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(As printed in the Jan 2002 AUSA Magazine)
Survivorship Planning, Part II
Department of Veterans Affairs Benefits
Command Sergeant Major Keith R. Miller, CLU, ChFC
US Army, Retired
In the December 2001 issue we introduced this series of articles with an overview of military survivor benefits and the need for a family survivorship plan. In this edition, we continue the series by looking at the survivors benefits from the Department of Veterans Affairs (VA) and how to incorporate these benefits into your plan.
I went through my military career with a "plan" I thought was adequate. I told my wife that she would get $200,000 from SGLI; all the documents she needed were in a box in our closet; and the Army would take care of the rest. Fortunately, my family never had to implement what was, in retrospect, a very weak plan. I'm sure I was not alone and suspect other military families have a similar "plan" in place today.
We'll begin by looking at the components of a survivorship plan. First, let's review the basic VA benefits for an active duty death. Dependency and Indemnity Compensation (DIC) benefits are available for a surviving spouse (it's suspended if they remarry); unmarried children under age 18, or between 18 and 23 if attending a VA-approved school; handicapped children; and in some cases, low-income parents of deceased servicemembers. To be eligible, the death must be "service-connected". Whether in combat, at work, on leave, or on weekend pass, as long as the death was not the result of the deceased's willful misconduct, most active duty deaths are "service-connected". Surviving spouses of servicemembers (all ranks) who died after January 1, 1993, will receive $935 per month tax-free. (Rates for those who died before January 1, 1993 vary in amount and are based on the deceased's pay grade.) DIC payments for each qualified child are $234. In the event there is only a surviving child and no spouse, a different rate applies (i.e. the child would receive $397 in lieu of $234).
There are other benefits and rules involved, but for basic planning purposes we'll take the above and compute the DIC income stream for an active duty servicemember with a spouse and 3 children. At the time of death the family would begin drawing a tax-free monthly benefit of $1,637 ($935+$234+$234+$234). Upon the 18th birthday of the oldest child the amount drops to $1,403, then $1,169 upon the next one's 18th birthday, and finally $935 per month when the youngest child turns 18. The question often arises concerning the impact on the benefits if the family is a dual-military family and the surviving spouse is an active duty military member. The surviving spouse and children would still be eligible for the same benefits as in the above example. In fact, if both the dual-military parents died, the children would be eligible for individual benefits from each parent's death. If you're on active duty or have a service-connected condition that may result in death, DIC should be part of your plan for survivor income.
There are additional VA entitlements, such as Dependents' Education Assistance. This benefit is available to unremarried surviving spouses for a period of 10 years from the date of the servicemember's death and to children who are less than age 26 at the time of the servicemember's death. Benefits may be used for GED, undergraduate or graduate degree(s) and for certifications from VA-approved business, technical, or vocational schools. (Children are ineligible if they are on active duty or attending a military academy.) The entitlement is $588 per month for 45 school months for each eligible beneficiary for a total of $26,460 for each person. When buying insurance to protect their future educational needs in case of your premature death, you may want to consider this VA entitlement as part of the coverage already available and reduce your overall insurance costs.
Additional VA entitlements for qualified survivors include but are not limited to: partial reimbursement of burial expenses, memorial headstones or markers, burial flags, burial in a National Cemetery, home loan guaranties for the surviving spouse, special allowances to pay for aid and attendance, and vocational rehabilitation training. Why is this important to know now? Because most of these benefits have a correlated dollar value in your planning methodology and could offset costs your family may incur at the time of your death or later.
What about survivor entitlements for retirees or veterans? The same basic entitlements are afforded the surviving family of a retiree or veteran if the death is determined to be "service-connected", meaning the death must have resulted (directly or through proximate cause) from a disability incurred or aggravated in the line of duty in the active military services. Most retiree and veteran deaths are not service-connected. However, it is important for the family to know the qualifying criteria because it is incumbent on them to prove that the death was service-connected. Incurring the expense of an autopsy may be warranted by the family if it would help to substantiate that the death was service-connected. Additionally, the survivors of retirees and veterans who had a 100% VA disability rating may have an entitlement to DIC, even for "nonservice-connected" deaths, depending on the length of time they held the 100% rating before death.
There are still more steps to putting a sound survivorship plan together. Sitting down with a counselor who specializes in VA benefits or visiting the VA website is a good starting point in researching the VA benefits available to your surviving family and determining the chronology of events that change the benefit amounts. The next article will focus on the Survivor Benefit Plan (SBP) and its integration with other government survivor benefits.
(Editor's note: CSM Miller is certified as a Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC) and works for the Armed Forces Services Corporation, Arlington, VA, which specializes in survivorship planning for the military family. He retired from the Army in 1996.)
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