CRSC Pay and Divorce in Arizona
Married couples seeking dissolution of marriage in the state of Arizona go through the divorce process in the Family Court. The division of marital assets is handled during this process. In cases where military benefits are among the list of assets and income to be considered, there can be some confusion regarding the division of military benefits in an Arizona divorce. Robert and Diane Merrill were married in 1963. While in combat in Vietnam, Robert Merrill was injured. He then retired from the army and went to work in the private sector in 1983. In 1993, Robert Merrill and Diane Merrill were divorced. At the time of the divorce, Robert received Military Retirement Pay and VA disability benefits (according to a disability rating of 18.62 percent). Robert’s disability benefits were not divided by family court, but each party was awarded 50% of the Military Retirement Pay as their sole and separate property.
The Family court issued a Qualified Domestic Relations Order to implement its award. After the divorce, Robert Merrill became unemployable due to the injuries he sustained during combat in Vietnam. As a result, the VA changed Robert’s disability rating to 100% in 2004 making him eligible to receive Combat Related Special Compensation which permits some injured veterans to waive some of their disposable Military Retirement Pay for an equal amount of tax-free Combat-Related Special Compensation Pay.
Federal Law Provides That CRSC Compensation is Not Community Property
According to federal law, the courts are prohibited from treating Combat-Related Special Compensation pay as community property. When Robert waived a significant portion of his Military Retirement Pay in accordance with this rule, Diane’s monthly share as allotted in the 2004 settlement decreased significantly (i.e. Diane’s monthly allotment decreased from $1,116 to $133 in 2010). Diane petitioned the court to award her arrearages due to reduced shares of military retirement pay, as well as compensation for future reduced payments. Her petition was denied. The Court cited Section 25-318.01 reasoning that law prescribed the requested relief. This decision was reversed by the Court of Appeals, which held that Section 25-318.01 upon which the decision was based only applied to VA disability benefits not Combat-Related Special Compensation pay. Case law was applied and the Court of Appeals concluded that Robert must indemnify Diane against the financial loss of the decreased Military Retirement Pay.
The Arizona Court of Appeals remanded the case back to the Family Court so that a determination could be made regarding Robert’s ability to indemnify Diane from his non-exempt assets. On remand, the Family Court awarded Diane arrearages as well as a monthly stipend to cover future losses. Robert appealed as the Family Court did not determine whether he could indemnify Diane using his non-exempt assets as ordered by the Court of Appeals. In 2014, while Robert’s appeal was pending, Section 25-318.01 was amended to apply to Combat-Related Special Compensation benefits in addition to VA with the change applied retroactively to July 28, 2010 (one day prior to the original version’s effective date). Robert filed a motion and the Court of Appeals vacated the 2013 order without addressing the issues raised on the pending appeal. They did so according to the interpretation that the retroactive change had superseded portions of the case at hand deeming the 2010 petition filed by Diane denied.
After considering legal arguments presented by both Appellee and Appellate, the Arizona Court of Appeals concluded Section 25-318.01 cannot be applied to prevent the Family Court from generating an order for compensation of a non-military ex-spouse for a reduction in their awarded share of Military Retirement Pay when the reduction is caused by the veteran’s choice to receive Combat Related Special Compensation benefits and when the award under discussion was included in a decree that was entered prior to the statute’s effective date. The case was, therefore, remanded to the trial court for further rulings. It is important to be aware that the Merrill v. Merrill decision was not a published opinion and, with a few exceptions, may not be cited as legal authority for the rulings made in that case.
Chris Hildebrand wrote this article to ensure everyone has access to information about family law in Arizona. Chris is a divorce and family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and, quite frankly, actually caring about what his clients are going through in a divorce or family law case. In short, his practice is defined by the success of his clients. He also manages all of the other attorneys at his firm to make sure the outcomes in their clients’ cases are successful as well.