Only disposable retired pay is divisible
A state court can divide military retired pay, but only the portion federal law defines as disposable. VA disability compensation is not part of it and cannot be treated as marital property.
A retiree may waive a portion of retired pay in order to receive VA disability compensation. When that happens, disposable retired pay falls, and a former spouse’s share falls with it.
And a court cannot order the difference restored
The Supreme Court held in Howell v. Howell (2017), following Mansell (1989), that a state court cannot order a retiree to indemnify a former spouse for the reduction caused by a VA waiver.
So this is not a risk that can be drafted away with a promise to make the other party whole. It has to be understood and priced into the settlement instead.
CRDP and CRSC are not the same thing
Two concurrent-receipt programs sit next to this, and they pull in opposite directions for a former spouse.
- CRDP, Concurrent Retirement and Disability Pay, restores retired pay that was otherwise waived. Because it is restored retired pay, it is divisible, and it can increase what a former spouse receives. It generally requires twenty or more years of service and a disability rating of at least fifty percent.
- CRSC, Combat-Related Special Compensation, compensates for combat-related disability and is generally not divisible, treated much like VA disability.
The election matters, and it happens after the divorce
A retiree eligible for both must choose between them, and the election can be revisited annually.
That means a post-divorce election can move income out of the divisible base. It is not something a former spouse controls, and it is worth modelling before a settlement is agreed rather than discovering the effect later.
This exposure can be quantified before you sign. It usually is not.
Talk it through