We Remember and Honor Our Nation’s Heroes on Memorial Day: Estate Planning for Members of the Military

by | May 28, 2021 | Wealth Management

pexels chad madden 8050329

“Our nation owes a debt to its fallen heroes that we can never fully repay.” – President Barack Obama

Thank you to the brave men and women who have made the ultimate sacrifice for our freedom and join us as we remember and honor our nation’s heroes on Memorial Day.

Today reminds us that legacies matter. Not only to our friends and our families, but also our communities and society writ large. Whether you are a veteran or just starting out in the military, planning your estate is an important first step to leaving your legacy.

Estate Planning Affects Everyone

Estate planning is important regardless of your financial situation. In fact, it may be more important if you have a smaller estate because the final expenses could have a much greater impact on your estate. Wasting even a single asset may cause your loved ones to suffer from a lack of financial resources.

Your estate plan can be relatively simple and inexpensive, such as preparing a will to distribute basic accounts and assets, or designating beneficiaries for your life insurance policy(s) and retirement account(s). If your estate is larger or you have more assets, the estate planning process may be more complex and expensive. In any case, you will probably need the help of professionals, including an estate planning attorney, a financial planner, an accountant, and possibly an insurance professional.

Issues to Consider

Your estate plan should be geared to your circumstances. Some factors that may impact your estate plan include whether:

  • You own real estate, especially if you own property in different states
  • You have minor children or children with special needs
  • You are married
  • You intend to contribute to charity
  • Your estate might be subject to estate tax
  • You become disabled or incapacitated and are unable to manage your financial affairs

How Do You Begin Planning Your Estate?

The process usually begins with an analysis of what you own. The type of assets and property you own can affect how you plan your estate. Next, formulate goals and objectives for your estate plan. Decide whom you want to inherit from your estate. Consider whether you want to place any restrictions or conditions on an inheritance (e.g., specify a replacement should a named beneficiary predecease you; control distributions to minors or someone you consider a spendthrift).

Consider how taxes might impact your estate. Taxes that may factor into your estate plan include federal and/or state gift and estate taxes, state inheritance taxes, and federal and/or state income taxes.

Additional goals and objectives you might consider include whether you want to:

  • Provide for your family’s financial security
  • Ensure that your property is preserved and passed on to your beneficiaries
  • Avoid disputes among family members
  • Provide for family members’ education
  • Determine who will manage your assets and property after your death and who will be responsible for carrying out your wishes (e.g., executor, personal representative, trustee)
  • Avoid probate
  • Minimize estate and other taxes
  • Plan for your potential incapacity

Common Estate Planning Tools

Many strategies and tools are available to help you carry out your estate plan. In most cases, these tools are governed by specific state law, as well as federal law in some instances. Therefore, you should consult with a knowledgeable estate planning attorney to ensure that your legal documents and estate plan comply with the appropriate laws. The following is a brief description of several common tools and strategies:

  • Last will and testament: A legal document that describes to whom and how you want your property distributed, names the person or entity that will administer your estate and specifies who will care for your minor or disabled child.
  • Trust: A separate legal entity that can hold property and assets for the benefit of one or more people or entities (e.g., spouse, children, charities), and can be implemented while you are alive or at your death (usually through your will). Trusts may incur up-front costs and often have ongoing administrative fees.
  • Durable (financial) power of attorney: A document in which you name someone to act on your behalf for a specific purpose (e.g., sell your home) or to manage your financial affairs should you become unable to do so yourself.
  • Health-care directives: A health-care proxy and living will allow you to express your wishes about the administration of medical treatment and life-prolonging measures during times when you cannot otherwise express those intentions.
  • Guardian for minors: Generally included in your will, this is the person who will be responsible for the care and protection of your minor children.
  • Beneficiary designations: Often overlooked, this important function applies to financial products you own such as life insurance, annuities, and qualified savings accounts such as your Thrift Savings Plan and IRAs and supersede instructions in a will.
  • Funeral and burial arrangements: Your wishes for your funeral, the disposition of your remains (e.g., cremation, burial), and organ donations may be expressed in your will, trust, or in a separate writing.

Survivor Benefits

Whether you are receiving military retirement pay, a private pension, or income from the military or private employment, your death could cause serious financial hardship to your family. A major part of estate planning is developing strategies and contingencies to provide for your family after your death. Servicemembers have several benefits including life insurance, death gratuity, and survivor benefits that may be available to help survivors should the unthinkable happen.

  • Life insurance: Offered through the military in several forms for active members and veterans including Servicemembers’ Group Life Insurance, Veterans’ Group Life Insurance, and Veterans’ Mortgage Life Insurance.
  • Death gratuity: A $100,000 death gratuity is paid to the next of kin of members of the military who die while on active duty or within 120 days of separation.
  • Dependency and Indemnity Compensation (DIC): A monthly benefit paid to eligible survivors of servicemembers who die while on active duty, or veterans whose death is due to service-related injury or disease, or veterans whose death is nonservice-related but who are receiving or entitled to receive VA compensation for service-related disabilities and who are totally disabled. Other eligibility requirements may also apply.
  • Survivor Benefit Plan (SBP): A pension-type plan in the form of an annuity that can be purchased to pay your surviving spouse and children a monthly payment based on a percentage of your retired pay. If you are on active duty, retirement-eligible, and have a spouse and/or children, they are automatically protected under SBP at no cost to you while still on active duty. You must pay premiums for coverage once you retire from the military.
  • TRICARE: Health insurance is available to certain eligible surviving family members of deceased active duty or retired service members. Conditions for eligibility may apply and costs for coverage and benefits available may vary based on the sponsor’s military status at the time of death and whether the family member is a surviving spouse or child.
  • Additional benefits: Available for survivors of veterans and servicemembers who die while on active duty includes burial in a national, state, or military installation cemetery (this is also available to spouses and dependent children of the servicemember), headstone or marker provided by the government, burial flag, and reimbursement for a portion of burial expenses.

Legacies are part of the ongoing foundation of life. We are grateful to our servicemembers for the impact they have on our communities and our nation. If we can ever be of service to you or your family, we stand ready to assist.

Prepared by Broadridge Advisor Solutions. Copyright 2021. Edited by BFSG, LLC.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Latest From The Blog

Archives

Our Services

Investment Management

Tailor portfolios to your needs and goals.

Retirement Planning

Investing and saving wisely is vital to success in retirement.

Financial Planning

Navigating the complexities of your financial affairs can be simplified.

Tax Management

Help to increase the amount you “take home”.

Estate Planning

Protect your loved ones and make sure your legacy endures.

Executive Compensation Analysis

Simplify the many options and decision points of executive compensation plans.

Education Planning

Confidently plan for your children’s future.

Charitable Giving

Give in a tax-smart, simple way.

*Please Note: Limitations.  The scope of services to be provided depends upon the terms of the engagement, and the specific requests and needs of the client. BFSG does not serve as an attorney, accountant, or insurance agent.  BFSG does not prepare legal documents or tax returns, nor does it sell insurance products.  Please Also Note: Different types of investments involve varying degrees of risk.  Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by BFSG) or any financial planning or consulting services, will be profitable, equal any historical performance level(s), or prove successful.

Sign Up For Our Newsletters

(They're great, we promise)

Connect With Us