The Nevada Supreme Court has ruled in two separate cases that a divorced veteran can't get out of a divorce settlement by swapping his pension for a disability check.
The main opinion was issued in the appeal by MaryAnn Shelton after her ex-husband traded his military pension for disability benefits. Many veterans do so because disability benefits are not taxable.
But the divorce issue came up because federal law specifically precludes state courts from considering disability benefits as community property.
Because of that, Ronald Shelton stopped paying his ex-wife the $577 a month from his pension they both agreed to during their divorce, saying he no longer had a pension to share with her.
Clark County District Judge Robert Gaston agreed with him even though he said it was an unfair result.
The high court panel of Chief Justice Deborah Agosti and justices Miriam Shearing and Nancy Becker overturned that ruling, saying federal law bars state courts from treating disability benefits as community property but that "states are not precluded from applying state contract law, even when disability benefits are involved."
The opinion says Roland and MaryAnn agreed in the divorce he would pay her $577 a month for her share of his military pension. The court described that as a contractual obligation which he agreed to and fulfilled for two years.
It said he unilaterally decided to convert the pension into a disability payment - which is permitted in military pensions. But that doesn't change the fact that he has a contract to pay her $577 a month.
"Roland cannot escape his contractual obligation by voluntarily choosing to forfeit his retirement pay," the opinion states.
The court then applied the same reasoning in a similar case involving Eva and Jose Olvera. They were divorced in 1979 and he agreed to pay her 41.2 percent of his pension benefit as her community property interest.
This time, the full seven member Nevada Supreme Court agreed that while the U.S. Supreme Court prohibits division of military disability benefits upon divorce, "the court has not prohibited states from allowing former spouses to recoup the amounts they would have received but for a post-decree waiver of retired pay."
Jose Olvera was ordered to resume making monthly payments to his former wife as ordered by the couple's divorce decree.
And the Nevada court ruled that he must pay her 41.2 percent of his gross benefit. That means she will get a proportionate part of the increase in benefits he receives by not having to pay taxes on the disability check.
