Survivor Benefit Plan (SBP) and Divorce

Published | By

Maximizing SBP Benefits in Divorce

Introduction

Welcome to our guide on navigating the intersection of the Survivor Benefit Plan (SBP) and divorce. The SBP is an important benefit for military members and their families, providing financial support to surviving family members in the event of the member’s death. However, divorce can complicate and impact SBP benefits for both the military member and their spouse. In this guide, we will discuss the impact of divorce on SBP benefits, eligibility for SBP benefits in divorce settlements, rules and limitations related to SBP and divorce, and options for former spouses of SBP participants. We will also address considerations for SBP and alimony in divorce settlements and answer common questions about SBP and divorce. Let’s dive in.

Understanding the Survivor Benefit Plan (SBP)

The Survivor Benefit Plan (SBP) is a military retirement benefit that provides a monthly annuity to surviving family members in the event of a military member’s death. It is designed to provide a source of income for the member’s spouse and/or children after the member’s death, ensuring their financial security. The SBP is an important benefit, as it can provide a steady stream of income for a spouse and children who may be left without the member’s military pension.

Impact of Divorce on SBP Benefits

Divorce can have a significant impact on SBP benefits for both the military member and their spouse. The main impact is related to the division of assets and benefits in a divorce settlement. Military pensions, including SBP benefits, are considered marital property and are subject to division in a divorce. This means that the non-military spouse may be entitled to a portion of the member’s SBP benefits in a divorce settlement.

Additionally, if the military member was already receiving SBP benefits for a former spouse, the divorce may impact the amount of benefits the former spouse receives. In some cases, the former spouse may lose their eligibility for SBP benefits altogether.

Eligibility for SBP Benefits in Divorce Settlements

In order for a former spouse to be eligible for SBP benefits in a divorce settlement, they must meet certain requirements. These requirements include:

The couple must have been married for at least 10 years while the member was on active duty
The divorce must be finalized before the member’s military retirement
The court must award the former spouse a portion of the member’s military retirement pay

If these requirements are met, the former spouse is eligible for a portion of the member’s SBP benefits in a divorce settlement.

SBP Divorce Rules and Limitations

The SBP has specific rules and limitations related to divorce and how it impacts benefits. These rules and limitations include:

Retired servicemembers must notify DFAS (Defense Finance and Accounting Service) within one year of a divorce becoming final. Failure to do so can result in the former spouse losing their eligibility for SBP benefits.
If a former spouse remarries before the age of 55, they lose their eligibility for SBP benefits. However, if the remarriage is later ended by death or divorce, they may be able to regain eligibility.
The former spouse’s portion of SBP benefits cannot exceed 55% of the member’s retired pay.
If the retired member dies before the former spouse, the former spouse will lose their eligibility for SBP benefits.
Benefits for a former spouse can be suspended or terminated if they cohabit with another person and hold themselves out as married.

It’s important to consult with a lawyer and understand these rules and limitations when navigating SBP and divorce.

Calculating SBP Benefits in a Divorce Settlement

The calculation of SBP benefits in a divorce settlement can be complex. The former spouse’s portion of SBP benefits is typically calculated using the retired member’s base amount of retired pay, which is the total amount of retired pay before deductions for SBP premiums or other benefits. This amount is then multiplied by the former spouse’s share of the member’s retirement pay.

For example, if the member’s base amount of retired pay is $2,000 and the former spouse is awarded 50% of their retirement pay, the former spouse’s portion of SBP benefits would be $1,000 per month. However, it’s important to note that the former spouse’s portion of SBP benefits cannot exceed 55% of the member’s retired pay.

Options for Former Spouses of SBP Participants

Former spouses of SBP participants have several options when it comes to SBP benefits in a divorce settlement:

Full SBP Coverage: The former spouse can choose to continue full SBP coverage, meaning they will receive a portion of the member’s retirement pay for the rest of their life.
Reduced SBP Coverage: The former spouse can choose to receive a reduced amount of SBP coverage, which will decrease the member’s retirement pay in order to provide benefits for the former spouse.
Former Spouse SBP Annuity: The former spouse can choose to receive a lump sum payment of the SBP annuity, which will end their eligibility for future SBP benefits.
Former Spouse SBP Annuity Refund: The former spouse can choose to receive a lump sum refund of the SBP annuity premiums paid by the member, which will also end their eligibility for future SBP benefits.

It’s important for former spouses to carefully consider their options and consult with a lawyer before making a decision.

Considerations for SBP and Alimony in Divorce

When navigating the intersection of SBP and divorce, it’s important to consider the impact of alimony on SBP benefits. Alimony is a court-ordered payment from one spouse to the other for support after a divorce. If a former spouse is receiving alimony, it can impact their eligibility for SBP benefits. This is because alimony is considered income and can affect the former spouse’s need for SBP benefits. It’s important to consult with a lawyer and consider the potential impact of alimony on SBP benefits in a divorce settlement.

Common Questions About SBP and Divorce

Here are some common questions and answers related to SBP and divorce:

Q: Can a former spouse be removed as a beneficiary from SBP benefits after a divorce?

A: Yes, a military member can change their SBP beneficiary at any time. In the event of a divorce, it’s important for the member to update their beneficiary designation to reflect their current wishes.

Q: If a military member dies before their divorce is finalized, is the former spouse still eligible for SBP benefits?

A: Yes, as long as the requirements for eligibility are met (10 years of marriage, award of a portion of retirement pay in a divorce settlement).

Q: Are SBP benefits considered community property in a divorce?

A: Yes, SBP benefits are considered marital property and are subject to division in a divorce settlement.

Navigating SBP Benefits in a Divorce Settlement

Divorce can have a significant impact on SBP benefits for both the military member and their former spouse. It’s important to understand the rules and limitations related to SBP and divorce, as well as the options available for former spouses in a divorce settlement. Consultation with a lawyer and careful consideration of all options is key when navigating the complexities of SBP and divorce to ensure the financial security of all parties involved.