The U.S. Supreme Court recently struck down an opinion from the Arizona Supreme Court in the case Howell v. Howell.  This case is important reading for any military members and their spouse who are divorced or considering divorce.

In the Howell case, Mr. Howell served in the military and earned military retirement benefits as part of his compensation for that service.  Military retirement benefits are community property and divisible in a divorce.  Consequently, when the Howells divorced, Mrs. Howell was awarded a portion of the military retirement in Mr. Howell’s name, and she began collecting her share of the monthly benefit after Mr. Howell’s retirement.

However, Mr. Howell then qualified to receive military disability benefits due to a service-connected injury.  When a service member qualifies to receive disability benefits, the member is required to waive a corresponding amount of retirement benefits.  Since disability benefits are not taxable income, the service member will generally accept the disability benefits in lieu of retirement benefits.

Mr. Howell therefore accepted the disability benefits, and he waived his right to receive the corresponding military retirement.  However, his actions created a new problem for Mrs. Howell.  Military disability benefits are not divisible community property.  In fact, the statute A.R.S. §25-318.01 specifically says that military disability benefits cannot be divided between spouses.  Mr. Howell’s unilateral choice to waive the military retirement benefit caused Mrs. Howell’s payments to suddenly go down each month without her consent, even though she had a vested property right and a court order entitling her to receive that money.  As an added complication, A.R.S. §25-318.01 was passed by the legislature after the Howells divorced, so there was a question as to whether the statute should even apply to their case. 

A.R.S. §25-318.01 also prohibits the court from entering an order requiring the service member to indemnify the spouse for the loss of the military retirement benefit waived to obtain a disability benefit, or for the military spouse to be awarded different property as compensation for the lost benefit.  As might be expected, litigation began between the Howells to determine if Mr. Howell could deprive Mrs. Howell of her retirement benefit by selecting disability status.

The Arizona Supreme Court ruled in Mrs. Howell’s favor.  The Court found that Mrs. Howell had a vested property right to receive the military retirement benefit, and that her right to receive that property came before the passage of A.R.S. §25-318.01.  Furthermore, Mr. Howell did not have the right to change her property right without her consent.  Mr. Howell appealed this decision to the United States Supreme Court.

The United States Supreme Court recently ruled in this case, and they reversed the Arizona Supreme Court and found in Mr. Howell’s favor.  The United States Supreme Court found that Mrs. Howell’s right to receive the military retirement was just an expectancy to receive that property that was subject to removal if a disability election was selected.  The U.S. Supreme Court found that A.R.S. §25-318.01 applied in the case and prohibited the Arizona court from finding in Mrs. Howell’s favor.

How will this change how we practice in this office?  This case is a huge red flag and will warrant discussion in every divorce involving a military member.  We have a case right now where we represent a woman who is divorcing a man who served in the military for twenty years.  The man already has a partial disability rating, and it is possible that he could ask for his disability rating to be reviewed and increased in the future.  If he does this and is successful, any military retirement received by my client could suddenly be reduced or eliminated entirely.  We will therefore work to structure a settlement that protects the client by awarding her different property in lieu of the military retirement to make sure that the assets awarded to her cannot be taken away in the future.  This will allow the client to move forward from the divorce with greater financial security and a firm understanding of her financial situation.

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