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

“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.

5 Emotional Roadblocks That Impact Your Estate Plan

As CERTIFIED FINANCIAL PLANNER™ professionals, we get to discuss everyone’s two favorite topics, death and taxes. The reality is that no one wants to discuss their death and this is the greatest hurdle to overcome and the reason so many people do not have an estate plan. Below are some other common roadblocks that can reduce the quality of your estate plan.

1. Not Discussing Finances with Your Heirs

Some interesting studies have shown inherited wealth typically does not make it past the first generation of heirs. The wealth that does make it and is passed to several generations have one common trait, the heirs were well prepared to handle the inheritance properly. The reason for this is the parents did a great job of communicating and teaching the proper values to their kids. This does not mean telling them everything they will receive but instead communicating your values and wishes for them to follow.

2. Thinking This Will Never Happen To Me

It is human nature to see something happen to a friend or on the news and think that could never happen to me. Many individuals do not want to consider their mortality and instead live with a feeling of invincibility. This trait is most common in men for sure but it can impact anyone. Delaying your estate plan is a recipe for disaster and this is a common reason why this occurs.

3. Deciding Who Gets What and How Much

Family dynamics are difficult to navigate, even for the closest of families. As you begin the process, uncomfortable truths will begin to emerge and are difficult to navigate. Who gets family heirlooms? Are there items that have strong emotional ties to you or heirs? The best way to get started is to make a list and start with the easiest assets and slowly work your way down.

4. Not Clearly Defining Your Goals or Objectives.

As you develop the estate plan, it is important to clearly define how you want to leave your legacy. Is there an alma mater or charity you want to leave money to? Do you have a child with substance abuse problems and how do you leave money to them in a way that doesn’t fuel their addiction? If you have a child that is well off and another that is struggling financially do you not split the assets evenly? How do you protect your kids from themselves, their potential ex-spouses, or creditors? It is important to have an estate plan that navigates difficult issues by clearly stating how your estate is to be handled in those circumstances.

5. Paying For and Working With An Attorney

People seem to have a fear of working with an attorney, just like many people have a fear of going to the doctor. Nobody sees an attorney for the fun of it and many people dread the topics discussed and also the seriousness of the topic typically begins to creep in. The other part of this is everyone knows working with an attorney is not cheap. While creating a good estate plan is not cheap, it will pay for itself tenfold by reducing hassles and costs for your estate when the documents are finally needed.

We also recommend you watch the replay of our Summer Webinar Series “Estate and Legacy Planning” which discusses estate planning basics, the documents you will need, and common estate plan designs.