What happens when you die? It’s an important question, one that man has attempted to define since our appearance here on Earth. Most people think about it some, others a lot, and a few maybe not at all. But who thinks about what happens to their money when they die?
As a member of the Armed Forces, you need to ask yourself this question: What is the financial plan for taking care of my family should I die in the line of duty? What kind of death benefits are they going to receive?
Too many Service Members give little thought to the financial implications of passing away while on active duty. For many, the DD-93 Record of Emergency Data and the SGLI election are just two more in a series of forms that they have to update once a year. But these are two of the most important forms you can ever fill out. It is vital that you educate yourself and decide who will receive your death benefits before it’s too late. The last thing any family should worry about when their loved one dies is finances. Yet many times this is a top stressor after the unthinkable occurs.
I recently had the opportunity to become certified as a Casualty Assistance and Casualty Notification Officer (CAO/CNO), and during the training we went into great detail on the survivor’s benefits provided to the family members of fallen warriors.
For this article, we’ll assume that you, a Soldier on active duty, just passed away. I’ll share with you what I learned and we’ll cover the Death Gratuity, the SGLI, and some of the other survivor’s benefits available to Gold Star families.
The Death Gratuity
- Amount: $100,000
- Taxable: No
- Form: DD-93 (Record of Emergency Data)
Your family has been notified of your death. Shortly after being notified, they were asked to provide a bank account number so that they could receive their Death Gratuity (DG). Your family is shocked to find out the amount is equal to $100,000 and is completely tax-free. Until I took the CAO/CNO course I really did not understand this benefit, the tax implications, and how it would be distributed to my family.
The DG can be distributed in full to one person or split 10 ways between your spouse, children, parents, siblings, adoptive mother and father, and guardians. Many people elect their spouse (or parents if single) to receive 100% of the DG. The DG is paid within 72 hours of your passing away. In the instruction page of the DD-93 it says “The member should make specific designations, as it expedites payment.”
The DG is designed to cover immediate expenses and living costs and not necessarily to pay off debts. There are many benefit programs that will cover certain expenses – and some companies will forgive debts of fallen service members. As you create your estate plan in preparation for the worst, it’s important to ask the companies you do business with what kind of survivor benefits they offer, if any. Take note that casualty assistance officers walk survivors through all the financial benefits they are entitled to receive.
If you elect to not give your spouse 100% of the DG, your spouse will be notified that this happened but not necessarily who received the money if it was someone outside of your immediate family. Be aware that if you’re a Reservist and die on your way to training, your family is eligible to receive the DG. This link explains who is eligible to receive the DG and what death situations will cause the DG to be distributed.
The Service Member’s Group Life Insurance
- Amount: $50,000 – $400,000
- Taxable: No
- Form: SGLV 8286 (Servicemembers’ Group Life Insurance Election and Certificate)
The Service Member’s Group Life Insurance (SGLI) is available to all Service Members and is a low-cost life insurance option for SM’s. The survivor’s benefit is payable in a tax-free lump sum or 36-month installment plan based on your election. You’ll receive coverage up to 120 days past your separation from the military, and up to two years if you leave the service as the result of total disability. Monthly costs range from $25 for the full $400,000 coverage to just $3.00 for $50,000 of coverage. The insurance premium also covers TSGLI (which we talk about next).
If you as the Soldier are the survivor, spouses and children are automatically covered under the Family SGLI if you are covered under the SGLI. Spouses will receive $100,000 of coverage and dependent children receive $10,000 of FSGLI coverage, unless you elect to reduce that coverage. Premiums are low for those under 35, maxing out at $5.00 a month for the full amount. Children are covered for free in the FSGLI program.
The scope of this article is limited to the benefits provided through the military. But you may always elect to purchase additional life insurance through a private company if you need more.
SGLI Traumatic Injury Protection Program (TSGLI)
- Amount: Variable depending on injury ($25,000 minimum)
- Taxable: No
- Form: SGLV 8286 (Servicemembers’ Group Life Insurance Election and Certificate)
SGLI Traumatic Injury Protection Program (TSGLI) is automatically available to members paying premiums to the SGLI. If you are traumatically injured and survive for 7 full days (168 hours) from the date of the injury, you’re eligible to receive tax-free compensation based on the injury. The chart here lists how much financial compensation you can receive if you lose a limb or become paralyzed. Should you become traumatically injured and then survive for 168 hours only to pass away, your family will be entitled to this compensation in addition to the base Death Gratuity and SGLI payments.
Unpaid Pay and Allowances
- Amount: Variable based on Service Member’s Rank/Time in Grade
- Taxable: Yes
- Form: DD-93 (Record of Emergency Data)
On your DD-93, you will need to designate who will receive any unpaid allowances and pay that were due to you upon your death. This money is not tax free and will equal up to a month’s worth of what you were receiving when you were alive. Take a look at last month’s LES to determine what your family could expect in the event of your death.
Dependency and Indemnity Compensation (DIC)
- Amount: Variable based on Service Member’s Pay Grade
- Taxable: No
This benefit lasts for the entire life of your surviving spouse if he or she does not remarry prior to age 57. If you were married on the date of your death, your spouse will receive an amount that varies depending upon your rank. Check out the paytable here.
This benefit is non-taxable, and surviving children will receive compensation as well. Your children will receive the DIC benefit until they turn 18, marry, or turn 23 if they attend a qualifying school. Parents of single soldiers are eligible to receive this benefit after applying for it, which is something financial counselors and the CAO should assist the survivors in doing.
Note: there is a Survivor Benefit Plan / Dependency and Indemnity Compensation offset for surviving spouses who receive both forms of compensation. This is outside the scope of this article, but you can read more about this and other Survivor Benefits Plan topics here.
Survivor’s Benefit Plan (SBP)
- Amount: Variable based on Service Member’s Pay Grade/Scale
- Taxable: Yes
The Survivor Benefit Plan can be thought of as insurance on your retirement pay. If you elect to buy into the Survivor Benefit Plan and die, your surviving spouse or eligible children will receive a portion of your retirement pay. You must be eligible for retirement pay for your survivors to be eligible to receive Survivor Benefit Plan benefits.
The amount of payment by the SBP will vary depending on the determination of whether or not you died in the line of duty (LOD) or due to some other circumstance. This benefit is either taken by the spouse, the former spouse, or at a children’s rate for the children of the deceased (there are specific age limits for surviving children).
Between the SBP and DIC, the calculations can become complex so a Retirement Services Officer (RSO) will walk the survivor through the math and help them decide what allocation is right for them. This article and podcast explains the SBP in more detail.
Coverdell Education Savings Accounts
- Amount: Up to 100% of your DG and SGLI Benefits
- Tax: Tax free growth and withdrawal
Coverdell Education Savings Accounts are designed for parents to help pay for the cost of qualified elementary, secondary, and college education expenses. For each Coverdell designated beneficiary in your family (children under the age of 18), there is a $2,000 a year contribution limit for Adjusted Gross Incomes under $95,000 for single filers and $190,000 for married filers.
All or part of the DG and SGLI payments can be deposited into one or more Coverdell Education Savings Accounts (CESA). This applies to each designated beneficiary of Coverdell ESAs in your family.
For example: if you have two children each child can normally receive up to $2,000 a year into their CESA. If you pass away on active duty, your spouse or child’s guardian could contribute up to 100% of your DG or SGLI payment into the children’s CESA. This money is tax-free and earnings will not be taxed upon withdrawal. The decision to deposit money from these benefits into a CESA must be made within one year of the death of the Service Member.
It’s not our place to tell you the best place to use the funds you receive through the various Survivor’s Benefits programs. But it is important to note that there are several different programs that provide education benefits for children of fallen service members.
Social Security Survivors Benefits
The Social Security Administration pays a one-time death benefit of $255, either to your surviving spouse who is caring for your dependent children, or eligible children aged 18 and under. The SSA will require documentation within 60 days of the death to start any other benefits your family is entitled to receive. Here is the Social Security Survivors Benefits Calculator for further reference.
Thrift Savings Plan and Savings Deposit Program
If you have a TSP account, it’s important that you designate a beneficiary. Doing so will clear the pathway for your survivors to receive any balance you have in the TSP (which is like a 401k). If you don’t have a designated beneficiary, the TSP payout will follow an order of precedence as follows: your spouse, your child or children (equally), and your parents. Use the TSP-3 form to designate one or more beneficiaries. Check out the pamphlet here for a detailed explanation of TSP Survivor’s Benefits.
For those of you participating in the Savings Deposit Program (SDP), the beneficiary designated to receive Unpaid Pay and Allowances will get your SDP balance.
Basic Allowance for Housing (BAH) and Moving
If you lived off post your surviving spouse will receive a lump sum equivalent to 365 days of BAH from the date of your death. If you lived on post, they won’t receive the lump sum but can remain in that on-post house for one year. The military will move your family one final time to the location of their choosing, and this must be completed within three years of the date of death.
Medical and Dental Coverage
Your family will receive the active duty coverage rate for three years, after which they will receive care at the military retiree rate. Your children will be covered at the active duty rate until they are 21 and if they are already a full-time student the age limit is raised to 23. If they aren’t covered by the Dental Plan, your survivors can opt-in.
Education Benefits
Surviving spouses and children are eligible to receive educational financial assistance. The Dependents Educational Assistance (DEA) program will offer up to 45 months of survivor’s benefits in the form of tuition for a degree, certificate, and apprenticeship programs.
There are many other programs dedicated to Gold Star families when it comes to education benefits, such as the John D. Fry Scholarship. Learn more at the TAPS program website. Many states also offer benefits for the children of fallen service members. Please check with your state military or veterans benefits agency for availability and details.
Military Star Card
If you’re like many families and single soldiers, you might have the Military Star Card (MSC). The clothing portion of your MSC balance is forgivable upon death in a combat zone. The balance for discretionary purchases may be forgiven but the surviving family will have to request that the debt be forgiven.
Businesses That Offer Survivor’s Benefits
There are some businesses that offer survivor’s benefits in the event of the loss of life by a service member. For example, Chase Bank has a military survivor program that is absolutely outstanding. They offer to forgive mortgage debt, auto loans, and credit card debt held by the deceased service member. This is the only program I’ve found so far, but be on the lookout for others.
Additionally, you should reach out to your financial institution and ask if they have a checklist or any specific guidelines for transferring or closing accounts and similar actions.
The HEART Act
The Heroes’ Earnings Assistance and Relief Act of 2008 enables survivors to deposit up to all SGLI and DG benefit monies tax-free into Roth IRA’s and Coverdell Education Savings Accounts. As part of the HEART Act, should your family need to withdraw money from the Roth IRA that received your DG and SGLI payment, they can do so without penalty or taxes.
Roth IRAs funded with death benefits are not subject to the same penalties and restrictions as a normal Roth IRA. Read up on the HEART act here and check out the paragraph on Survivor Benefits.
Tax Implications of Survivor’s Benefits
You’ve learned that the Death Gratuity and the SGLI are both tax free. So what does this mean for your family’s future? What if they took that money and invested it in a low-cost index fund for 30 years until it’s time for your spouse to retire?
Assume your family received the DG and the maximum SGLI benefit of $450,000, and invested only $250,000 of that money into a Roth IRA.
- If your spouse made no further contributions to the account, at a 7% rate of return they’d have over $1.9 million after 30 years.
- At 40 years they’d have $3.7 million.
- If they contributed the current maximum of $5,500 a year for 30 years at that same rate of return, they’d have over $2.4 million tax-free.
The financial legacy associated with this is amazing. While nothing can replace the loss of a human being, discussing a plan to handle the financial survivor’s benefits should you pass away can have a lasting impact on your family’s legacy.
The Bottom Line
It’s not fun or easy to think about death and what will happen to your loved ones if you pass away. However, we all accept it as part of the job and know full well that we have committed ourselves to a higher calling that can result in the unthinkable. Because of this, it’s essential to plan ahead and take care of your family even after you’re gone. Sit down with your spouse, parents, or loved one and discuss your personal financial plan if you make the ultimate sacrifice.
You’ll leave a lasting financial legacy if there is a plan in place to help guide and manage the benefits that your survivors will receive. Consult with your unit personnel rep to square away your DD-93 and SGLI, and see your legal office to create a will that clearly states your wishes when it comes to the immediate concerns following your death. Doing this will allow you to take peace of mind to work in garrison or downrange.
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Jeri Jarrett says
My ex husband and I were married over 10 years. He was retired and remarried when he passed away a couple of weeks ago. What am I entitled to as far as monies.?
Debbie Tuson says
Hello, My mother has been receiving surviving spouse VA benefits due to my father dying in 1974 after he retired, a a result of a service connected disability. She is now 93 and close to dying. If those benefits are paid in arrears, do we return the benefit paid for the month she passes, Or if she is alive part of the month and gets paid the next month, is she entitled to the benefit for the month she passed? Also should she have received the Death Gratuity ? Of so, is it too late? Thank you so much for this sight.
Ryan Guina says
Hello Debbie, I am sorry for your loss, and for your mother’s current health condition. I pray that she and your family will find peace during this time. In regard to your question, I recommend contacting the VA customer helpline at 1 (800) 827-1000. They can help you with these questions and ensure you have the correct answers and know what to expect with regard to benefits. I wish you and your family the best.
Denise Moon says
Why do you need to be together for 10 years if you were the only spouse
Denise Moon says
As a ex-wife of a veteran am I eligible for any benefits, we were only married for 6years but neither one of us remarried.
joan gay lamb says
I am the divorced spouse of an Air Force officer who died in February, 2019. I was awarded survivors benefits by court order at the time of the divorce.
I applied for survivors benefits in Mach, 2019. It has been 77 days since his death, and I have not received any benefits yet. What is the reason for the wait?
Andy p. Mofan says
Mam, sir may matanggap na ibang benefits Ang anak ng namatay na sundalo bukod sa pension na hanggang edad 21 lng. Wala na PO Kasi kaming ibang natanggap.
Shannon Rink says
Hello,
I have a question no one seems to be able to answer. I have contacted Social Security and they told me my Survival Benefits I receive my from my Retired Military ex-husband is Social Security. If this is the case, why did he have to pay premiums on the SBP? And why, if he had had elected to cease the Plan, would I have had to pay the premiums?
Thank you in advance,
Shannon Rink
Melissa Curry says
Chase is not military friendly. They may say they have a clause to help survivors but they argued with me and gave me the run around for four months after my husbands death.
joe henderson says
My wife passed away in Sept this year. She had some accounts with her own name and a mortgage. I receive 2 checks, 1 for $113,000 and one for$ 73,000. No income, only $800 a month SSDI and my mortgage is $ 1738 dollars a month. What can I do with nothing but $800 a month and just the insurance checks from her death? Plus I am on SSDI social security disability hence the $800 dollars a month. She receives no SSI. What do I do? Will I lose everything?
Larry Floyd says
My father passed away at 79 and payed in on the survival benefit plan so my mom would be taking care of.My question is she has bad health now and needs day to day help is there a program where she could get help as in home health care and handicap equipment like walk in tubs,ramps,and home health care.
Ryan Guina says
Hello Larry, Thank you for your question.
I recommend looking into the Aid and Attendance Benefit, which she may qualify for. There are certain net worth and income limitations, so it is advisable to take your time going through the eligibility and application process. I’m not aware of other programs besides this one. But you could try contacting a Veterans Service Organization to see if they have additional information.
I wish you and your family the best!
Dakota Rhodes says
Mark,
I am an Army veteran and now an Army widow. Sadly, my husband passed away last October and I found this to be one of the most useful articles I have come across detailing spousal benefits. I do have a question though regarding the BAH- how does one about claiming that benefit and who exactly is it through, DFAS? I have not heard of it and they seem oblivious, are you aware of the form used etc… any assistance would be greatly appreciated.
Kind Regards,
Dakota
Melissa Schreur says
Thank you for putting together this resource for us military families! I’ve found that spouses are usually unaware or confused on the benefits we have if our service member passes away. As a military spouse, I’ve come to notice we tend to be the last to recieve information(if at all) and that it is usually incorrect. This breaks down the benefits nicely and gives us insight on who to talk to should we need more detail.
blanche says
my husband has lung Cancer,we live pay check to pay check we don’t have ins and I don’t know how to keep ends meet with outhis pay with mine,he’s been to vet hospital and their helping with med bills ,greatfull will as a spouse get help to keep ends together on paying bills that we pay now,rent eyc
Mark says
Talk to the VA hospital. They should have a representative/office that can explain your benefits for your particular situation. This article primarily covers service members who are on active duty when they pass away.