The Gray Divorce Podcast: Episode 11 Military Divorce with David Smith

Andrew Hatherley |

What is special about Military Divorce?

Timing is very important! 

Military divorce is famous for its specialized terms. For instance, there's the 10/10 rule. There's also the 20/20/20 rule. And let's not forget the 20/20/15 rule for health benefits. 

Here's a brief summary of each: 

The 10/10 rule: Marriage overlaps at least 10 years of creditable military service. The former spouse is eligible to receive their share of retired pay directly from the Defense Finance and Accounting Services department (DFAS). When the marriage overlapped less than 10 years of creditable service, a former spouse must get their court-ordered share of retired pay directly from the member. Obviously, receiving payment directly from DFAS eliminates potential conflict and pitfalls. A former spouse nearing the 10-year marriage military overlap may benefit in the long run by delaying divorce until the 10th year is reached. 

David and I discuss the myth that 20/the so-called 10/10 Rule stops spouses with fewer than 10 years of marriage to their share of the military retirement.  

The 20/20/20 rule: To qualify, the couple must have been married for at least 20 years overlapping the member's military career before an un-remarried former spouse is entitled to receive the full range of military benefits (in addition to the court-ordered share of retired pay). The former spouse maintains an ID card and all benefits that go along with it, including Tricare medical, access to military installations, the commissary, et cetera.  

20/20/15 Health benefits: A former spouse who was married for at least 20 years to the member, during which the member served at least 20 years, and there were at least 15 years of overlap, is entitled to 1 year of transitional medical benefits. This means Tricare at Tricare prices, not CHCBP (the military version of COBRA) prices! 

Remember that 20/20/20 and 20/20/15 benefits are statutory entitlements in military divorce, not a bargaining chip that the military member can use during negotiations. 

The Thrift Savings Pan 

We discussed the TSP, similar to a 401(k) or IRA, available to the military. because the new Blended Retirement System means an employer match, the TSP is an increasingly valuable asset.  

Post 9/11 GI Bill Benefits 

David and I discuss the post 9/11 GI Bill, a very valuable benefit in military divorce, which provides a member or family member with up to $160,000 of benefits toward a college degree. Per federal law, the court may not order the division of this benefit; a former spouse may only use it if the spouse were an eligible beneficiary at the time of divorce, and the member agrees to share it. 

We cover this and a lot more! Be sure to tune in! 


Announcement: Welcome to The Gray Divorce Podcast, hosted by divorce financial analyst and retirement planning counselor Andrew Hatherley. Join Andrew and guest experts as they help late life divorcees build the financial and mental foundation for a meaningful future. There is life after divorce. Now on to the show.

Andrew Hatherley: Hello everybody. Welcome to the Gray Divorce Podcast. Today's guest is David Smith. David is a retired Lieutenant Colonel and Certified Divorce Financial Analyst. The subject of today's podcast, as you may have guessed, is military divorce. First a little bit about David Smith. David retired in 2002 from the US Air Force after serving 20 years as a general dental officer. In 2015, he opened his comprehensive divorce financial planning firm, Sand Oak Divorce Solutions in Panama City, Florida. In addition to the personal experience of seven divorces in his own family, David realized an overwhelming unmet need for divorce education in his local community.

David is passionate about making divorce a less stressful experience. As a certified Divorce financial analyst, he specializes in helping individuals and couples answer the financial questions they have before, during, and after their divorce. As a collaboratively trained financial neutral and Florida Supreme Court's certified family mediator, David can work either jointly with both parties or with only one party within the divorce.

David is an independent Financial Advisor, Chartered Financial Consultant, and Chartered Advisor for Senior Living. Man, David, you've got a lot of credentials for the purpose of today's discussion. Befitting his 20 years service in the Air Force and divorce financial training. David is an expert in the world of military divorce, which as we shall see soon, is quite distinct from civilian divorce.

David, welcome. 

David Smith: Thank you very much, Andrew for that so kind introduction. I'm very, very happy to be here and happy to talk about this subject which is very, very, very near and dear to my heart. 

Andrew Hatherley: Yes, I can imagine. And you know, the little bit of background work that I've done in my work as a CDFA and in preparation for my discussion with you is distinguishing military divorce from civilian divorce and there's some distinct differences here. Why don't we start with an overview here, 20,000 foot overview. When a military couple or gets divorced, assume one party or even both parties in the military, what are the key benefits we're looking at dividing in a military divorce?

I'm assuming the obvious one is the pension. 

David Smith: Yes, you're right. And one of the big things about a military divorce is just all the acronyms and the things that are out there that folks may not be familiar with. But yes, the division of the pension is a big one. There's also a thrift savings plan, TSP, which is the military equivalent basically to a 401k.

There's considerations for qualifications, for medical benefits. and there's other benefits as well, such as potential educational benefits under the post GI bill and also survivor benefit program, which allows a former spouse potentially to receive a portion of the pension if the military member passes away first.

So there's lots of different components that go into military divorce. There are and I doubt that we're gonna be able to go the depth that it probably deserves in the course of our half hour conversation. But I certainly hope that we can peak our listeners' interests, particularly those who may have a personal relationship with military divorce and offer some guidance so that they can come to you for more detailed information going forward.

Andrew Hatherley: But let's focus on that first major benefit of pensions. You know, when I was looking at military division of pension you mentioned so many acronyms and so many rules. I came across the 10-10 rule. The 20-20-20 rule. The 20-20-15 rule. It really seems like timing is a crucial component of a decision with respect to, to military divorce.
 Perhaps we could look at an overview of, of that starting with 10 years or even before that if you'd like David, what do you say? 

David Smith: Sure. Yeah, that sounds good. And the rules that you just pointed out, Andrew, are, and I wanna make note, everybody understands it, these are federal rules, right?

These are not state rules. And so the 10-10 rule actually comes into play as far as dividing the pension itself. If there was at least 10 years of marriage and there was at least 10 years of creditable service toward retirement by the military member, and those overlap, that's that 10-10 rule definition, then the former spouse could get their portion of the pension payments paid directly from the finance office, typically it's DFAS. There's an acronym, defense, finance and Accounting Service. 

Andrew Hatherley: First of many, I'm sure.

David Smith: Yeah. That's where the 10-10 rule comes into play.

Andrew Hatherley: Okay, so that's important because the ex-spouse, let's say the outspo, the non-military spouse is getting paid directly from this defense, finance, and accounting service.

So it's not their former spouse who's making the payments after 10 years. 

David Smith: Right, exactly. Yeah. If they don't meet that rule, they can't get those payments direct. They'd have to make some other arrangement.

Andrew Hatherley: Well that makes the process a lot simpler for the receiving spouse. Certainly after 10 years.
 Now let's just backtrack a little bit because I've read that there's a myth that spouses with less than 10 years of marriage are not entitled to a portion of the military pension. You wanna disabuse us of that myth. 

David Smith: That is an absolute myth. That's true. There's not a 10 year requirement of marriage to be able to divide the pension.

The 10 year requirement only falls under the rule, that definition of the 10-10 rule that I just provided. So yes, that is something that people have some confusion about. 

Andrew Hatherley: Okay. Now, like civilian life, let's say the marriage is very short. Maybe 1, 2, 3 years. Would a pension division even come into play here?

David Smith: Yes, it could come into play, although with a very short marriage as you just mentioned or described, or if it's gonna be a long, long time before the service member actually begins to collect their pension. There's gonna be a small portion of that, which is considered marital property. I'm in Florida.

It's called an equitable distribution state, fancy term. But so marital property would be very small, so there's another way to consider dealing with the pension versus actually dividing it. 

Andrew Hatherley: Okay. Very good. All right, so the next step along the timing process, and you hear that the golden rule or the golden benefit is the 20-20-20 rule.

What does that mean, and what does that imply for a divorcing couple? 

David Smith: Right. One of those big areas that I mentioned before in the overview about the benefits is the qualification for continued healthcare benefits or TRICARE in the military. Right? So the 20-20-20 rule is that when there's at least 20 years of marriage, at least 20 years of creditable service toward retirement by the service member. And at least 20 of those years overlap. That's where that 20-20-20 comes from. Yeah. That's the golden goose. Because if the spouse outspo meets that requirement, they're able to keep their healthcare and their on base privileges for the rest of their life. And so that's obviously a very big one. The potential landmine though is if they remarry they could lose those benefits.
Or if they enroll in an employer sponsored health plan, my understanding is they would be suspended until they come out of that plan. So you have to be very careful with that qualifying and then maybe disqualifying yourself without realizing it. 

Andrew Hatherley: No, that's important to know. How do these Tricare health benefits apply or not apply for a, a marriage that doesn't meet that 20-20-20 rule, let's say the couple have been married 12 years or 16 years. How can a spouse or can spouse continue to receive any sort of health healthcare benefit? 

David Smith: Right. Great question. So, The next level down from the 20 20 20 is what's called 20 20 15, which is defined exactly the same way, except when it's concerning the years of marriage and the years of creditable service, both 20 or more.

But the 15 is the how much years of overlap. Now, that's a very similar sounding rule, but it has significantly different results for the outspo because if they qualify for that rule, under that rule, they're only gonna get one year, of transitional coverage through tricare. They do not get any access to the base benefits at all.

But the other things concerning remarriage and employer enrolling in employer plans, that still applies to that same rule or under that rule. 

Andrew Hatherley: Yeah, I can see how that can get pretty complicated and I think its important. I mean, I always say it's very important for divorcing couples to get educated about the laws.

But with military divorce, there are so many different rules, regulations, and opportunities where it might pay to wait a little bit in some cases. 

David Smith: Yeah, exactly. If you don't have the marriage final, the divorce, excuse me, finalized, if it's a short period of time to meet that 20-20-20 rule.

You can see in here there's a significant difference in the medical benefits that the outs spouse could receive. 

Andrew Hatherley: So, with respect to, let's go back to the 10 or 12 year marriage and healthcare benefits. There's a COBRA equivalent for military isn't there?

David Smith: Yep, you're right on track.

And another acronym here for that is CHCBP. That stands for the Continued Healthcare Benefit Program. So under that program, if they don't meet any of the other two rules that I've described, they actually can have COBRA light coverage generally up to 36 months if they don't qualify under the other two rules.

But those premiums are high, just like COBRA premiums are high. Right? So there's three different levels they could potentially not qualify for or, not qualify for to fall under. 

Andrew Hatherley: Right. And you said 36 months of coverage potentially?

David Smith: Yes. Relative to Cobra, I believe is usually only 18 months, but this one can go up to 36.

Andrew Hatherley: Okay. Very good. What about the issue because in military so much depends on your rank. So I've heard that if someone is potentially in line for a promotion, this could have a big effect on the pension and potentially the sb. The spousal benefit as well, right?

David Smith: In 2017, I believe it was Congress through the National Defense Authorization Act, they came out and actually said they changed the rules so that for a person who is not, retired yet, still active duty or in the reserves and, and they get divorced, the outs, spouses benefit, future benefit is actually frozen at that hypothetical level as if the service member retired on the date of the divorce. So they would not benefit from future promotions years of service that gets increased and so forth. So yes, it's a very different situation there. Now for those that have not retired yet at the time they're divorced. If they're already retired, then of course that doesn't come into play right now.

Andrew Hatherley: You mentioned the issue of being retired. You know, I wanted to go back to a misconception that seems to apply sometimes in the civilian pension world, but also military.

The misconception that a former spouse is entitled to half of the service members' retired pay and divorce. I mean, this is a generalization. This doesn't even hold true anywhere, even civilian life. It all comes down to the marital share, right? 

David Smith: Yes. Right. You have to identify and define.

The marital portion is the only part that's up for division. If there were pieces or parts of the pension that were acquired or earned prior to or after the date of the divorce, as I was mentioning with the frozen benefit rule then it's only the marital portion that's considered.

Andrew Hatherley: So really the only situation in which half of the marital share equates to half of all retired pay is when the service member is retired at the time of divorce and the marriage completely overlapped the service member's entire military career. 

David Smith: Right. If the period of marriage and the period of service 100% overlaps, then yes, it's a hundred percent marital.

Andrew Hatherley: Okay, that's a lot. That’s more than an appetizer for people to put you on with respect to pensions. Let's quickly shift over to thrift savings plan, which is essentially the military equivalent of a 401k plan? 

David Smith: Yes, it is. 

Andrew Hatherley: Okay. So in civilian, these type of a 401k plan is governed by the Employee Retirement Income Security Act or ERISA.

Now, that's not the case with the TSP, is it. Now an ERISA plan needs to be divided by what's called a QDRO in civilian life, but you don't have QDRO in military divorce. 

David Smith: Yes, that's correct. It's not called a QDRO. It's an order to divide the TSP, but it's not called a QDRO.
It's a retirement benefits court order is the official name for that.

Andrew Hatherley: Okay. Now, does that need to be drawn up by, I see you're, you're a QDRO specialist. Do you do these or is this does an attorney need to drop up one of these? 

David Smith: Yes, I will draw those up. Typically though, I'll not do that unless both of the parties are represented by an attorney so that we have, and everybody gets their opportunity to review it before it's submitted to the TSP.

Andrew Hatherley: Okay. Cool. I wanted to go back a minute because it occurred to me the issue of, you mentioned the issue of potentially remarrying. The death of the military service member and the effect on the pension or for the spouse in civilian life, we would look to potentially ensure if the benefit does not continue we would look to ensure it. 
How does it work when the military service member passes away and what happens to the pension then? 

David Smith: Right, great. Great question. Another big area of discussion during the divorce is whether or not the outspo is going to be named as the beneficiary to what's called the SBP, that Survivor Benefit Plan.

So in essence, the Survivor Benefit Plan works this way. When the military member retires, they elect to have a certain amount of their retirement benefit covered. and they pay a premium every month. There is a cost that comes out of that, their benefit to pay for the SBP benefit. And if the service member then passes away first, then there is whatever the elected benefit amount that they chose, the name spouse would receive 55% of that elective benefit. So that's a very important topic for discussion. Otherwise, if the SBP is not in place and the service member passes away, the payments are gonna stop. There won't be any payments to anyone. 

Andrew Hatherley: Okay. So very important that they'd be educated about that by their attorney or certified divorce financial analyst, because that's a crucial issue.

I'm curious, because this is the Gray Divorce Podcast. You may not know the answer to this, but I'm wondering if if military divorce has a higher incidence of over 50 divorce compared to civilian life, you wouldn't happen to have any thoughts on that, would you?

David Smith: Well, I do have some thoughts. I can't give you specific statistics, but I think just military in general because of the stress of the service, the deployments, all the various things that are happening around the world, being away from your, you know, separated from your family for periods of time that can bring about a lot of relationship issues and again, I don't have particular statistics, but my gut tells me that military divorce rates are pretty high, as are the older individuals, the gray divorce population. We're seeing definite increases in the rates of divorce in that demographic. 

Andrew Hatherley: Yeah. You know, when we were talking about these rules you know, the 20-20-20 rule, the, the 10-10 rule, it occurred to me that we have this stereotype of the military as being, as being disciplined and regimented.

Well, it kind of is with these rules as well, because these are statutory entitlements, right? These aren't bargaining chips that an attorney would bring up in divorce. I mean, if you've got the right to something you're getting it, no matter what, this can't be negotiated away.


David Smith: Well, I look at it this way. There are these things, a lot of these things that we're mentioning that there's a right to it. The couple though can decide basically however they want to handle that division, if they are in a process that's, you know, an out of court process such as mediation or collaborative divorce, right?

Then they can maintain that control over, over that decision. If they can't decide everything and go in front of the judge, then yes, they're gonna be have those parameters of what the statutes allow them to do. So yeah, there's a lot of benefits there that they can qualify for and what actually happens to them and how they're divided can certainly be up to the couple if they're able to have that discussion or with a team of professionals to help them come up with options that are best for them and their family, both short and long term. 

Andrew Hatherley: Okay. No, that's good to know. We mentioned, we've talked about the pension benefit and the and the TSP, the military equivalent of the 401k and the TRICARE Health benefits.

But we alluded earlier on to other potential benefits. A divorcing spouse might be entitled to with respect to potentially going back to school training education, and this is particularly important for people going through gray divorce, who may have been out of the out of the workplace for a while.

Could you give us a, in a little bit of an overview on some of these other benefits that might be available in military divorce? 

David Smith: Sure. Yeah. One of them doesn't often get discussed, it seems, but the post 9/11 GI bill benefits. That's actually where an active duty service member, again, I know we're talking about gray divorce here, but that's for this particular program.

This is an active duty service member that's met certain criteria. That criteria generally is if they've completed at least six years of service, and they also agree to serve four more years in service, they can actually transfer their benefits through what's called a transfer of entitlement or a TOE.

It is important to note though, that the transfer of those benefits from one spouse to the other has to occur during the time they're married. A former spouse, does not qualify for this particular entitlement. And if that transfer of entitlement is done, qualified individuals can get up to 36 months of benefits.

That could be for money, for tuition, housing, book supplies. And there's, you know, as far as who's covered what benefits qualified family members can receive, when they can use them, the transfer process, all that, there's a great website through the VA. If you go to or you just basically do an internet search for VA, post 9/11 GI bill benefits, and you'll, you'll find a document that breaks down or gives a lot more details about this particular program.

I do wanna mention though, one other thing, this is benefit. is not considered marital properties, so it can't be forced in a divorce or ordered in a divorce. In other words, this is voluntary that the military member can do this transfer, which also means at any time they could revoke, cancel, or change, take back the transfer of entitlement.

So there needs to be some language really to end the settlement agreement, right, to address this potential issue and make sure that they protect the recipient's right to this benefit.

Andrew Hatherley: Very, very interesting. That's good to know, David. I can't imagine anyone going through a military divorce without having an advisor by their side who specializes in this.

But this information is a lot. And I'm assuming you've got a long checklist that you go through when you're working with your clients in military divorce to cover all these things. 

David Smith: Yes, exactly. I mean, there are just in our conversation today, you can hear there are lots of dates to be considered.

There's lots of documents specific to be gathered in deciding what's marital and what's not. You know, what are their options? Do they take SVP or not? I mean we talked a little bit about TSP there may be loans on the account. Is all of that marital or not? Yeah there's lots of of checkpoints and and information to gather so that they can be the best educated about making the decisions about what the best options are.

Andrew Hatherley: It's interesting, you used the word loan and something we haven't discussed in this conversation, but comes. all the time in divorce. Settlement negotiations is the family home, and correct me if I'm wrong, but with VA loans sometimes these allow for a hundred percent financing, right?

So don't we have the situation sometimes in military divorce where perhaps there's less equity in a home to negotiation? 

David Smith: It can very well be because yes, you're right with the VA loans there's no down payment required. So obviously they're not the couples that hasn't put any money into it if they do that that way.

So yes, that's a potential to have a smaller amount of equity. The difference between the value of the home and what's actually owed could be a fairly small number. 

Andrew Hatherley: Well, which makes it all the more important that the issues concerning the military pay and the TSP be properly addressed.

Look, David, this is a wealth of great information but lest I've neglected to ask you anything that you think is really important is there anything that you would add?

David Smith: Just a couple of other key things I wanted to make sure that your audience is aware of as far as the SBP, the Survivor Benefit Program.

And we're talking about rules. So one key rule is if the former spouse or the outspo is named as beneficiary within one year of the dated divorce, and that's an absolute within a year of the dated divorce there's some paperwork that needs to be submitted or to make sure that the finance service knows that this person has been named.

So that's a key a key rule that one year rule. The other thing I want your audience to know and be aware of is that the federal rules only allow one, only one spouse or a former spouse at a time to be named to receive the benefit. So you can't have multiple spouses, or, I mean, mult, not multiple spouses, multiple spouse or a former spouse, right?
 To be named as SBP, it can only be one person.

Andrew Hatherley: It's not like the situation with social security that if you're married to four different people for 10 years, they could all claim on your on your benefit. That's great, David. That's terrific. How can our listeners get in touch with you?

You know, if they wanna learn more? 

David Smith: Sure, I'm more than happy to schedule 20, 30 minutes to talk with folks. They can either reach me by calling my office in Panama City, Florida. That number is 850-252-6325. Or they also can contact me through my business website. And you mentioned at the top of podcast here. Sand just like the beach, which is beautiful here in Panama City. Oak like the tree. Divorce

Andrew Hatherley: Terrific. Well, David, thank you very much once again for sharing your expertise on a very detailed specific subject of of military divorce and really appreciate your help.
Thanks a lot. 

David Smith: Thank you again, Andrew. I've really enjoyed the time and, and thank you so much for asking me. And I certainly hope this information is beneficial for those folks out there. 

Andrew Hatherley: I'm sure it will be. Thanks a lot, David. All right, bye-bye.

Announcement: Thanks so much for tuning into this episode of The Gray Divorce Podcast. To learn more or get in contact with your host, you can visit Andrew's website at Also, please feel free to rate, subscribe, and leave a review wherever you listen to your podcasts. That helps others find the show and we greatly appreciate it.

Thanks again for listening, and we'll catch you in the next episode.

Andrew Hatherley: Information provided is educational only and should not be construed as legal or tax advice. Each situation is unique and should be discussed with your tax or legal advisor prior to implementation. Andrew Hatherley is not an attorney and does not provide legal advice. Information provided is financial in nature.

Advisory services offered through Hatherly Capital Management, llc. Divorce Financial Analysis Services offered through Wiser Divorce Solutions an affiliated company.