Every divorce is unfortunate and stressful; the unique stresses of a military divorce can make it even more difficult to make necessary decisions for the good of the family.
DIVORCE – MILITARY DIFFERS FROM CIVILIAN
Military divorces sometimes include elements that make them more complicated than civilian divorces. Military couples must be aware of factors that affect their divorce as a result of military service. Special knowledge of laws and familiarity with issues is needed when it comes to military divorce, such as:
- Military pay
- Military retirement pay
- Military Disability pay
- Military pension division orders trough DFAS
- Survivor benefit plan (SBP)
- Military housing
- Medical and other military benefits
- Separation bonuses
- Transfers to the Reserve/Guard
- Uniform Services Former Spouses’ Protection ACT
ARM YOURSELF WITH INFORMATION
The following tips will help to navigate the roadblocks and landmines often present in military divorce:
Track and understand gross income and all factors that impact Modified Adjustable Gross Income (MAGI).
Be aware of the Combat zone exclusion– Service in a combat zone may mean that a portion of pay is excluded from income.
Be aware of the 2003 Military Family Tax Relief ACT– This relates to the sale of the home, often resulting in relocation. The new law offers an exception to the use and ownership (2 out of 5 years) rule for the service members in “qualified official extended duty.” The rule is extended from five years to ten years for the single property.
Take advantage of education credits– The service member, spouse or a dependant is entitled to tax credits or deductions if enrolled in a college or vocational school.
Be aware of the automatic two-month extension– Check with an accountant to see if qualified.
Permanent Change of Station and Child Tax Credits– These credits can alleviate the cash flow burden on moving families.
Falling short of 20 years– Divorcing before the service member attains 20 years of creditable service to qualify for retirement pay can be detrimental to the non-military spouse.
Military pensions subject to different rules than QDRO– Divisible in the event of divorce, military pensions are subject to different rules than the Qualified Domestic Relations Orders (QDRO) for private retirement accounts or Domestic Relations Orders (DRO) for state and municipal pensions.
Alimony and child support– are also subject to special rules.
Lodging or food in lieu of BAH or BAS– Depending on the state, family law courts may also assign/credit income to a service member who receives lodging or food in lieu of BAH or BAS.
Military housing is considered an “in-kind payment” – much like a company car provided by a private-sector employer.
When divorce is inevitable, it’s important to do the financial homework. If necessary, seek professional help. A divorce financial analyst, especially one with knowledge about military divorce, can help a military couple avoid financial pitfalls so common when emotions affect decision-making.