June 27, 2016 5:25 pm
By: Stephen K. Lehnardt
The one thing everyone forgets to check and update is the beneficiary designation on life insurance and retirement plans. This seemingly small item is mission critical for your family’s financial health and well being, and forgetting to check and update can result in delays and unintended financial harm.
Most servicemen and women name the beneficiary of their Servicemembers Group Life Insurance (SGLI) policy and related retirement plans immediately after they enlist. The person they think of at that time may not be the person they ultimately want to receive benefits later. The beneficiary designation doesn’t automatically change when they marry, have children, or go through other life stages.
Retirement and insurance plans pay named beneficiaries, separate from the will. For example, a service member’s will may provide that his or her child can’t access the assets left in trust until he or she reaches age 25. However, if the child is a named beneficiary of an SGLI policy, SGLI regulations overrule the will and the proceeds will be paid directly to the child if he or she is 18 or has attained the state’s age of majority; or they will be paid—regardless of age—to a legal guardian who may not be the person the service member would have chosen to manage these funds for his or her child.
Another way to go, to ensure wishes are followed, is to have a trust for the child is the insurance beneficiary. A trust allows you to write the rules and determine how your beneficiary will benefit from the insurance proceeds paid into the trust. A trust can also protect insurance money from the child’s creditor, failed marriages, and from spend down requirements if the child would otherwise qualify for any federal, state or other special needs programs.
At the Veteran’s Law Firm, we work every day to make the government keep its promises to our military servicemen and women, so they receive the benefits they have earned through their service.
For information about pension, compensation and other benefits, take a look at our website.
: Wall Street Journal
(April 19, 2016) “How to Serve Military Families”