One of the quirks of family law is that a veteran’s military retirement is subject to equitable distribution but that veteran’s military disability is not. South Carolina law treats military retirement as marital property. Tiffault v. Tiffault, 303 S.C. 391, 401 S.E.2d 157 (1991). However a United States Supreme Court opinion forbids state courts from treating military disability as anything other than income to the disabled veteran. Mansell v. Mansell, 490 U.S. 581 (1989).
A retired veteran can seek a disability rating or an increase in his or her disability rating. Obtaining a disability rating or an increase in that rating does not increase the amount of gross income received from the military but it shifts that income from retirement to disability. For all veterans this has the advantage of increasing net income, as disability benefits are not subject to state or federal income taxes while retirement benefits are. However, for divorced or divorcing veterans, this has the additional advantage of reducing the amount of benefits subject to equitable distribution.
Often the non military spouse does not need alimony at the time of the divorce, especially if that spouse can expect to receive a substantial portion of the veteran’s military retirement. However an agreement or final order that seems fair when the veteran is solely receiving military retirement may become inequitable if that veteran later moves benefits from retirement to disability.
The way of protecting the non military spouse from the inequities of such a shift is by reserving alimony. This assumes that the non military spouse is not barred from alimony due to his or her adultery. It further cannot protect a non military spouse from this inequity if that spouse later remarries. However having a provision in any separation agreement that reserves alimony if the military spouse seeks disability (or increased disability) offers some protection. While Mansell prevents family courts from treating military disability as marital property subject to equitable distribution it does allow such disability to be treated as income in a consideration of alimony.
“Jurisdiction to award alimony may be reserved when there is a determination that there exists an identifiable set of circumstances that is likely to generate a need for alimony in the reasonably foreseeable future.” Williamson v. Williamson, 311 S.C. 47, 426 S.E.2d 758, 760 (1993). A military veteran shifting retirement to disability is such an “identifiable set of circumstances.” Failing to seek a reservation of alimony when negotiating a separation agreement or trying a marital dissolution case on behalf of a non-military spouse may turn an agreement or order that was fair when executed into something inequitable if the military spouse later obtains disability.