Nolo's Essential Guide to Divorce - Emily Doskow [146]
Early Separation Payments
It's unlikely that the armed services will be offering early separation incentives to service members in the near future. (In fact, it seems more likely that service members would be offered enlistment and reenlistment bonuses.) But if there is such a payment to divide in your divorce, you should know that states have differed widely in their treatment of early separation payments. Some treat them like retirement benefits and others like income. Be sure to consider such payments an element of your settlement negotiations.
Accrued Leave
Every service member accrues 30 days of paid leave each year. The maximum that can be accrued, with a few exceptions, is 60 days. Each month of accrued leave is worth the same as a month's pay. State divorce law applies to accrued leave just as it does to retirement pay, and states differ as to whether accrued leave is property to be divided. Generally, your state's rules about accrued leave will be the same as the rules about unused vacation and sick pay in civilian jobs. (See Chapter 11.)
Civil Service Rollovers
A little-known fact about military retirement is that service members who move from the military into a federal civil service job can roll over their military retirement benefits into that new job's retirement plan. The result is that the military pension disappears, and the funds reappear in the retirement plan for the new job.
If you're counting on payments from an ex-spouse, you don't need to worry. To roll over military pension benefits into civil service retirement, a worker must authorize the Office of Personnel Management to deduct any amounts due to a former spouse under a valid court order. Still, make sure that your settlement or divorce judgment includes language stating that the service member won't convert military into civil service retirement benefits without consent from the former spouse and that if a conversion occurs without your consent, you're entitled to receive the equivalent of what you were entitled to from the military pension.
Life Insurance
Life insurance is often a good way to secure ongoing support obligations. If your final divorce judgment says that one spouse must pay child or spousal support, make sure that the paying spouse's life is insured in an amount that will compensate for the loss of support if that spouse dies. (See Chapter 11.)
This rule, of course, applies to military spouses as well, and is especially important for active duty military personnel. But one note of caution: Make sure that you obtain private life insurance, and don't rely on the Servicemembers Group Life Insurance (SGLI). It's important for the recipient spouse to own the insurance policy, so that spouse keeps control over the beneficiary designations (to make sure the kids remain the beneficiaries). The law says that service members always retain control over the beneficiary designations under the SGLI, regardless of court orders or marital settlement agreements that state otherwise.
Tax Issues
The Military Family Tax Relief Act helps service member taxpayers by creating less stringent rules for capital gains tax exclusions (see Chapter 10 for basics of capital gains) as well as death benefit payments. Also, if you are a service member who owes back taxes, you may get a break in the form of a deferral or relief from interest and penalties if you can prove that your ability to pay was affected by your military service. Any of these issues may come into play in your divorce if you are dividing liability for back taxes or selling a home.
Military service members can qualify for head of household status and can transfer dependency exemptions just like civilian taxpayers. (See Chapter 10 for more about taxes and divorce.)
The Legal Assistance Office can help. Tax matters are within the scope of the Legal Assistance Offices