Are Military Retirement Payments Community Property?

Oftentimes a spouse earns retirement benefits as part of their job compensation. In Arizona, those benefits are considered community property. But, how is that calculated? In Czarnecki v. Czarnecki, 600 P.2d 1110 (1978) the Arizona Court of Appeals addressed this question.

Facts of the Case

Mrs. Czarnecki filed for divorce from Mr. Czarnecki in 1973. Mr. Czarnecki retired from the military that same year and received retirement benefits. Wife asked for the court to divide the retirement as community property. Husband admitted in a verified answer that the retirement account was community property.

The court entered a divorce in 1973. It did not divide the property in that decree. However, it entered a second decree in 1974, disposing of all property except the retirement benefits. It amended the decree again only a few months later, without mentioning the retirement benefits. This decree was amended yet again by a decree filed May 15, 1974. Neither of the decrees entered in 1974 referred to the military retirement benefits.

The issue remains with the husband’s retirement plan; is it his separate property or community’s property?

In 1975, Mr. Czarnecki petitioned the court to terminate Mrs. Czarnecki’s spousal maintenance since she had remarried. She responded, asking the court to divide the retirement pay.

The court held a trial on the matter in 1975. It took evidence on where the couple lived prior to Arizona, without objection. It ruled that all of the retirement benefits were Mr. Czarnecki’s separate property. From this ruling, wife appeals.

Admission in Pleading

Wife argued that husband could not deny that 100% of the military retirement benefits were community property. He had admitted this in his verified answer to the complaint. The Court agreed that a verified admission prevents that party from presenting a counter argument. However, the other party waives the admission if they fail to object and allow evidence to be heard at trial on the matter.

In this case, husband’s attorney allowed evidence to be heard of where the couple had lived before Arizona. The court said it wanted to determine the community property portion of the retirement pay. Wife failed to object to the questions and thus waived the admission.

The Court of Appeals found that 35% of the retirement pay was actually community property. It then awarded Mrs. Czarnecki half of that.

Distinguishing McClellon v. McClellon, 464 P.2d 982 (1970)

Mr. Czarnecki argued that the court had the right to award him 100% of the retirement pay. It cited the McClellon v. McClellon case in support. In that case, the Court did not award the wife a one-half interest in the accounts receivable of her husband. It ruled that this would make it impossible for him to pay child support and alimony.

The Court of Appeals said that the record in this case does not support a similar conclusion. Mr. Czarnecki’s only family obligation is a child support payment of $375 per month. His retirement pay is $1,035 per month. In addition, he is a college graduate with a master degree and a teaching certificate.

The Court also said that retirement benefits are different in nature from accounts receivable of a business, which were at issue in the McClellon case. For those reasons, it rejected husband’s argument.

The Court awarded the wife 50% of the community portion of the retirement. The Arizona Court of Appeals reversed the judgment below. It remanded the case to the trial court. It ordered the court to determine the community interest in husband’s retirement pay and award wife one-half of that interest.

The Arizona Court of Appeals distinguished this case from its prior ruling in the McClellan v. McClellan case.