Characterization of Disability Allowance in Washington Divorce

In a Washington divorce case, a disability allowance is treated differently depending on whether it replaces future lost wages or a standard retirement pension.  This distinction will determine if the allowance is considered separate or community property. In a recent case, an ex-wife challenged the characterization of her ex-husband’s disability allowance.

The ex-husband began working for a fire department in 1963.  The couple married in 1991.  The ex-husband was injured on the job and determined to be physically unable to perform his job duties.  He began receiving a monthly allowance of about 60% of his salary.

The ex-husband brought most of the assets to the marriage, but the couple signed a community property agreement that purported to transfer all separate property to community property.

The husband filed for divorce in 2016.  The trial court found the community property agreement was valid and awarded 50% of the collective assets, except the disability allowance, to each party.  The court found the disability allowance was the ex-husband’s separate property, noting he worked for the fire department 28.5 years before they were married. The trial court found a determination the ex-husband would receive the disability allowance was based on a medical evaluation and he was not given an option to take retirement instead.

The ex-wife appealed, arguing the court erred in finding the disability allowance was the ex-husband’s separate property.  The appeals court found the trial court was incorrect in focusing on whether the husband chose to receive the disability allowance.  He was entitled to retire and get a pension when he was injured. It was likely he would have retired before the divorce, as he was in his 70s when the trial occurred.  The appeals court noted the disability allowance replaced the ex-husband’s retirement benefits. It held the disability allowance represented deferred compensation rather than lost future earnings.

The ex-husband argued the property division was fair and just. He argued the vast majority of his retirement pension had been accumulated before the marriage and only 5% could be considered community property.  The trial court had noted that the ex-husband’s service related pension or allowance was mostly his separate property because he had worked for the fire department for so long prior to the marriage.

The appeals court, however, pointed out the trial court’s finding did not consider the community property agreement.  The community property agreement characterized all property as community property and made no exception for retirement accounts.  The disability allowance was a significant asset and the appeals court found that its mischaracterization probably affected the property division. The amount of maintenance awarded to the wife, in light of the husband’s disability allowance, did not amount to an equitable property division.

The appeals court reversed the trial court’s judgment and remanded for an equitable property division.

As this case shows, characterization of a disability allowance depends on the nature of the allowance.  If you are facing divorce, the experienced Washington divorce attorneys at Blair & Kim, PLLC, can help you get a fair and just property division. Call us at (206) 622-6562 to set up a consultation.