Is Military Disability Pay a Marital Asset?

Is military disability pay a marital asset? That question often causes confusion during divorce, especially when one spouse served in the armed forces. Disability benefits follow different rules than military retirement pay, and the difference matters. While one can be divided in court, the other is often protected under federal law. Knowing how the system works helps both parties avoid surprise outcomes and plan for fair settlements.

What Counts as Military Disability Pay?

Military disability pay is compensation for veterans who suffered service-related injuries or conditions. The Department of Veterans Affairs (VA) awards this pay based on the severity of the disability, ranging from 0% to 100%. Veterans may receive this pay in addition to, or instead of, military retirement benefits.

Disability payments serve as compensation for loss of function or reduced ability to earn. The amount often depends on a rating system, with higher ratings bringing higher monthly checks.

Types of Military Disability Benefits

Several programs provide benefits to disabled veterans. Each comes with its own set of rules that affect divorce outcomes.

VA Disability Compensation

This is a tax-free monthly benefit given to veterans with service-connected disabilities. It is not tied to years of service and does not require retirement.

Military Retirement Waiver for Disability Pay

Retirees can choose to waive part of their military retirement to receive VA disability pay. This often allows them to avoid taxes on that portion of income.

Combat-Related Special Compensation (CRSC)

This benefit gives additional pay to eligible retirees with combat-related disabilities. It’s not taxable and is separate from VA disability compensation.

Concurrent Retirement and Disability Pay (CRDP)

Veterans who meet certain requirements may receive both retirement pay and disability pay without waiving one or the other. CRDP restores the amount waived for VA benefits.

Federal Law and Property Division

In divorce, courts split marital property based on state laws. But when it comes to military disability pay, federal law takes control.

The Uniformed Services Former Spouses’ Protection Act (USFSPA) allows courts to treat military retirement pay as marital property. However, it clearly excludes VA disability compensation from division.

In 1989, the U.S. Supreme Court decided in Mansell v. Mansell that states cannot treat waived military retirement pay—used to receive VA disability benefits—as community property. This ruling limits what a non-military spouse can claim.

Can a Spouse Claim Part of Disability Pay?

In most cases, courts cannot divide VA disability compensation directly. It is considered separate income meant for the veteran alone. However, there are indirect ways it may impact a divorce case.

Disability Pay as Income for Support

While courts cannot divide disability pay, they can count it as income when calculating alimony or child support. That means a veteran’s payments may increase their financial responsibility, even though the funds are not split.

Disability Pay Replacing Divisible Retirement

Some veterans waive a portion of their retirement pay to receive disability compensation. In doing so, they reduce the amount of retirement pay available for division. This move can lower what a spouse receives.

Courts often cannot stop this waiver. However, some states award indemnity to the non-military spouse if they lose expected benefits due to the waiver. That issue remains controversial, and outcomes vary by state.

Disability Ratings and Divorce Timing

When the veteran received a disability rating can change how the court views the asset.

• If the disability rating came before marriage, courts treat it as separate property.
• If the rating came during the marriage, some spouses argue it should count in asset division, but federal law still blocks direct division.
• If the veteran receives a rating after divorce, it usually has no impact on marital asset division, though it may change support obligations.

Retirement Pay and Waivers: A Common Dispute

To receive tax-free disability pay, many veterans waive an equal amount of their retirement pay. This often frustrates former spouses who lose part of their court-awarded retirement share.

Courts in some states allow adjustments or offset payments. Others say the spouse cannot recover lost benefits because the law prohibits it.

What About Survivor Benefits?

VA disability pay stops when the veteran dies. Spouses cannot receive a portion after the veteran’s death unless they qualify for Dependency and Indemnity Compensation (DIC). However, DIC is not automatic and depends on several factors.

Retired veterans may also elect the Survivor Benefit Plan (SBP), which provides ongoing payments to a surviving spouse. SBP premiums are paid with retirement pay, not disability pay.

State Differences in Treating Disability Pay

States cannot divide VA disability directly, but how they handle the consequences of disability pay varies.

Some courts may:

• Treat waived retirement as income for support
• Order compensation for lost retirement benefits
• Consider disability income when dividing other assets

Others strictly follow the federal limits and deny compensation for waived retirement.

Veterans and spouses should consult a lawyer familiar with military divorce to understand local laws.

Protecting Your Rights During Divorce

If you or your spouse has military disability pay, you need a clear strategy to protect your interests. Veterans should track their pay sources and rating history. Spouses should know what to expect in court and ask for financial disclosures.

Tips for Veterans

• Keep copies of VA rating decisions
• Understand how your pay structure affects divorce
• Talk to a lawyer before changing your benefits

Tips for Spouses

• Ask for a full breakdown of military income
• Request financial records and retirement details
• Speak with a lawyer about your state’s treatment of waived pay

Final Thoughts

Military disability pay often falls outside the scope of property division in divorce. Courts cannot split it directly, but they can consider its impact on support and other financial matters. Veterans and spouses should both understand the limits of federal law and the possible outcomes based on their state.

Getting clear legal advice makes a difference. Military divorce involves more than standard property division. When disability benefits enter the picture, the rules change. Being prepared helps both sides handle the process with fewer surprises.

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