Planning for Your VA Disability After a Divorce
Listen, divorce happens. And in the military, it actually happens a lot. The military divorce rate sits at 3.5%, higher than the national civilian rate. Deployments only up the risk. Veterans with PTSD and TBI face compounding vulnerabilities in both marriage and managing finances during and after divorce.
Divorce is hard enough, but veterans have a little something extra with which to contend: They have to juggle their state’s family court (where divorces are decided) and the federal agencies that govern VA disability and military retirement.
Oh yeah, and this is all going down while figuring out major life changes, like which dumpy one-bedroom apartment to rent, swiping for dates on Tinder, and if a race car bed is right for you.
One breath of fresh air up front is that federal law gives VA disability benefits significant protection from divorce attorneys. But you should still know what protections are out there and where your top cover ends.
Simply put: You do need to keep tabs on your finances. Everyone knows they need to lawyer up in a divorce, but this is also the time to accountant up.
What the Courts Can and Can’t Do
She (or he) can take the house, the kids, and the ice cube trays out of the freezer, but the Uniformed Services Former Spouses' Protection Act (USFSPA) says she (or he) can’t take VA disability compensation. It’s excluded from the "disposable retired pay" state courts can divide as marital property.
For those in the back: No family court judge can award your ex any or all of your monthly disability check. The Supreme Court upholds this law every time. Even if a plucky court does try to divide it as marital property, the VA just won’t do it.
But here’s the trick: Just because your VA disability can't be divided as property doesn't mean a court will ignore it. They see VA disability compensation. And they count it as income when calculating child support and alimony.
And because of its tax-free nature, VA disability can make a veteran appear to have more available income than a civilian earning the equivalent gross amount from a taxable job. Some state courts even gross up VA disability income when calculating support, which can raise the support obligation.
Plan accordingly.
When Your Money Is ‘Commingling’
Veterans who live in community property states face an extra fun variable that might be missing from any legal brief, and it might make you soil your actual briefs.
Federal law protects VA disability compensation, sure, but that protection applies to the source of the funds, not to every account those funds touch.
If you're depositing your disability check into a joint checking account that also receives your spouse's income, you've potentially "commingled" it with marital assets. And depending on the state, commingled funds can lose their protected status and become subject to division.
It’s an easy fix, but you need to do it before filing for divorce. So put your VA check in a separate bank account. Don't mix it with joint accounts. Keep records showing where the money came from.
Keep your receipts! Always keep receipts!
Retirement Pay
VA disability and military retirement pay have entirely different rules. Under the USFSPA, retirement pay can be divided as marital property. If your ex gets the court order, a portion of your retirement goes directly to them, up to 50% (or 65% if child support is also involved).
Many veterans waive a portion of their military retirement pay to receive VA disability compensation because the two benefits traditionally couldn't be collected dollar-for-dollar (known as Concurrent Retirement and Disability Pay, or CRDP). When a veteran waives retired pay, that waived portion shifts to the VA.
The ex-spouse who had a USFSPA order on retired pay will see their share of that income reduced when it becomes VA disability pay.
But there’s always a catch: If CRDP increases the veteran's disposable retired pay, an existing USFSPA order may give the former spouse a larger share of that restored amount, even as the VA disability portion remains protected.
An accountant familiar with military pay and a family law attorney should review how CRDP interacts with any existing domestic relations order in your case. Trust us, this isn't a DIY calculation. I wrote this and still only kind of11 understand it.
The 20/20/20 Rule
If your marriage overlapped with at least 20 years of military service, and the service itself lasted at least 20 years, your former spouse may be entitled to continued TRICARE health coverage, commissary access, and a military ID regardless of what happens to VA disability.
This is the "20/20/20 rule," and it operates independently of VA disability compensation.
If the overlap is between 15 and 20 years (the "20/20/15 rule"), the former spouse may qualify for a limited period of transitional TRICARE coverage, which terminates if the former spouse remarries.
None of this comes from a VA disability check, but it's part of the full financial impact of a military divorce, and everyone involved needs to understand the benefits that survive the marriage and which don't.
The Survivor Benefit Plan
Military retirees going through divorce have to make a Survivor Benefit Plan (SBP) decision. Not only is it one of the most consequential financial calls you'll make (even if you weren’t getting a divorce), but the window to make it is a slim one to boot.
When military personnel retire, they elect whether to cover their spouse under SBP. Those divorced after retirement have one year from the date the divorce is final to elect "former spouse" coverage. If you miss that window, your ex-spouse loses coverage. Like, forever.
But SBP coverage for a former spouse can be ordered by the court and written into the divorce decree. If it does, both you and your erstwhile spouse must ensure it's actually processed by DFAS within one year of the divorce.
Decrees that require SBP coverage get lost in the bureaucracy sauce all the time, so the onus is on you (and technically your ex-spouse). The court can’t make sure it happens, but it can throw your butt in jail if you don’t.
Or more likely, it will make you pay for the coverage your ex would have received.
SBP pays 55% of the elected base amount to a surviving former spouse for life, indexed to inflation. Whether that's the right financial move in your specific situation depends on your ages, health, other assets, and income.
You Ex Can Go to the VA Directly
The divorcing veteran’s nightmare scenario is one you may never have thought possible: the VA redirects a portion of a veteran's disability compensation directly to a dependent spouse, former spouse, or child, bypassing the veteran entirely if the veteran fails to provide adequate financial support.
It’s called VA disability apportionment. And no, it can’t be ordered by a judge. Your ex has to ask the VA for it. Most of you are currently hoping your exes never find out about this option.
Before you freak out, know that apportionment isn't automatic, and it isn't easy to obtain. A former spouse or dependent must apply to the VA, demonstrate financial need, and show that the veteran isn't supporting them.
The VA will weigh the veteran's financial needs against the dependent's claim and make a judgment call. Veterans can even appeal an apportionment if it creates genuine financial hardship.
Separately, and importantly, for veterans who waived military retired pay to receive VA disability compensation, that compensation can be garnished for child support and alimony. This exception allows courts to reach VA benefits in support cases where the veteran has traded out taxable retired pay for tax-free disability compensation.
The 10/10 Rule
There are a lot of these rules, I know. But there’s a reason for that. Veterans listen to their buddies way too often.
You've probably heard of the "10/10 rule." Moreover, you probably heard from someone on Facebook or at the VFW translate it to something along the lines of: "If we weren't married for 10 years, she can't get anything."
Cute, but that's not what the 10/10 rule is.
The Uniformed Services Former Spouses' Protection Act's 10/10 provision governs whether the government can make direct payments to a former spouse from military retired pay. It does not determine whether a former spouse has a claim to retired pay. That's decided by the court under state laws.
If a couple happened to be married for eight years during six years of military service, a court might still award the former spouse a share of the retirement.
The only thing the 10/10 rule affects is the payment: DFAS will direct-pay the former spouse if the marriage and service overlap 10 years, but if it doesn't, the veteran receives the full check and is responsible for paying the former spouse's court-ordered share themselves.
Involve a Financial Counselor
Not every veteran needs a financial planner for divorce. But those receiving both VA disability and military retirement pay, if SBP is on the table, or if significant assets like a home purchased with a VA loan are involved, might want to consider it. These systems are complex enough that professional guidance quickly pays for itself.
The VA's Vet Centers provide free financial counseling as part of their readjustment services. The VA's FINVET program through the MIRECC at the VA Rocky Mountain Mental Health Institute provides veteran-specific financial literacy tools, including resources designed for veterans navigating major life transitions (like a divorce).
The only people who get out of divorces clean are people with an airtight prenup. If you’re reading this, we’re guessing you did not get a prenup. But you can still come through in a strong financial position with good legal and financial help early enough in the process.
