The Military Money Manual Podcast Military Divorce - What You Need to Know and Do with David Smith #196
Think military divorce means automatically splitting everythign 50/50 and going to court? Wrong on both counts! Certified Divorce Financial Anaylst David Smith reveals what most military families get wrong and what it costs them!
In today's episode, we'll discuss the complex financial and logistical aspects of military divorce, covering everything from pension division to healthcare benefits, tax implications, and emotional support strategies.
Key Topics Jurisdiction & Legal Considerations- Multiple state options for filing (voting state, property ownership state, driver's license state, tax filing state)
- Importance of consulting with an attorney early to determine proper jurisdiction
- Each state has different rules, formulas, and processes
- JAG office can provide consultation but cannot represent service members in divorce proceedings
- Four main options: DIY without professionals, mediation, collaborative divorce, litigation
- Court is NOT the only option
- Out-of-court processes (mediation, collaborative) are often more cost-effective, private, and less stressful
- Consulting attorneys vs. representing attorneys - different roles and costs
- Division is not the only option - can use offsetting with other assets
- Must determine what portion is "marital" vs. "separate" property
- Not all pension components are divisible (e.g., VA disability)
- Requires a Military Retirement Pay Division Order through DFAS
- Differences between active duty, reservist, and guard member pensions
- Critical considerations:
- Only ONE SBP beneficiary can be named
- Previous spouses from earlier marriages may already occupy the "SBP chair"
- Premium costs must be negotiated
- Former spouse can be SBP beneficiary even without receiving pension payments
- Time-sensitive: Required forms must be submitted within specific timeframe or rights are lost
- Cannot be automatically transferred - requires proper paperwork
- Courts CANNOT order TRICARE coverage - falls under federal rules
- Key rules: 20-20-20 (full benefits for life), 20-20-15 (transitional benefits)
- Based on: length of marriage, service member's creditable years, overlap period
- COBRA-like option available if don't meet other rules
- Must be transferred WHILE married - cannot go to former spouse after divorce
- Service member can rescind the transfer
- Can be transferred to children as alternative
- Settlement agreement language is critical to protect this benefit
- Multiple TSPs possible (civilian federal employee spouse, reservist who went active duty)
- Pre-tax and Roth portions have different tax consequences
- Must account for outstanding loans
- Requires Retirement Benefits Court Order (different from pension division order)
- Not always split - can use offset method with other assets
- Military leave - has monetary value on LES
- Credit card points and miles - can be worth $30,000-$40,000
- USAA Subscriber Savings Account
- Pets - especially valuable show animals
- Life insurance policies
- Filing status changes
- Tax bracket shifts
- Capital gains considerations when dividing assets
- Pre-tax accounts (traditional IRA, 401k) vs. post-tax accounts have different real values
- Child tax credits and claiming dependents
- Early withdrawal penalties
- Separate property: assets brought into marriage, inheritances, gifts (if kept separate and not commingled)
- Marital property: everything accumulated during marriage
- Characterization process is essential before division discussions
- Making verbal agreements before completing full financial inventory
- Not understanding tax consequences of asset division
- Overlooking hidden assets (leave balance, points/miles, etc.)
- Rushing decisions - most divorce decisions have no do-overs
- Not considering pre-tax vs. post-tax asset values
- Misclassifying assets as marital or separate
- Learn about all four divorce process options
- If abuse is present, seek legal counsel immediately
- Open credit card and bank account in your own name
- Create timeline of important dates and duty stations
- Gather supporting documents (tax returns, bank statements) in cloud storage
- Document account numbers, login credentials, passwords
- Consider consulting with CDFA before hiring representing attorney
- Listen deeply and empathetically
- Avoid projecting your own divorce experience onto theirs
- Don't rush them into decisions
- Offer practical help (childcare, meals, house cleaning)
- Point them to resources (counselors, family services, professionals)
- Give them breathing room
- Divorce in the military involves unique complexities beyond civilian divorces
- Court is not the only option - consider mediation or collaborative processes
- Complete financial inventory BEFORE making division decisions
- Everything accumulated during marriage is generally marital property
- Professional guidance (CDFA, attorney consultation) is an investment, not just a cost
- Most divorce decisions are final with no do-overs - take time to understand options
- David's website: sandoakdivorcesolutions.com
- Free 30-minute phone consultations available
- David's LinkedIn: linkedin.com/in/davidsmithcdfa/
- Find a CDFA through Institute for Divorce Financial Analysts: institutedfa.com
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