The U.S. military provides very generous pensions. A 20-year veteran can retire and collect 50 percent of their base pay and cost-of-living increases for the rest of their lives. Dividing military pensions in a divorce is important for spouses but may be a complicated issue in mediation or settlements.
Amount and filing
The pension amount allocated to the servicemember’s former spouse may depend on whether the divorce is filed in California or another state. Each state has their own laws governing the division of assets.
This issue may be more complex than it appears because military families move often, and the divorce should be filed where the servicemember is a resident or domiciled. Spouses may also agree to a state for filing their divorce.
Allocation
A service member’s length of service may play an important role with allocating their pension. It can be many years before a divorced spouse can get access to their share of the pension.
Spouses may trade their share of a future pension in return for getting significant assets, such as equity in their home. Taking this lump sum now avoids the possible risk of service members losing their pension by leaving the military before they are eligible for retirement, being dishonorably discharged, or because of their death.
Waiting until the ex-spouse is eligible for full pension benefits also has other disadvantages. It could be many years until the service member’s spouse receives any money. Recipient spouses may be unable to afford waiting. For example, they may have dropped out of the workforce or given up college or training because of the constant relocation of military families.
Other options include taking a lump sum payment instead of monthly support payments. There is a calculated risk, however, that full pension benefits may ultimately exceed the value of any lump sum payments.
These issues may be resolved in mediation or in a prenuptial agreement before marriage. An attorney can discuss the best choices for property division and help spouses seek a fair and reasonable agreement.