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Have you properly designated your SGLI beneficiaries?

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IT'S THE LAW

By The Staff

By 1st LT. ANTHONY OSBORNE

Fort Knox Legal Assistance Office

If something were to happen to you today would your family members have the financial support they need to recover from the loss of your income?

Service members Group Life Insurance  is designed to help your surviving family by providing income replacement in the event of your death.

Have you properly designated your SGLI beneficiaries on SGLV Form 8286 “hereinafter 8286” so your family will be taken care of? You can update this form at the Soldier One Stop or the Military Personnel Office.

SGLI automatically insures all service members for $400,000 unless coverage is reduced or declined on the 8286. SGLI proceeds are payable to the surviving beneficiaries if a service member dies, even if the death is self-inflicted. Confinement or conviction for certain crimes can cause a member to lose SGLI coverage. See the Department of Veteran Affairs Web site to learn more about SGLI.

In meeting with service members, I have observed that a great deal of misunderstanding exists about how a will relates to SGLI and how SGLI beneficiaries receive insurance proceeds.

For example, if a service member divorced and remarried again, but failed to update the 8286 to name a new spouse as their beneficiary, the ex-spouse would receive the entire distribution no matter what a will said; a most unfavorable result.

It is critical that you keep your 8286 properly updated because a will, power of attorney, or state law requirement cannot change or cancel your SGLI designation.

The majority of married service members list their spouse as their principal beneficiary. If a married service member elects reduced insurance coverage or designates a beneficiary outside of his or her spouse or family members, the servicing personnel unit must provide the spouse with written notification.

It is recommended that service members designate beneficiaries by relationship on the 8286, such as “to my children in equal shares.” However, it is important to note that the law excludes step-children, step-parents, and certain illegitimate children from being included in these traditional family groups. To overcome this exclusion, the language you include in your 8286 must specifically list step-children, step-parents, and illegitimate children by their full names if you wish to include them as beneficiaries.

Keeping your SGLI beneficiaries properly updated also means understanding how minors inherit SGLI proceeds.

For example, if a service member names her two minor children as her principal beneficiaries, both to receive 50 percent of her SGLI proceeds, what becomes of the distribution? A state court would appoint a guardian to hold the proceeds until the children turned 18, at which time they would receive their entire share. Distributing a large cash bequest to an 18-year-old may not be the intent of the service member, but that is what happens if a minor child is named as a primary beneficiary.

Two other options exist for naming minor beneficiaries to receive SGLI proceeds. A service member can name a custodian to hold the property for his minor beneficiaries under a state Uniform Gift to Minors Act or Uniform Transfers to Minors Act. The custodian can use the money for the benefit of the minor and, if state law allows, the custodian may be able to hold the property past the beneficiaries’ 18th birthday.

A third option for naming a minor as a beneficiary is for a service member to have a will prepared which includes a testamentary trust. The will must be prepared prior to updating the 8286. Designating a trustee in a will is a desirable option because the service member can specify how the trustee will use the SGLI proceeds for the minor children. The trustee will be empowered to pay for the health, education, maintenance and support of the beneficiary but, more importantly, the trust is usually written to withhold large distributions to the children until they have reached a more mature age where they can responsibly handle the money, usually 25 or 30.

Another attractive feature of a testamentary trust is it that it allows you to name a trustee (the one who controls the money) separate from the guardian of your children. This option can help to ensure that the trust assets are preserved over time to care for all your children.

A last SGLI and VGLI feature to be aware of is the accelerated benefits option. This gives terminally-ill SGLI and VGLI policyholders access to up to 50 percent of the face value of their policies before they die. Policy holders qualify for the option if they have a written prognosis from a physician of nine months or less to live.

Life is unpredictable. Make sure that your 8286 reflects who you want to receive your SGLI proceeds. Be sure to include contingent beneficiaries in your planning so that in the event you and your spouse or children were to die at the same time, your SGLI proceeds would go where you want.

If you have questions about SGLI, call the Legal Assistance Office at 624-2771 to schedule an appointment.