Disposable earnings= basic pay, BAQ, BAS, Sea Pay, Special Pay, etc. • 2-month support arrearage; alimony and c/s • May eliminate need for contempt • 60% or 50% limit

  30. MERGER OF MILITARY RETIRED PAY INTO CSRS/FERS RETIRED PAY • Prevent circumvention of order • No waiver of retired pay • Enhance CSRS/FERS annuity • Effective January 1, 1997 • Member must authorize Director to pay annuity to former spouse from FERS or CSRS; 5 USC 8332 (c)

  31. VA Disability Fix • 42 USC 659; eff. Feb. 1997 • “Moneys subject to process” • Paid by Secy of Veterans’ Affairs • As compensation for service-connected disability • If member waived retired or retainer pay; i.e was eligible for longevity retirement • For child support, alimony, fees and costs

  32. VSI/SSB Fix • 5 CFR 581.103 • Garnishment for alimony and child support • Office of Personnel Management • Personal Responsibility and Work Opportunity Reconciliation Act of 1996 • Not equitable distribution

  33. CONCURRENT RECEIPT • FY 2004 Defense Authorization Act • 10 U.S.C. sec. 1414 • Concurrent Disability Pay • Retirees with 20 or more years service • Disability Rating of 50% or higher • Phase in period over 10 years before full concurrent receipt • 100% disability rating gets full CDP

  34. CONCURRENT RECEIPT CONTINUED • Former spouses with pension award need to contact Defense Finance to resume payments • Justification may exist to reopen final judgments to obtain pension award • Modification of alimony award may be justified

  35. PROCESSING THE MILITARY DIVORCE CASE; WHAT YOU MUST KNOW Peter Cushing

  36. THE S/A AT DIVORCE HEARING... ?

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