This is the third in a series of articles on dividing military pensions. Read our other articles on military divorces and retirement.
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The Survivor Benefit Plan (SBP) is a very important and incredibly valuable benefit available to military spouses and/or children AND it is a benefit that can be allocated in a divorce. Read on to learn all you need to know about the SBP in a military divorce!
Normally, when a military retiree (or service member) dies, their retirement payments (or pay) stop completely. The SBP change that by allowing a designated spouse and/or child to continue receiving a portion of that pay. Beneficiaries of the SBP continue receiving a a monthly payment (called an annuity) after the service member dies until a specified end point.
How much is SBP worth?
So, before we discuss dividing the SBP, the first question on your mind might be, what's the SBP worth. The answer is a lot, or maybe... nothing. SBP allows a spouse (or former spouse) to collect a payment every month until they die or remarry (if that marriage is before the age of 55), but only if they outlive the servicemember retiree.
SBP is calculated as a percentage of the servicemember's retired pay. SBP can allow a designated beneficiary to receive up to 55 percent of a service member's retired pay upon the death of the member. This maximum 55% can be reduced by the servicemember. A servicemember has to pay a monthly premium to cover the cost of SBP each month, so some servicemembers may elect to reduce the value of the SBP to reduce the premium. However, whatever the percentage is, that amount will be paid out to the beneficiary every month until either:
If the spouse is designated, The spouse dies or remarries before the age of 55.
If the children are designated: The children are no longer dependents (more on this below).
Dividing SBP in divorce
SBP is a very valuable benefit that can be awarded in a divorce. Typically, SBP only comes into play in marriages of long length, due to the value and impact on future relationships. It is important to know that DFAS has strict rules about SBP elections and coverage. You should read them carefully before making decisions about SBP elections. Here are some important things to know before negotiating this benefit:
If you are divorcing before the servicemember retires, remember you could potentially be arguing over nothing. There is never a guarantee retirement will happen until it happens. If the servicemember doesn't retire the former spouse gets nothing.
Remember that the SBP is only valuable IF the former spouse outlives the servicemember (or there is a child election). Until the servicemember dies, the former spouse gets their share of retirement pay.
Finally, like any other asset, the SBP has a value. It is always important to value all divisible assets. Experts are able to put a dollar tag on the value of the SBP, which could be $50,000-100,000! Assets are divided equally in a divorce, so if the spouse gets the SBP, it is counted toward his/her "half" of the marital property even if they never get it because of the reasons above. Before you fight over giving or not giving the SBP, both parties may want to consider whether that $50k-$100k makes the divorce settlement better or worse for them.
Naming Children as SBP Beneficiaries:
Naming the Former Spouse and the Marital Children: In addition to a former spouse, a servicemember can also name children as SBP beneficiaries. If this is done, SBP payments will be made first the former spouse, but if the former spouse dies or otherwise becomes ineligible, then the SBP would go to the eligible children, who would divide the annuity equally. When you include child coverage with former spouse coverage, only your children of that former spouse are covered. Any other children will not be paid benefits under this option.
Naming the Children Only: An additional option is to only name the children as beneficiaries of the SBP. if this is done, then all of the servicemember's children are covered regardless of their other parent.
Children are eligible for SBP payments as long as they are unmarried, under age 18, or under age 22 if still in school. A child who is disabled and incapable of self-support remains eligible if the disability occurred before age 18 (or before age 22 if a full time student). Marriage at any age will terminate a child's eligibility. You may want to consider whether or not it makes sense to only name your children as beneficiaries given how short a time frame they may collect compared to a spouse.
SBP's and Future relationships:
As a servicemember, it is really important to know that you can only designate ONE spouse as the SBP recipient, so you if give your SBP to a former spouse in a divorce and remarry, your new spouse cannot also be named as a recipient. If you predecease your new spouse, they will not collect any retirement pay after you die. If a servicemember name someone other than their current spouse as the recipient (such as pursuant to a divorce decree), they are required to notify their current spouse.
If a former spouse receives the SBP, a new spouse cannot also be designated later.
As a former spouse, you only continue to get SBP if you don't remarry before 55, so if you are divorcing young, and may remarry, you may never even get the benefit of this. However, if your next marriage ends due to death or divorce SBP can be restarted.
Percentage Elected and Premiums:
If you decide to award SBP in the divorce, make sure you negotiate what percentage will be elected. Along with the percentage elected comes the premium payment. SBP is not free. It requires the servicemember pay a monthly premium to continue the coverage. Who pays this monthly fee should be negotiated as well, particularly since the cost of the fee depends upon the percentage of retirement elected to be paid out. It is likely in the former spouse will want a high percentage (higher premium) while the servicemember will want a lower percentage (lower premium), but payment of the premium can be considered in the divorce settlement negotiation.
Specific information on how premiums are calculated can be found on DFAS' website. Make sure you look at premiums for your situation: awarding to spouse/former spouse; spouse/former spouse AND kids; or kids only.
A note about SBP Premiums:
Premiums are paid from gross retired pay. This means they don't count as income, which means that your taxes are reduced by the value of the premium. This means less taxes, decreasing the out-of-pocket costs for SBP. Premiums are also partially funded by the government and the costs of operating the program are absorbed by the government, so the average premiums are well below the cost for a conventional insurance policy. One last thing: Timing of SBP Elections
There are a lot of runs on the timing of SBP elections. Former spouses have deadlines by which they must make their SBP election after the date of the divorce (namely one year). If a spouse misses this they may waive their election unless they can successfully lobby for a change of records.
On the other hand, if a servicemember is married and declines SBP at retirement, they will not be eligible to later cover that spouse or a later new spouse. If you are retiring with plans to divorce, you may want to elect your current spouse as the beneficiary even if it is not awarded in the divorce. You can always stop or change the allotment later as long as a divorce decree doesn't require you to keep it. But if you don't select your spouse at retirement, the SBP election will be gone forever. If a servicemember is unmarried upon retirement, they may elect SBP coverage for the first spouse acquired after retiring. However, the election must be submitted to DFAS within one year of marriage.
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I believe my spouse forged my signature on the DD2636 at the time of his retirement. A copy of this election document was officially requested during divorce proceedings and he refused to produce it. How can I get a copy of this document ? Thank you 🙏