Even as the number of military service members deployed to Iraq and Afghanistan dwindled in recent years, the reduction in the size of each of our military branches and continued overseas commitments require increased deployment rates to areas like Africa, Europe, and South Korea. In this article, I discuss four important steps service members should take prior to any deployment. These steps include creating or updating a will or estate plan, updating account beneficiary information, drafting powers of attorney, and preparing personal finances to maximize benefits and protect against loss. These subjects are often pushed aside by service members during the whirlwind pre-deployment train up and also those who expect the luxuries of comfortable living and internet access that accompanied many recent deployments. While no means exhaustive, this list should get you headed in the right direction.
Even as the number of military service members deployed to Iraq and Afghanistan dwindled in recent years, the reduction in the size of each of our military branches and continued overseas operations required increased deployment rates to areas like Africa, Europe, and South Korea. In total, deployment rates remain the same or even higher than in the past. Even with routine deployments, service members often fail to take appropriate financial steps before leaving. With easy internet access at many overseas locations, most people can manage their finances without too much difficulty but are often unprepared for unexpected events. In this article, I cover essential steps to take before deployments to maximize benefits and lay groundwork in case a significant loss occurs. It’s intended to be a starting point, but not an exhaustive source as each subject has too much detail for one post. Also, please keep in mind that this information is general and does not account for variations in state laws or individual circumstances.
Update Will and Estate Plan
Of course, creating and updating a will is a recommendation we hear all of the time, so most of us become desensitized. But a will, even for younger service members with families or property, is essential for proper management of an estate. And yes, pretty much everyone has an estate that must be distributed upon death; a will is an opportunity to ensure distribution according to one’s wishes. Critical, non-financial decisions include items like selecting an executor or determining who will become responsible for caring for children under different circumstances. Nolo.com provides an excellent overview of executor responsibilities; deliberate thought should go into the selection of this person.
We have all heard the stories about someone who forgot to update their will, resulting in savings and assets going to a recently divorced spouse, for example. Lacking a will entirely is just about as bad. Upon someone’s death, assets and responsibilities go through a court process called “probate,” which is the process where the deceased’s estate pays off any debts, and remaining assets are distributed according to the will and state law. States also have a special set of laws for people who die without a will. These laws vary by state, but could easily result in properties not going to intended recipients.
Service members can draft wills at on-base legal offices and are often offered the opportunity to create a will as part of their deployment preparation. Any service members who own property or other assets or have complex obligations should consider working with an estate lawyer who can determine the applicability of various laws and statutes to each service member. Estate lawyers exist because the subject is complicated enough that a general-purpose lawyer in a military unit may not have sufficient knowledge to best serve clients with complex circumstances.
Update Beneficiary Information
Following closely behind a will in importance is updating account beneficiary information. Beneficiaries are often designated on 401(k) accounts, TSP, IRAs, life insurance (including SGLI), and bank accounts. If you took care of step 1 and created a will, why is this step important? Fortunately or unfortunately, accounts with designated beneficiaries bypass the probate process controlled by a will and the court system. In other words, the beneficiaries listed for each account receive the assets regardless of any instructions included in a will. As such, updating a will but leaving outdated beneficiary information could result in assets transferring to unintended recipients. Service members will have to contact each financial institution where they have accounts and life insurance to update beneficiary designations.
Draft Powers of Attorney
Powers of attorney authorize another person or entity to conduct transactions on your behalf or in your name, and that ability may be critical for a spouse or family. These requirements include mundane tasks like annual registration renewal for a car, managing a home or mortgage, and access to bank or investment accounts. Powers of attorney can be general or specific. A general power of attorney authorizes a designated representative to conduct any business on your behalf without restriction. As some might suspect, the general power of attorney is subject to abuse when service members are out of contact for extended periods of time. Because of some instances of abuse, some organizations may decline to provide services under a general power of attorney, which leads us to the special version.
Special (or limited) powers of attorney provide specific authority for the designated person or entity. An example is someone who receives the ability to manage a service member’s home while deployed. A power of attorney may authorize the representative to interact with the mortgage company, conduct repairs, and pay bills, but not provide authority to conduct a cash-out mortgage refinance. Service members should consider designating someone, such as a spouse or family member, to have authority to manage some regular affairs during deployment. To prevent abuse, major financial decisions or changes should not be authorized unless the service member anticipates a specific need. One can also assign an expiration date to powers of attorney, which may make sense in the case of a deployment with known start and end dates.
I deployed to Afghanistan at a time with reliable and regular internet access, so I was able to manage my finances without much difficulty. Future operations and deployments may not afford such luxury. Preparing finances for deployment include the mundane, such as automating bill payments, but also maximizing benefits. Many deployed service members will earn special pays and be shielded from income taxes. Armed with this information, service members should plan to pay down debt principal or direct additional funds toward savings, if at all possible. Don’t allow lifestyle creep to consume temporary extra income.
Additional benefits exist beyond extra income. The DoD offers the Savings Deposit Program, which I detailed in a previous article. It provides a 10% interest rate on up to $10,000 in savings during qualifying deployments. A little planning can allow service members to maximize this benefit. Also, contributions to TSP can be changed to Roth contributions during the deployment, exempting those funds from taxation forever. Companies like USAA offer interest rate reductions on their credit cards or refunds of credit card interest altogether. The Service Members Civil Relief Act (SCRA) provides many financial and legal protections as well. While these protections generally apply during any active service, deployment preparation is as good a time as any to review and maximize the benefits.
Perhaps one of the most important steps for service members with family obligations should be to review life insurance selections. Deployments can be the riskiest time in some service member’s lives. For many, the insurance provided through SGLI, combined with DoD death benefits, is sufficient and inexpensive. Those with more significant obligations, such as caring for a spouse and children, mortgage payments, or other financial goals should have commensurate insurance. Ultimately, the amount of life insurance benefits should be able to replace the majority of a service member’s income for several years while also covering obligations like mortgage payments, car payments, and children’s education. Deploying service members must choose life insurance policies that cover them while participating in military operations. Standard life insurance policies do not pay out during a loss on deployment.
Command and Signal
The many requirements placed upon our service members before a deployment often cause them to ignore proper preparation of their finances. While most will make it through deployments unscathed, they expose themselves and their families to significant financial risk or lost opportunities to make significant strides toward financial goals. If you are reading this article and are deploying in the near future, I hope it gets you moving in the right direction. A little preparation can go a long way, and you could complete many of these steps even if a deployment is not upcoming. No better time than the present.
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