What is it?
The Department of Veterans Affairs (VA) pension program benefits former service members who have limited incomes and, in some cases, health problems that aren't related to military service. The VA also administers a special pension program for Medal of Honor recipients. Currently, veterans are receiving four types of pensions: The Improved Pension, the Old-Law Pension, the Section 306 Pension, and the Medal of Honor Pension.
Veterans with service-connected disabilities will not be entitled to receive a VA pension, but they may be eligible for disability compensation from the VA or for disability retirement pay.
Applying for benefits
To apply for pension benefits, veterans must:
- Submit VA Form 21-526, Veterans Application for Compensation or Pension.
- Provide medical records to support any disability claim (if necessary).
- Provide dependency documents (birth, marriage, and divorce/death records for both the veteran and spouse).
- Provide military discharge papers (DD Form-214) if they have a copy. For further information, contact a local VA Regional Office by calling (800) 827-1000.
The Improved Pension
To be eligible for an Improved Pension, veterans who are age 65 or older must have limited income and assets (countable income must be under a certain annual limit and assets cannot be excessive), and they generally must have a period of service that includes at least one day on active duty during wartime and 90 days total active duty time. (Veterans who entered active duty after September 7, 1980 generally must have served at least 24 months or the full period for which they were called or ordered to active duty.) Also, veterans must have been discharged under conditions other than dishonorable.
Veterans under age 65 who meet the above requirements may also be eligible if they are permanently and totally disabled, meaning that they will likely be unable to permanently hold a substantially gainful job.
Veterans whose employment and health problems are caused by alcoholism and drug abuse will not be eligible for veterans pensions.
A veteran who qualifies for the Improved Pension will receive a monthly benefit check. The amount he or she receives depends upon the veteran's marital status, whether the veteran has dependent children, and whether the veteran is able to care for himself or herself. Pension benefits are designed not to be the sole source of support for the veteran but rather to supplement other types of income (such as other retirement and Social Security income) in order to bring income up to an established level. This means that if the veteran (or spouse or dependent children) earns income or has unearned income, it may reduce (dollar for dollar) the amount of pension benefit he or she receives.
Some income will not reduce a pension benefit. This income includes Supplemental Security Income (SSI) benefits, welfare benefits, and some wages earned by dependent children.
- Health care--Veterans receiving pensions have a high priority for inpatient and outpatient VA medical care.
- Aid and Attendance--If a veteran enters a nursing home, requires the aid and attendance of another person, or is permanently housebound, he or she may receive an increase in benefits or may be permitted to have additional income that won't lessen his or her pension benefit.
- Burial benefits--Survivors of veterans receiving VA pensions will usually receive a small burial allowance to offset the cost of the veteran's burial in a national or private cemetery.
- Death pension--Available to qualified survivors of low-income veterans, the death pension provides a fixed monthly benefit that usually increases annually with inflation. The amount of monthly benefit a survivor receives depends upon the survivor's other income and whether other dependents reside with the survivor. Survivors who receive a death pension may also be eligible for Aid and Attendance, if they meet the requirements.
- Vocational training--A veteran receiving a VA pension may be eligible to receive up to 24 months of vocational training and then 18 months of job-placement assistance.
Veterans who receive the Old-Law Pension must have filed applications for benefits before June 30, 1960, and must be veterans of World War I, World War II, or the Korean War. Otherwise, eligibility rules are the same as the Improved Pension rules.
Beneficiaries receive monthly checks under the same rules as, and in an amount equal to, those received by veterans under the Improved Pension. However, benefits may be reduced if veterans receiving without dependents benefits or Aid and Attendance benefits enter a VA facility for care. For further information, contact a local VA Regional Office at (800) 827-1000 to find the office nearest you.
Section 306 Pension
Veterans who receive Section 306 Pension benefits must have filed an application between July 1, 1960, and December 31, 1978. Anyone currently receiving a Section 306 Pension can switch to the Improved Pension. Otherwise, eligibility rules are the same as those for the Improved Pension except that certain additional items may be excluded from income such as wages of family members under age 18 and dividends from commercial insurance. In addition, certain assets that are countable under the Improved Pension aren't countable under the Section 306 Pension.
Beneficiaries receive benefits under the same rules as, and in an amount equal to, the benefits received under the Improved Pension, with one exception. Some veterans (those without dependents or those who are receiving benefits at a without-dependents rate) will have their monthly benefits reduced three months after entering a VA facility.
Medal of Honor Pension
A veteran who has been awarded a Medal of Honor can elect to receive a special monthly pension. This pension does not reduce any other government benefits the veteran may receive.
Members of the Military: Estate Planning
Whether you're a veteran or just starting out in the military, planning and preparing your estate is of vital importance. Why is estate planning so critical? Because, at your death, you leave behind the people you love and all your worldly goods. Without proper planning, you have no say about who gets what, and more of your property may go to unintended recipients instead of your loved ones. If you care about how and to whom your property is distributed, you need to prepare your estate plan.
Who needs estate planning?
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 may be relatively simple and inexpensive, such as preparing a will to distribute basic accounts and assets and 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'll 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 particular 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?
It generally 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 available that can 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're living 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.
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. Service members 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 Service members' 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 service members 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 service members 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 service member), headstone or marker provided by the government, burial flag, and reimbursement for a portion of burial expenses.
By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death based on your goals and objectives.
With your estate plan successfully completed, the next critical step in the overall process is to carry out periodic reviews and to update your plan when appropriate.
The Dorion-Gray Team
Dorion-Gray Retirement Planning, Inc. is located at 2602 IL Route 176, Crystal Lake IL 60014-2225. Securities offered through Securities America, Inc. a registered Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Dorion-Gray is not affiliated with Securities America companies. All content provided by Forefield is protected by copyright. Forefield claims no liability for any modifications to its content and/or information provided by other sources. Neither Forefield Inc. nor Forefield Advisor ™ provides legal, taxation or investment advice.
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