Veterans, like other civilians, should consider making an estate plan to manage and protect their assets, provide for their families and make sure that their benefits and wishes are honored in the event of incapacity or death. Additionally, certain benefits like pensions and insurance should be considered in their estate plans. Working with a financial advisor who specializes in estate planning can walk you through specific strategies for your needs.
What to Know When Creating a Will for Veterans
Creating a will is an essential step in estate planning for veterans and military members. This estate planning document aims to respect a person’s assets and wishes, and protect their families.
One of the first considerations when creating a will is to understand the unique benefits and entitlements that veterans may have, such as pensions, disability benefits and survivor benefits. These should be clearly addressed in the will to ensure they are properly allocated to beneficiaries.
Another critical aspect is the designation of an executor. The executor will be responsible for managing the estate, paying debts and distributing assets according to the will’s instructions. Veterans should choose someone they trust and who understands their specific needs as well as the complexities of military benefits. It’s also wise to name an alternate executor in case the primary choice is unable to serve.
Veterans also should consider the guardianship of minor children. If a veteran has young dependents, the will should specify who will take care of them if both parents pass away. This ensures that the children are placed with someone who can provide the care and stability they need.
Property distribution is another significant consideration. Veterans should list all of their assets — including real estate, personal property and financial accounts — and specify how they would like them distributed. Detailing this information can prevent future conflicts among survivors and ensure that each beneficiary receives what was intended.
Trust Considerations for Military Families
Creating a trust is also an important estate planning step for many military families, as it provides a structured way to manage and distribute assets. One of the primary considerations for military members is the flexibility and control that a trust offers, especially in the face of frequent relocations and deployments. A trust can manage assets according to a grantor’s specific wishes, providing continuity and oversight even if the grantor relocates or is absent for an extended period.
One key aspect to consider is the type of trust. Revocable living trusts are popular because they allow the grantor to maintain control over the assets and make changes as needed. This is particularly beneficial for military families who may experience significant life changes. On the other hand, irrevocable trusts offer additional benefits such as asset protection and tax advantages, but they cannot be easily modified once established.
Another consideration is the selection of a trustee. The trustee will be responsible for managing the trust assets according to the terms set out in the trust document. Military families should choose someone who is reliable, financially savvy and familiar with their specific circumstances. It is also prudent to name a successor trustee to step in if the original trustee is unable to serve.
A trust should clearly address military benefits and entitlements. This includes considerations for survivor benefit plans (SBP), thrift savings plans (TSP) and military pensions. Proper planning can ensure that these benefits are maximized and distributed according to the service member’s wishes, providing financial security for surviving family members.
How Military Members Can Avoid Probate
Military members can take several steps to avoid probate, ensuring a smoother and quicker transfer of their assets to beneficiaries. Here are some options they might consider:
- Creating a living trust. One effective method to avoid probate is the creation of a living trust. By transferring assets into a revocable living trust, military members can maintain control over their property during their lifetime and specify how it should be distributed after their death. Since the trust owns the assets, they do not go through probate, allowing for a more efficient transfer to heirs.
- Designating beneficiaries in policies and accounts. Another approach is to designate beneficiaries for financial accounts and insurance policies. Military members can name beneficiaries on their retirement accounts, such as the TSP, and on life insurance policies provided through programs, like the SGLI. Assets with designated beneficiaries bypass probate and go directly to the named individuals, ensuring that they receive the funds promptly.
- Opting for joint ownership. Joint ownership of property is also a viable strategy to avoid probate. By holding property jointly with rights of survivorship, military members can distribute the property automatically to the surviving co-owner upon their death. This method is commonly used for real estate and bank accounts.
What Military Members Need to Know About Life Insurance
Life insurance is another critical component of financial planning for military members, providing essential financial protection for their families.
The primary option available to service members is the SGLI, which offers affordable term life insurance coverage up to $500,000. This policy is specifically designed for military personnel, providing coverage during active duty and up to 120 days after separation. It also includes traumatic injury protection, which can be a crucial benefit for those in high-risk roles.
Beyond SGLI, military members should consider whether additional life insurance is necessary to meet their family’s financial needs. For this, they might purchase a supplemental policy through a private insurer to provide more comprehensive coverage. Factors to consider when weighing whether this is necessary include the family’s current and future financial obligations, such as mortgage payments, children’s education costs and ongoing living expenses.
Tips for Creating an Estate Plan as a Military Member
Here are seven general estate planning tips for veterans:
- Establish a will. A will outlines how your assets should be distributed upon your death. It also allows you to name guardians for minor children, ensuring they are cared for by someone you trust.
- Create a living trust. A living trust can help avoid probate and provide a smooth transition of assets. It also allows you to manage your property during your lifetime and specify how it should be handled after your death.
- Designate beneficiaries. Make sure to designate beneficiaries for life insurance policies, retirement accounts and other financial assets. This bypasses probate and distributes assets directly to chosen individuals.
- Set up powers of attorney. A durable power of attorney for finances and a healthcare power of attorney authorize someone you trust can make financial and medical decisions on your behalf if you become incapacitated.
- Review and update plans regularly. Life changes, such as marriage, divorce, the birth of a child or deployment, can affect your estate plan. Regular reviews and updates will keep your plan current and effective.
- Utilize military benefits. Take advantage of benefits such as the SGLI and SBP. These benefits can provide additional financial security for your family.
- Consider consulting a professional. Working with a financial advisor or estate planning attorney experienced in military benefits can provide valuable guidance.
Bottom Line
By establishing key documents such as wills, trusts and powers of attorney, veterans can provide for their loved ones and secure their financial future. When creating an estate plan, it’s important for veterans to consider unique benefits like pensions, disability compensation and other military-specific entitlements. Regular updates and professional advice can also help navigate these complexities.
Estate Planning Tips
- A financial advisor can help you create a plan to manage and distribute your estate. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You can do estate planning on your own. But, make sure you know the risks to DIY estate planning.
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