Marriage of Chapman

Summary

Philip's 2003 settlement agreement gave Judy $475 a month as her community share of his military retirement pay. After judgment he elected tax-free combat-related special compensation in lieu of retirement pay, in the same dollar amount, and kept paying Judy until 2014. The court held the election could not defeat her community interest, because the order enforced the agreement and did not divide the CRSC as property. It reversed the constructive trust because his election was not wrongful, and left other equitable relief to the trial court. Affirmed in part, reversed in part, and remanded.

What it means for the financial analysis

The characterization fixed at judgment controls, and a later waiver or conversion by the retiree does not change what the other spouse is owed. When a settlement awards a fixed monthly share of retirement pay, pull the pay statements to see whether the payor has since switched to disability or CRSC. That conversion changes the payor's tax picture, not the amount owed under the agreement.

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