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KEEP YOUR HANDS OFF MY DISABILITY PAY! SERVICE-CONNECTED DISABILITY AND ALIMONY

There is no doubt, military veterans and their spouses each sacrifice to allow the family to function while the service member is deployed or otherwise serving our country.  A divorcing couple with military retirement, disability benefits and child support in issue, may square-off when arguing over the “proper” community property division and support.

Effective October 1, 2015, AB 140 will become law as part of Nevada Revised Statute Chapter 125 (Dissolution of Marriage) which will be amended to clarify and confirm Chapter 11 of Title 38 of the United States Code, the existing federal law which states federal disability benefits awarded to veterans for service-connected disabilities pursuant to shall be exempt from the claims of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process.  It has been well established that a Nevada family court could not directly divide a veteran’s disability benefits, as this is preempted by federal law.[1]  Arizona, by contrast, went much further and precluded their family courts from considering or acknowledging disability benefits awarded to veterans through the Department of Veterans Affairs (“VA”) under title 38, chapter 11 of the U.S. Code. [2]

From the service-members’ perspective, he or she provided the service and was awarded disability for a reason, which may include significant physical and/or emotional impairments.  The service member views this as wholly separate from anything that should be given to the other spouse, as they suffered to obtain the benefit. From the spouses’ perspective, he or she may have had to travel, take on a larger “in home” responsibility, or given up a career to support the veteran.  Thus, alimony may be important to get that spouse on his or her feet after the divorce.  Now, Nevada law is an attempting to make its law mirror the pre-existing protections in place that prohibit a veteran’s service-related disability benefits from “attached, levied or seized.”

[1] See Mansell v. Mansell, 490 U.S. 581, 588–89, 594–95, 109 S.Ct. 2023, 104 L.Ed.2d 675  (1989) (holding that federal law prevents states from treating military disability pay as divisible community property).

[2] ARIZ. REV. STAT. ANN. §§ 25-318.01(1), -530.

The Nevada language will state:

Unless the action is contrary to a premarital agreement between the parties which is enforceable pursuant to chapter 123A of NRS, in making a disposition of the community property of the parties and any property held in joint tenancy by the parties, and in making an award of alimony, the court shall not:

  1. Attach, levy or seize by or under any legal or equitable process either before or after receipt by a veteran, any federal disability benefits awarded to a veteran for a service-connected disability pursuant to chapter 11 of Title 38 of the United States Code.
  2. Make an assignment or otherwise divide any federal disability benefits awarded to a veteran for a service-connected disability pursuant to chapter 11 of Title 38 of the United States Code.[1]

2. Make an assignment or otherwise divide any federal disability benefits awarded to a veteran for a service-connected disability pursuant to chapter 11 of Title 38 of the United States Code.[1]

[1] In addition, NRS 125.210 was modified to add the language to subsection 3, which states, “Unless the action is contrary to a premarital agreement between the parties which is enforceable pursuant to chapter 123A of NRS, in determining whether to award money for the support of a spouse or the amount of any award of money for the support of a spouse, the court shall not attach, levy or seize by or under any legal or equitable process, either before or after receipt by a veteran, any federal disability benefits awarded to a veteran for a service-connected disability pursuant to chapter 11 of Title 38 of the United States Code.

 

BEWARE THE TRAP – PRACTICE POINTER GIVEN THE CODIFICATION OF FEDERAL LAW

Should a post-divorce Shelton-like fact pattern arise, the non-veteran spouse may enforce their settlement agreement or the Court’s order.  A spouse that promises to pay $X could, improperly, attempts to use the new language added to NRS Chapter 125 in order to argue that the Court should treats the VA disability as untouchable.  It is, in fact, “un-attachable.”  Importantly, the family court is not barred from considering all revenue (or ability to work, and all of the other alimony factors found in

NRS 125.150(8)[1] and the progeny case law interpreting the same, which goes beyond this summary article).  Practitioners must be cognizant of the law change because the intent is to bar a family court from squarely looking at the disability pay and mandating that specific source of revenue be effectively assigned to satisfy an alimony obligation.  But, a Nevada Court is not required to engage in a fiction and pretend the income does not exist.  A Decree or marital settlement agreement must be properly crafted to avoid unintended language which a Court might find antithetical to the language that states, “…the court shall not:  (1) Attach, levy or seize by or under any legal or equitable process either before or after receipt by a veteran… or (2) Make an assignment or otherwise divide any federal disability benefits…”

In summary, a properly drafted agreement, or careful language put on the record (as applicable), can protect the spouse getting an appropriate alimony award when VA disability is a source of income for the paying party.  It is best to acknowledge the VA disability income, but note that it is not set over to the alimony recipient at all.  Rather, how the paying party satisfies the settlement or court ordered alimony obligation is up to the payor, based on the resources at the payor’s disposal.  This is not unlike what takes place in child support cases when a court sets the amount based on imputed income.  The family court has discretion to find the payor has the ability to pay without ever explicitly directing the payor to use VA disability to satisfy the obligation.  If a payor chooses to pocket the VA disability, and leave an alimony obligation un-satisfied, clearly, or Order to Show Cause for Contempt is on the table.


[1] See Mansell v. Mansell, 490 U.S. 581, 588–89, 594–95, 109 S.Ct. 2023, 104 L.Ed.2d 675  (1989) (holding that federal law prevents states from treating military disability pay as divisible community property).

[2 ARIZ. REV. STAT. ANN. §§ 25-318.01(1), -530.

[3] In addition, NRS 125.210 was modified to add the language to subsection 3, which states, “Unless the action is contrary to a premarital agreement between the parties which is enforceable pursuant to chapter 123A of NRS, in determining whether to award money for the support of a spouse or the amount of any award of money for the support of a spouse, the court shall not attach, levy or seize by or under any legal or equitable process, either before or after receipt by a veteran, any federal disability benefits awarded to a veteran for a service-connected disability pursuant to chapter 11 of Title 38 of the United States Code.

[4] 10 U.S.C. § 1408(a)(2).

[5]  NRS 125.150(8).  In addition to any other factors the court considers relevant in determining whether to award alimony and the amount of such an award, the court shall consider:

(a) The financial condition of each spouse;

(b) The nature and value of the respective property of each spouse;

(c) The contribution of each spouse to any property held by the spouses pursuant to NRS 123.030;

(d) The duration of the marriage;

(e) The income, earning capacity, age and health of each spouse;

(f) The standard of living during the marriage;

(g) The career before the marriage of the spouse who would receive the alimony;

(h) The existence of specialized education or training or the level of marketable skills attained by each spouse during the marriage;

(i) The contribution of either spouse as homemaker;

(j) The award of property granted by the court in the divorce, other than child support and alimony, to the spouse who would receive the alimony; and

(k) The physical and mental condition of each party as it relates to the financial condition, health and ability to work of that spouse.

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