Divorce and Remarriage

questions & answers

Question: I understand that when a divorce occurs, everything accumulated is community property. However, is a disability retirement subject to joint disbursement. My online research gives me conflicting answers. How do the courts interpret this?

Answer:

Your question is difficult to answer, in part because of your use of the phrase "disability retirement" without further explanation of exactly what is going on in your particular case. For example, does this involve military retirement or disability pay? Or is this standard disability? Or does this disability retirement income come from a personal injury lawsuit (e.g. lump sum judgment)? The general rule (cited in 3 AZPRAC Sec. 330) that may apply to your circumstances is that disability benefits are divisible as marital property in a divorce to the extent that they are selected in lieu of retirement benefits in which the other spouse has a community interest.

For example, retirement benefits earned during marriage are community property, and a wife is entitled to an amount equivalent to her share of her husband's retirement benefits even though they were classified as disability benefits after divorce. That portion of benefits attributable to retirement, as distinguished from disability, is deferred compensation which is subject to a community interest. There are special rules for military disability, too. Also, recovery of damages for personal injury that are tied to lost wages during the marriage or medical expenses incurred by the marital community are considered community property, whereas compensation strictly connected to the victim's loss of personal "well-being" are the separate property of that victim.

Like personal injury recoveries, disability benefits have various component parts that may be separate or community property. So, as another example, the portion of disability proceeds that represents compensation for a husband's loss of earning ability during marriage is community property, while the remainder of a lump-sum payment, although paid during marriage, compensates future, post-dissolution, lost earning capacity due to husband's personal injuries, and that portion is the husband's separate property. 

I don't know if these two lines of thought will help you, but I think - in the end - you are going to have to consult a family law attorney who has proven expertise in property division, and who can look over the paperwork in question.