VA Disability Benefits and Marital Property

Recently, the Superior Court, in Goodemote v. Goodemote, addressed the issue of whether VA disability benefits are considered marital property to be subject to equitable distribution during a divorce. The general rule in Pennsylvania is that VA disability benefits are not marital property.  This rule comes from Section 3501(a)(6) of the Divorce Code which states that marital property does not include “veterans’ benefits exempt from attachment, levy or seizure pursuant to the act of September 2, 1958 (Public Law 85-857, 72 Stat. 1229), as amended, except for those benefits received by a veteran where the veteran has waived a portion of his military retirement pay in order to receive veterans’ compensation.”

However, in this case, Husband had taken his disability checks and deposited them into an investment account.  During the course of his marriage, the account increased in value by approximately $84,000.  Wife claimed that this growth in his investment should be considered marital property.  This issue was one of first impression for the court, but it agreed with Wife.

The Court based its decision on a U.S. Supreme Court case, Porter v. Aetna Casualty & Surety Co., 370 U.S. 159 (1962), which adopted a three-part test for determining whether veteran disability payments retain their exempt status.  The test addresses 1) whether the funds are readily available as needed for support and maintenance, 2) whether the funds actually retain the qualities of monies, and 3) whether the funds have not been converted into permanent investments.

The Court reasoned here that since he never withdrew money from the investment account for his daily needs, and because the account was comprised of several investment portfolios, the funds had been converted into permanent investments and thus were subject to equitable distribution as martial property.