As the United States’ military actions in various parts of the world continue, it is more likely that you will have a client who ends up deployed away from home. This can wreak havoc on a family’s finances. Household income may plummet, children and spouses may have to move back home with Mom and Dad or into a smaller place, and non-working spouses may have to find a job to hold the family together.
The military does an excellent job of putting in place the estate planning framework that many clients delay implementing. Before deploying, most military members are required to create a will and related documents and have a chance to purchase service member group life insurance (SGLI). Their checks, less a small amount for their health and welfare, are automatically deposited back home. They can set up allotments to pay bills, continue savings programs and meet other financial obligations.
But with your help, there is more that they can do. Deployments don’t usually happen unannounced so there is normally at least a 30-60 day window to make financial plans. What can you do to help your military clients?
Know your clients
First, you have to know which of your clients have military family members (spouses and children). This is not as obvious as it sounds. If you have a client who is in the National Guard, you may not know it. Yet about 50 percent of the deployed forces in Iraq and Afghanistan and all of those scheduled to patrol the United States-Mexico border are National Guard members.
Help them max out military insurance
Second, encourage those who are active, Reserve, or Guard members to elect the maximum amount of SGLI they are eligible for. As of Sept. 1, 2005, this amount was raised to $400,000 in most cases. The monthly cost is $3.25 per $50,000 of coverage, or $26 per month for the full $400,000.
Identify insurance exclusions
Your military clients may have other life insurance. You can review the policy exclusions to see what payments, if any, will be made if they are killed by hostile action, friendly fire or other military activity. The answers may surprise you, your client and your client’s family after the review. Many clients may have group term life insurance at work. Again, check to see if there will be any coverage in the war/hostile activity zone. Border-patrol duty could add an unexpected twist when you are reviewing policy exclusions.
Disability income insurance is another problem. As with life insurance, it likely excludes coverage for disabilities that result from hostile action, friendly fire and so forth. Social Security is a fallback, but a poor one. Nonetheless, it is an excellent idea to have a frank discussion about the limits of Social Security and service-disabled pension benefits.
Get their financial house in order
Check individual retirement account (IRA) and qualified plan beneficiaries to make sure the right ones are named and that appropriate secondary beneficiaries are named. This applies to both spouses. After all, if something happens to the stateside spouse and to the war/hostile action zone spouse, the traditional beneficiary is gone.
Help your clients analyze expenses and create a budget while both are still here. It is easier to identify unneeded expenses and potential shortfalls and begin to take action while the family is still together.
Sources of emergency cash
Consider advising your client to put a home equity line of credit in place before the military spouse deploys. It will be difficult to do this once the spouse is under orders or already deployed. If the spouse is already deployed, make this line of credit a priority when he or she gets leave or returns. This asset could mean the difference between keeping the house and paying the bills, and declaring bankruptcy. Once the spouse is on leave from his or her regular job, lenders may be less willing to grant a line of credit.
Not since World War II have so many citizen soldiers and members with children been deployed. A frank discussion and some planning can ease part of the burden for your military, Guard and Reserve clients.
Janet Arrowood is a freelance writer in Littleton, Col. She can be reached atTheWriteSource@yahoo.com.