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Dividing military retirement during divorce: What you need to know

Military divorces differ from a civilian divorce, especially when it comes to dividing retirements, property and assets. Understanding the way retirement and other assets are divided during divorce can help you better prepare for the future.

The impact of the Uniformed Services Former Spouses Protection Act

The Uniformed Services Former Spouses Protection Act gives each state the authority to divide military retirement during divorce. The court will have to calculate the value of the retirement benefits, adjust for inflation and account for any other nuances that may impact the final amount divided between spouses.

In order for an ex-spouse to receive retirement payments from the Defense Finance and Accounting Service (DFAS), the marriage must have lasted a minimum of 10 years with a spouse serving at least 10 years of service in the military during the same time period. An ex-spouse is eligible to receive up to 50 percent of military retirement pay under current guidelines. This can be in addition to receiving child support and alimony.

Even if you do not meet this 10 year guideline, you may be able to receive a portion of the retirement payment but it will depend on several factors. It will not be through DFAS, and your rights must be stated in your divorce settlement agreement, final orders and a separate Domestic Relations Order.

The Survivor Benefit Plan provides income to surviving spouses when a retired military member passes away. However, you only have one year after your divorce to notify the Defense Finance and Accounting Services of this change in order to still be eligible. You can still receive coverage after divorce, but you need to follow strict rules immediately after your divorce to remain eligible.

A Warning Note:

One major caveat to receiving military retirement benefits is the requirement for the service member to serve for at least 20 years to qualify for retirement pay. If the service member quits after 18 years, he or she is not entitled to their military retirement since the 20 years was not met. Spouses need to keep this in mind when dividing assets during divorce, especially if the spouse has not complete at least 20 years of service yet.

How to prepare for divorce

You should make a list of all your assets and benefits (including retirements), noting the value before and after taxes. Keep in mind that traditional 401(k)s, IRAs and military TSPs are subject to being taxed. A Roth IRA or 401(k) is not. The reason you need to consider the tax implications is because it can significantly change the value you will receive.

Dividing retirement benefits and other financial accounts is a serious issue that can play a huge role in your monthly budget and long-term financial goals. It is important to make sure this is handled correctly from the start.

Due to the complex nature of military divorce and the nuances of calculating support and dividing retirement benefits and other assets, it is important to work with a lawyer who has experience navigating the complex issues of military divorce. Failing to do so could result in a poorly-drafted divorce settlement that will do you no favors when it comes time to retire.

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