An interesting, if poorly chosen headline, story in the Saturday N.Y. Times examines the issues confronting the families of U.S. military who have died in combat and who are beneficiares under the enhanced combat death benefit provision.
What I found moderately offensive in the headline, the use of the term "windfall", is in fact a life insurance death benefit provided to the named beneficiary of each U.S. Serviceman or Service woman. I hardly think the death of a loved one and the cash it brings is a windfall, but the N.Y. Times does need to sell newspapers and the headline certainly grabs your eye.
In the bigger picture, those of us in the settlement planning community, who routinely as part of our professional practice work with personal injury victims, widows, orphans and estates are sadly too familiar with the issues this article raises. While I am thrilled the U.S. Government made this change three years ago as the prior amount paid to the surviving family was embarrassingly low, it does raise a whole roster of new problems that the article actually does a good job in addressing. Among them:
1. The issues a sudden influx of cash create to young widows who have typically never had to manage more then $500 a week as opposed to $500,000. Few if any people are properly prepared at a time of emotional trauma to make rational or quality long term decisions when that money is sent to them by the government. Settlement professionals such as myself are well aware of the grief process confronted by families where they spend funds down quickly to emotionally rid themselves of the money, or fall prey to other family members who feel entitled to the money.The more people are aware of the risks of putting this money in these young peoples hands the greater the chance we can start educating them about how to handle it wisely.
2. The issue of beneficiary designations. Often times young men or women will get married prior to heading over seas but fail to update or change beneficiary designations. This can create circumstances where in a mother, brother or other person is legally entitled to the payment as opposed to the widow or widower. The family conflicts, as well as financial hardships, this can create is discussed in the article.
3. The VA does offer free financial consulting referrals for up to a year after the death of a service man or woman but as any settlement professional will attest, the vast majority of surviving family members are so over come with grief and emotional issues they are in no position to be making life time planning or investment decisions at this time. This can lead to decision paralysis or dissipation of the funds through impulsive decisions. I'm wondering what long term consulting or advisory services are available for these families.
What the article doesn't mention, that I would like to hear from our readers about, is does the VA and the U.S. Government offer the survivors something akin to a settlement annuity in which the family can take all or part of their distribution in monthly installments? I'll profess some ignorance on this topic but we will be taking this up as a subject on Speaking of Settlements probably next week to investigate what options are there for the surviving families. I'd like to see NSSTA and other settlement planning organizations begin to look at these cases and to share our 25 years of experience and knowledge with families facing major decisions while dealing with incredible grief and duress. Obviously, I would hope that the option to have a family take a secured, tax free guaranteed income over time as opposed to trying to manage a lump sum of cash is something that is available to every surviving beneficiary.