Divorce Settlements

“Magic Words” – Last Chapter

“Magic Words” - Last Chapter

Published on January 11, 2020

Mark Sullivan

Mark Sullivan

Law Offices of Mark E. Sullivan, P.A.

 

     

    The final set of “magic words” are ones which belong in every military pension division order, incorporated settlement or divorce decree. These required phrases are set out in the Uniformed Services Former Spouses’ Protection Act (USFSPA), 10 U.S.C. §1408, and in the rules for administration and enforcement of pension division, found at Chapter 29 of Vol. 7b, Dept. of Defense Financial Management Regulation (a.k.a. the DoDFMR).

     

    Compliance with the SCRA

    Every pension division instrument must state that there has been compliance with the Servicemembers Civil Relief Act, or SCRA. In general, this means that the rights of the servicemember (such as the right to obtain a stay of proceedings under certain conditions and the bar against default judgments) have been protected. The statute is found at Chapter 50 of Title 50, U.S. Code.

    MAGIC WORDS: “The rights of John Doe, the defendant, under the Servicemembers Civil Relief Act, Chapter 50 of Title 50, U.S. Code, have been observed.”

    The “10/10 Rule”

    Getting direct payments from the retired pay center is important for the former spouse (FS); it means a regular garnishment of retired pay, deposited in the recipient’s bank account around the first of each month. It is important for the retiree as well, since it eliminates the need to write a check to the FS every month and to keep track of COLAs (cost-of-living adjustments) once a year.

    The “retired pay center” is DFAS, the Defense Finance and Accounting Service, for those who are retired from the Army, Navy, Air Force and Marine Corps. It’s the Coast Guard Pay & Personnel Center for those retiring from the Coast Guard and the commissioned corps of the Public Health Service (PHS) and the National Oceanic and Atmospheric Administration (NOAA).

    According to the USFSPA, the retired pay center cannot garnish retired pay as property division unless it appears from the application for a share of retired pay that the marriage overlaps the creditable service by at least 10 years. Thus it is essential to include this essential language in the pension division instrument.

    MAGIC WORDS: “The parties were married to each other for at least 10 years during which the member performed at least 10 years of service creditable in determining the member’s eligibility for retired pay.”

    “Disposable” Retired Pay – It’s Disposable

    Surprisingly, the phrase “disposable retired pay” is not in the set of “magic words” for the pension order. Although Congress stated in the USFSPA that “disposable retired pay” is all that a state court can divide in military pension division (see 10 U.S.C. §1408 (a)(4)), the rules have made this term irrelevant or, more properly, disposable. All awards of a portion of the military pension are to be construed as dividing the retiree’s “disposable retired pay,” regardless of their wording. So your order will not be rejected for faulty language or the absence of “magic words” if it divides John Doe’s “military pension” or “uniformed services retired pay,” for example.

    In the Meantime…

    Interim payments must be addressed in the pension division order. That’s because the parties need to know who makes what payments while the order is being processed by the retired pay center. According to the USFSPA (see 10 U.S.C. §1408 (d)(1)), the pay center will begin pension-share payments within 90 days of the retiree’s entitlement to receive retired pay or 90 days from the receipt of an acceptable order, whichever is later. For this reason, the order should specify that the retiree is responsible for payments in the interim. In a case where John Doe is the plaintiff and the military member or retiree, the following phrasing would be useful.

    MAGIC WORDS: “Plaintiff will receive payments at the same time as Defendant. The parties acknowledge that DFAS is not required to begin payments to the former spouse until 90 days after receipt of an acceptable order or the start of retired pay, whichever is later. Defendant will be responsible for making these payments each month to Plaintiff until DFAS begins making these payments to her, and during this interim, Defendant will pay Plaintiff directly her full share, unadjusted for taxes.”

    Language for the Award – Four Options

    Finally, there are “magic words” involved in phrasing the award. The retired pay center will only accept a pension division instrument which specifies the award to the FS in terms of a fixed amount, percentage, formula, or hypothetical amount of retired pay. Examples of each one may be found in these Silent Partner infoletters: “Getting Military Pension Orders Honored by the Retired Pay Center,” and “Military Pension Division: Guidance for Lawyers.” All of the Silent Partner infoletters will be found at www.americanbar.org > Family Law Section > Military Law Committee, and at www.nclamp.gov > Publications.

    A Helpful Checklist

    Note that “one size fits all” definitely doesn’t apply to military pension division orders. A good practitioner will check and re-check the pension division order to be sure it complies with the regulations and the statute, accomplishes the needs of the client, makes sense, and will be honored by the retired pay center. Here is a checklist that DFAS uses for pension division orders:

    DFAS CHECKLIST FOR MILITARY PENSION DIVISION ORDERS

    • FORMER SPOUSES’ PROTECTION ACT CHECK SHEET
    • MEMBER’S NAME
    • SOCIAL SECURITY NUMBER
    • SERVICE OF APPLICATION (personal, certified or registered mail, return receipt requested)
    • FINAL DECREE OF DIVORCE, DISSOLUTION OR ANNULMENT OR LEGAL SEPARATION
    • ISSUED BY A COURT – OR – A COURT ORDERED, RATIFIED OR APPROVED PROPERTY
    • SETTLEMENT INCIDENT TO SUCH A DECREE
    • AUTHENTICATED OR CERTIFIED PRIOR TO SERVICE OF PENSION ORDER
    • MEMBER PROPERLY IDENTIFIED (E.G., NAME, ADDRESS, SSN)
    • NAME, ADDRESS, AND SSN OF FORMER SPOUSE
    • ORDER PROVIDES FOR ONE OF THE FOLLOWING: A) PAYMENT OF FIXED MONTHLY AMOUNT OF $________; B) FIXED PERCENTAGE OF ______%; C) FORMULA CALCULATION (must use retirement points in Guard/Reserve case); D) HYPOTHETICAL CALCULATION:
    • MEMBER’S RIGHTS UNDER THE SERVICEMEMBERS CIVIL RELIEF ACT COMPLIED WITH
    • JURISDICTION MET
    • RESIDENCE (NOT DUE TO MILITARY ORDERS)
    • DOMICILE
    • CONSENT
    • ORDER HAS NOT BEEN AMENDED, SUPERSEDED, OR SET ASIDE
    • ORDER IS FINAL DECREE, NO APPEAL MAY BE TAKEN, NO APPEAL WAS TAKEN WITHIN TIME PERMITTED
    • FORMER SPOUSE MARRIED TO MEMBER AT LEAST 10 YEARS DURING AT LEAST 10 YEARS OF CREDITABLE SERVICE
    • PAY ENTRY DATE:
    • RETIREMENT DATE:
    • MARRIAGE DATE:
    • DIVORCE DATE:
    • IF DIVORCE AFTER 12/23/16 AND MEMBER WAS NOT RECEIVING RETIRED PAY AT DIVORCE, ORDER CONTAINS TWO DATA POINTS REQUIRED BY DoDFMR VOL. 7B, CH. 29, §2908: HIGH-3 PAY AT DIVORCE AND TOTAL YEARS OF CREDITABLE SERVICE (FOR RC MEMBER, TOTAL RETIREMENT POINTS) AT DIVORCE

    More detailed information and illustrations can be found in Chapter 8 of THE MILITARY DIVORCE HANDBOOK (Am Bar Assn., 3rd Ed. 2019).

    Magic Words – Again?

    The two prior pieces about the issue of special language in military divorce cases dealt with a) wording to secure the Survivor Benefit Plan for the non-military spouse, and b) wording required by the Frozen Benefit Rule so that the retired pay center would accept the pension division order. This “magic words” installment deals with the all-important issue of jurisdiction. If the court lacks jurisdiction, then your efforts would be wasted. Be sure that the judge makes the right findings.

    The issue of jurisdiction under 10 U.S.C. 1408, the Uniformed Services Former Spouses’ Protection Act, is covered at subsection (c)(4) of the statute. Since most cases are settled with a consent order or a separation agreement incorporated into the divorce decree, the likely “magic words” you’ll need to use would be: “The court has jurisdiction to divide the uniformed services retired pay of the defendant, John Doe, due to his consent to the jurisdiction of the court.”

    jurisdiction to divide the uniformed services retired pay
    When the case is contested, you’ll have to look elsewhere for a jurisdictional basis for the order dividing military retired pay. The usual base to use is domicile. If your state is the “state of legal residence” of John Doe – that is, his domicile – then the order might state: “The court has jurisdiction to divide the uniformed services retired pay of the defendant, John Doe, due to his domicile in the state of East Virginia.”

    Don’t be deceived by “home of record.” That phrase is not intended to mean one’s domicile. It’s only a reference to the place from where John Doe entered the service, and to which his household goods will be shipped upon his discharge. It may be his domicile, but that’s not dead certain. For example, when I entered military service in December 1971 [that so long ago that dinosaurs ruled the earth!], my domicile and my home of record were both Ohio, since I went on active duty from Cleveland. When I was transferred to Ft. Bragg in 1972, both were still Ohio. But in 1976 when I decided to obtain reciprocity admission to the N.C. Bar, I changed my domicile to N.C. (by changing my car title and driver’s license, my bank, my voting records, my personal property tax listing, my state income tax info, etc.), even though my home of record remained Ohio. You can look up the incidents of domicile in a Silent Partner infoletter, “Divorce and Domicile,” at www.americanbar.org > Family Law Section > Military Law Committee, or at www.nclamp.gov > Publications. The infoletter contains a checklist of every conceivable item that would be relevant in a domicile determination.

    The last test is rarely used. It involves the exercise of jurisdiction by the court in East Virginia due to John’s residing in that state, but not due to military orders. Thus your order might use the following “magic words” for jurisdiction, assuming that you have the facts to back this up: “The court has jurisdiction to divide the uniformed services retired pay of the defendant, John Doe, due to his residence within the territorial jurisdiction of the court other than because of military assignment.” This test is only used when there is a nearby state boundary, such as the following – John is stationed at Eglin AFB, Florida, but he’s living just across the state line in Gulf Shores, Alabama, to be near his aged parents (and to get rent-free lodging). In that case, Alabama could exercise
    jurisdiction over the military pension division, since John’s residing in Alabama is not due to his military assignment in that state.

    The rules for military pension division are published by DFAS, the Defense Finance and Accounting Service; they’re found at the Dept. of Defense Financial Management Regulation, Vol. 7b, Chapter 29. The rules state that for a court order to be accepted, it must explicitly state the basis for the court’s exercise of jurisdiction. So don’t just recite the usual “blanket language” of “This court has jurisdiction over the parties and the subject matter of this case” without adding the proposed language set out above.
    Anything less than the specific basis for jurisdiction will result in a rejection letter from the retired pay center, whether that’s DFAS (for Army, Navy, Air Force and Marine Corps) or the Coast Guard Pay & Personnel Center (for USCG, and for the commissioned corps of NOAA and PHS).

    All of this (and more) can be found in Chapter 8 of THE MILITARY DIVORCE HANDBOOK (Am Bar Assn., 3rd Ed. 2019). The website is: https://www.americanbar.org/products/.

    -Mark Sullivan

     

    The Value of Leave

    Who hasn’t doubted the value of a vacation day or two during busy times at work? The rest and respite provided by taking leave for a few days can often recharge one’s batteries, as well as make room for family time and duties at home.

    But the North Carolina Court of Appeals was thinking of a different “value of leave” when it decided Rathcamp v. Danello on December 4, 2018.  In the Rathkamp case, the Court of Appeals (COA) addressed an appeal by both parties to a 2017 equitable distribution order from Mecklenburg County related to the parties’ divorce. One of the issues was valuation and classification of the vacation and sick leave of the former husband.

    The ex-wife claimed that the judge had erred in failing to classify, value and divide her former husband’s job-related sick leave or annual leave. The judge made a finding in his order that there was insufficient evidence to allow classification, valuation or distribution of the accrued leave.

    What did the former wife have for proof? The COA said that there was a “Statement of Earnings and Leave” that documented the ex-husband’s accrued leave as of 6 days after the date of separation, but there was no proof of its value, only the affidavit of the ex-wife that it was worth $56,218.

    The COA noted that the record showed annual leave of 83 hours and sick leave of about 440 hours for the ex-husband; there was no evidence, however, no evidence in the record supported the classification and valuation claimed by the ex-wife.  Noting that case law provides that the “… party claiming that property is marital property must also provide evidence by which that property is to be valued by the trial court,” the COA affirmed the trial court’s finding of insufficient evidence, which meant a loss of about $28,000 by the former wife.

    What went wrong? The ex-wife should have obtained documents from the former husband’s employer (such as an employee manual) which would have stated whether there was a cash value to accrued sick leave and vacation time.  A current or former employee familiar with the policy of the employer could have also given testimony to back up the ex-wife’s assertion of a value of over $56,000.  With such a value at stake, it certainly would make sense for the ex-wife and her attorney to spend some time nailing down the means of establishing value for the accrued leave.

    The issue is not unique to North Carolina.  While half a dozen states have clearly held that vacation time and leave are marital or community property, three states – Illinois, Kentucky and Maryland – have stated that leave may not be distributed as marital property.  The Maryland case found that leave was “alternative wages,” not deferred compensation; the appellate court held that accrued leave was less tangible, more difficult to value and more personal than pension and retirement benefits, and thus it was a nonmarital asset.

    In some cases, leave can have little or no value.  In the Maryland case, for example, the wife would have lost her sick leave (about $11,000) if she terminated employment.  It was only good for taking time off for health reasons, not for cashing in the time.

    The same is not true, however, for military leave.  Servicemembers get 30 days of paid leave each year, accruing at 2.5 days a month.  It is worth the same amount as the base pay for each day of leave, and thus one can determine the value of an Army sergeant’s accrued leave by looking at the Leave and Earnings Statement (LES); the row entitled “Leave” will show in the box marked “CR BAL” the number of days of existing leave that have been earned as of that pay period. If the sergeant’s base pay is $4,000 a month, and his or her LES shows 60 for “CR BAL,” then the leave is worth $8,000.

    It takes some time to establish the rules for valuing leave.  I was tasked with writing a brief for a Colorado attorney who needed to determine the value of the 65 days of leave shown on the LES of the husband, an Army warrant officer.  I finally figured out the location of the rules and the statute governing this issue for military cases, and I’ve finished the brief; it will be presented to the court in Colorado Springs in April.

    It’s surprising how seldom accrued leave comes up in settlement negotiations.  Most of the time the parties seem unaware of the value of this asset.  It’s truly “hidden money” for some people who are going through a divorce.  In recognition of this potential problem, I wrote an article several years ago entitled “Hidden Money in Military Divorce Cases” which deals with this and other matters which may be overlooked in the divorce process.

    The case is: Rathkamp v. Danello, No. COA 17-760, 2018 N.C. App. LEXIS 1190, 2018 WL 6318307 (N.C. Ct. App., Dec. 4, 2018).