Dividing Military Pensions During Divorce

Between potential deployments, base housing and various military benefits, there is a lot to think about when pursuing a divorce as a member or a spouse of a member of the armed services. One item that deserves special attention is division of military pensions.

Even considering homes and investments, military retirement accounts are often among the most valuable assets many servicemembers hold. It is reasonable to focus on dividing these holdings fairly.

Tax issues in North Carolina

One of the common discussions when it comes to negotiating the division of military retirement pay is tax structure. As explained by Zacks, people pay North Carolina income tax for military retirement pay, with an allowed exemption. Many other states either waive tax for military pensions or do not have income tax in the first place.

Division issues at the federal level

As explained by the Defense Finance and Accounting Service, a recent revision of the Uniformed Services Former Spouses’ Protection Act — one of the most important federal laws in this area — provided some clarification on how to¬†divide pensions as property during divorce. Basically, the law now takes into account:

  • Date of divorce
  • Relevant rates for that date
  • Adjustments for cost of living at retirement date

The complexity of dividing IRAs, 401-K plans and other retirement accounts often pales in comparison to dividing military pensions. That is not to say that these are impossible to divide fairly. Maintaining attention to detail and working from an up-to-date knowledge of the rules should allow negotiators to reach an equitable and actionable division agreement.

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