VA Disability in a Divorce

When a military veteran has a service-connected disability, she may be entitled to receive VA disability payments from the Department of Veterans Affairs. There are several VA disability and divorce issues you should know, from whether any of the disability payments are divisible as marital property to how they are treated for purposes of child support and maintenance.

All veterans with a VA disability rating of at least 10% are entitled to VA disability payments, not just military retirees. However, should a retiree have a disability rating of under 50%, military retirement is reduced, dollar-for-dollar, by the amount of benefits received. So why waive retirement to receive disability benefits? Two reasons - first, VA disability payments are not taxable, and second, the payments are not divisible by a domestic relations court.

Application for VA Disability Benefits

VA disability payments are not automatic - as with everything else in the military, there is a process, and this one requires that the retiree affirmatively apply for disability payments. 38 U.S. Code § 5101. The specific form used is the VA Form 21-526, Veteran's Application for Compensation and/or Pension. While disability applications often come contemporaneous with separation from the military, as long as the condition was service-connected, there is no deadline to apply. So when addressing VA disability and divorce issues, do not assume there will be no future VA benefits simply because the veteran is not currently receiving them.

A VA disability election is revocable, per DOD Financial Management Regulation, Volume 7B, Section 120205. Presumably a veteran would have little incentive to do this, unless to facilitate receipt of Combat-Related Special Compensation (CRSC). Revoking a VA disability election requires filling out the same VA Form 21-526.

VA Disability Payment Rates

The VA awards a disability rating between 10% and 100%, which, along with the number of family members, determines the amount of the servicemember's. The VA publishes Veterans Compensation Benefits Rate Tables annually in December.

The minimum disability payment, for a 10% rating is $153/mo in 2021, and the benefits increase up to $3653.89 for a 100% disabled veteran who has a spouse and child, and even more with more children or qualifying parents.

Note that a member’s rank, while affecting the retirement payment, does NOT affect the amount of disability paid. So a married member with no children and a 30% disability rating will receive the same payment  regardless of whether he was an Army Specialist (E-4) or a Colonel (O-6).

In other words, a 40% disability rating is not somehow multiplied against the military retirement itself - after all, veterans who did not retire also receive it. Instead, the monthly disability payment is determined solely by the VA rate table. And a retiree who receives $800/mo in VA disability benefits for a 40% rating will waive $800/mo of retirement, regardless of how much retirement she is actually receiving.

Disabled veterans can download a VA Benefit Summary Letter from the Veterans Administration website which provides all pertinent details needed for VA disability and divorce situations, including the disability rating, monthly payment, and when the payment amount was last changed.

VA Disability Payments After Divorce

As noted above, the VA disability benefits amount depends upon whether the veteran has a spouse, at least for ratings of 30% or higher. That means that upon divorce, the payment will decrease as there is no longer this portion of the payment. The payments with a spouse are about $50/mo higher with a 30% disability rating, more than $100/mo higher with a 60% rating, and about $200/mo higher with a 100% VA rating.

So if you are the veteran, when calculating post-divorce child support or maintenance, you will want to make sure that your income includes the reduced amount, and not the higher amount based upon being married.

VA Disability and Divorce - Not Marital Property to Divide

In our VA Waiver article, we discuss how the retirement payments waived to receive VA disability payments are not divisible, per 10 U.S. Code § 1408(a)(4)(A)(ii). But what about when the member is receiving disability payments when there has been no waiver?

Federal law does not authorize states to treat VA disability payments as marital property and divide them in a dissolution of marriage action. Mansell. Contrast that to retirement, where the Uniformed Services Former Spouses Protection Act explicitly authorizes states to divide military retirement at divorce.

VA Disability and Divorce in Colorado

The Colorado Court of Appeals has held that courts cannot divide VA disability payments as property in a divorce. Tozer (a case primarily concerned with Chapter 61 disability retirement, but it also addresses VA disability payments).

That limitation also means that courts cannot do some kind of "backdoor" division of VA disability benefits at divorce by giving the non-veteran spouse additional property to make up for not receiving a share of the disability payments. In a 2019 unpublished decision, the appellate court upheld a trial court determination that it could not consider a military member's VA disability payments for the purpose of awarding the spouse more of other assets:

"Thus, courts may not shift marital property to avoid the requirements of the USFSPA or Mansell’s holding, nor may they financially compensate a former spouse for not receiving a share of the military spouse’s disability pay.”

Copeland, ¶ 13 (Cleaned up).

For a more in-depth discussion of Copeland, see our blog post Veterans Benefits for Divorced Spouses – Not Divisible.

Division of VA Disability Payments After Deposit Into Account?

Once deposited into a marital account, however, disability payments may potentially be divided in a divorce, particularly if they are commingled with marital funds. In Green, the husband commingled his VA disability payments into a bank account with marital funds, and the trial court divided the account as a marital asset, including the disability deposits. The husband appealed, and the Colorado Court of Appeals affirmed.

Had the husband segregated his disability payments in a separate account, and not combined them with any other funds, he likely would have ended up with that account set aside to him as his separate property. Moreover, federal law also has an anti-assignability clause, which prohibits VA disability payments from being assigned:

“Payments of benefits due or to become due under any law administered by the Secretary shall not be assignable except to the extent specifically authorized by law, and such payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.”

38 U.S. Code § 5301(a)(1).

VA Disability and Child Support and Alimony

U.S. Supreme Court Decision on VA Disability

Veterans disability payments count as income for purposes of calculating child support and maintenance - the fact that they are tax-free payments means they are “invisible” to the IRS, but not invisible to other agencies or for other purposes.

The U.S. Supreme Court addressed the use of garnishing VA disability payments to pay child support, and noted that the benefits were intended not just for the veteran, but as the law stated, to “provide reasonable and adequate compensation for disabled veterans and their families.” Rose, at 630 (Emphasis in original).

In Rose, both sides conceded, and SCOTUS accepted that: “a state court may consider disability benefits as part of the veteran's income in setting the amount of child support to be paid.” Rose, at 626. Although this was not an explicit part of the Court’s ruling, state courts have interpreted it that way in subsequent years.

In his excellent treatise which every serious practitioner should own, nationwide military family law guru and retired Colonel Mark E. Sullivan notes "the near-universal rule among the states is that VA disability compensation payments are counted in the calculation of support." (Sullivan, Mark, The Military Divorce Handbook, 3rd Ed, p.318), with the only apparent exceptions being Texas and Alabama, with respect to alimony.

VA Disability May Be Garnished for Child Support & Alimony

Disability payments from the Veterans Administration are not normally subject to garnishment or assignment. 38 U.S. Code § 5301(a)(1). However, there is a limited exception in 42 U.S. Code § 659(h)(1)(A)(v) which authorizes garnishment only to the extent that military retirement was waived to receive VA disability. So there are two preconditions to garnishing VA disability payments for family support:

• The veteran has retired, not simply ETS'd, and
• The veteran has a disability rating of 40% or less, so there is a VA waiver in effect against the military retirement.

See our article on garnishment of military pay for more details on how to garnish family support from VA disability benefits.

VA Disability and Child Support in Colorado

Colorado's definition of income for purposes of calculating child support and maintenance is expansive: “Gross income' means income from any source and includes, but is not limited to…”, followed by a long laundry list of items which covers basically everything, including non-taxable payments such as trust income and gifts. C.R.S. 14-10-114(8)(c) (for maintenance) and C.R.S. 14-10-115(5)(a)(I) (for child support).

Perhaps more useful, VA disability payments are not on the very, very short list of payments excluded from the definition of income in either statute.

In a 1990 case, neither party disputed that the VA disability benefits counted as income to the spouse. Accordingly, and without any analysis, the Colorado Court of Appeals concluded that “disability benefits are expressly included as ‘gross income’” under Colorado law. Fain, at 1087. 

The Colorado Court of Appeals was a bit more explicit in 1991, rejecting a husband’s argument that counting VA disability payments as income to calculate alimony was effectively an impermissible division of the disability payments in violation of federal law:

“The federal law relied upon by husband is limited to a consideration of the treatment of military disability as marital property, rather than as a resource to be considered in determining the propriety and amount of an award of spousal maintenance, and therefore, it is inapplicable to the issues presented here. In addition, because of the qualitative difference between a maintenance award and a division of property, we are not persuaded by husband's argument that by awarding maintenance to wife, the court is indirectly accomplishing what it may not do directly.”

Nevil, at 1123.

Finally, in 2020, the Colorado Court of Appeals gave this issue a full analysis, and held that under Colorado law, Veterans Administration disability payments are properly included as income for purposes of child support and maintenance: "we conclude that veteran's disability benefits fall within the broad definition of gross income." M.E.R.-L., ¶ 21.

The Court considered and rejected every argument the retiree made trying to exclude the VA disability benefits from income, including:

• Only disability benefits from an insurance program count as income. ¶ 20.
• As the benefits are not taxable, neither are they income. ¶ 22.
• Federal law precludes states from treating VA disability benefits as income (The court found the opposite - that Rose authorizes states to do this). ¶ 23.
• States are preempted from counting disability benefits as income for child support purposes by the USFSPA and the U.S. Supreme Court decision in Howell by effectively dividing the VA payments. ¶ 28.

While the M.E.R.-L. decision was from Colorado, it referenced a host of decisions from other states which similarly treat VA disability payments as income for the purposes of child support and maintenance (¶ 25 and ¶ 29), and was further persuaded by the fact that every single state which has considered this issue has come to the same conclusion - that federal law does not prohibit states from treating VA disability payments as income for purposes of child support or maintenance.

For a complete discussion of the M.E.R.-L. decision, see our blog post VA Disability and Child Support – It’s Income.

What does this mean for VA disability and divorce cases? A military retiree with a 50% or higher disability rating receives both his/her full military retirement, and a full VA disability payment, not reduced by a VA waiver. Both of those payments count as income for purposes of child support and alimony, but only the military retirement itself is divisible as property in a divorce, not the VA disability payments.

Colorado Will Not "Plus Up" VA Disability Payments to Account for Taxes

Colorado does not “plus up” disability payments to take into account their tax-free status. So while receiving $2000/mo disability might be the equivalent of a salaried person receiving $2400 and paying taxes, the court must only use the $2000/mo, and not impute additional income for the fact that the VA disability is not taxable. Fain..

This is inconsistent with the way Colorado treats tax-free maintenance, which is plussed up by either 20% or 25%, depending upon incomes, for purposes of the child support worksheet. No one ever accused the law of being completely principled!

VA Disability Rating Not Mean Unable to Work

A military member who is receiving a full retirement, as well as VA disability, may well have enough to live on without working. And after 20+ years of service to the nation, the retiree may well have earned the right to kick back, believing that the fact he has an 80% disability rating means he should not be required to work.

However, a VA disability rating is primarily intended to compensate the veteran for medical impairment, and not necessarily to replace lost wages. But the loss of ability to work is one of the factors the VA considers when determining ability to function:

“The basis of disability evaluations is the ability of the body as a whole, or of the psyche, or of a system or organ of the body to function under the ordinary conditions of daily life including employment.”

38 C.F.R. § 4.10 (Emphasis added).

And as the U.S. Supreme Court recognized, benefit calculations include "the degree to which the veteran's ability to earn a living has been impaired." Mansell, at 583.

A 100% disabled veteran is entitled to the maximum VA disability benefits, without more, does not mean the veteran is unable to work productively. Without a total disability determination, a VA rating is the sum of various conditions, rather than an indication of ability to work - that determination is one typically made by the Social Security Administration when deciding whether to pay SSDI.

The VA does have a process by which a veteran can claim total disability has rendered him unemployable, and therefore seek additional compensation utilizing a VA Form 21-8940, Veteran's Application For Increased Compensation Based On Unemployability.

A member qualifies for a total disability determination:

“when the disabled person is, in the judgment of the rating agency, unable to secure or follow a substantially gainful occupation as a result of service-connected disabilities”

38 C.F.R. § 4.16

So while it is still possible for a veteran with a regular disability rating to put on evidence of his inability to work, the family law judge is more likely to accept he is unemployable if he has a total disability determination from the VA, or Social Security Disability.

And certainly the absence of any total disability determination can be argued as an indication that the federal government has not found the medical conditions render the military member unable to work. 

VA Waiver of Military Retirement

When a member with a non-combat related VA disability rating below 50% retires from the military, he/she must waive military retirement, dollar-for-dollar, in order to receive the VA disability payments. This reduces the disposable retired pay available for division in a divorce, thereby harming the other spouse’s economic interests.

While most states previously ordered the retiree to indemnify the spouse for that reduction, the U.S. Supreme Court put a stop to that in 2017 with the Howell decision, holding that ordering the retiree to indemnity the other spouse for the VA waiver was an impermissible division of VA disability in violation of federal law.

For a more complete discussion of the VA waiver in a VA disability and divorce situation, see our VA Waiver in a Divorce article.

VA Disability and Divorce FAQ

If you need a Colorado Springs attorney for your military family law case, we would be honored if you would consider the veterans divorce lawyers at Graham.Law. Military divorce is not easy, but whether you are active duty, retired, a veteran receiving benefits, or a family member, we understand VA disability and divorce, and our attorneys understand your situation and can help.