In the July 10, 2017 Investment News publication, there was an article discussing a 2008 piece of legislation known as the HEART Act. I had never heard of it before. This is an amazing piece of law that can radically change retirement and educational benefits for military widows. This law gives service members and their families many forms of financial assistance as a further means of thanking them and compensating them for their service in the ongoing war against terrorism. The law contains several provisions designed to allow service members to make a smooth financial transition both into active duty and then back into their civilian lives. If you are in the military and are not familiar with this law, please make every effort to learn more about it because it offers a wealth of benefits to those who qualify.
One of the more important features of this act relates to retirement and education savings account contributions. The beneficiaries of service members killed in the line of duty are typically eligible to receive two forms of compensation: one is the death benefit from a SGLI policy that automatically pays a maximum of $400,000 to the beneficiary of each deceased service member. The other is a military death gratuity that pays $100,000. The HEART act allows beneficiaries to place these funds a traditional IRA, Roth IRA and/or a Coverdell Educational Savings Account. This provision can be a life changer for the families of the deceased soldier. Normally, the annual amount that can be contributed to an IRA is $5,500, plus $1,000 catch-up if you are age 50 or older. The Coverdell ESA limit is $2,000 a year. The HEART Act allows the widow to contribute the proceeds from the life policy and the death gratuity into the traditional or Roth IRA and/or the Coverdell savings plan without regard to the statutory limits listed above. Even better, you choose how much you want to contribute. You do not have to contribute the entire award. If you meet with your tax or financial advisor, I think you will be amazed at the possible enhancements to your retirement income, especially using the Roth IRA, since distributions from it are tax-free. A word of caution: meet with your advisors to help determine how much you can safely deposit in these accounts without having to draw them out prematurely. Early withdrawals incur penalties that may help to erase any benefits accruing to you.
There are other features of this Act that extend to other areas of employer related compensation and tax savings for service members. A few of them include penalty-free distributions from all qualified retirement plans, tax-free status for bonuses paid by states or other political bodies to service members for duty served, and classifying differential pay as W-2 income instead of 1099 income. Please get the information you need from qualified advisors to make sure you are aware of all the good news contained in the HEART Act. To transition to God talk, Beverly and I enjoyed a plethora of heartwarming moments while hosting our two granddaughters for two weeks as they participated in the River Oaks Art Camp. Alike but different, talented, and fun to be with describe them well. But, as we approach the end of their stay, this verse hits home: “so then, a Sabbath rest still remains for the people of God, for those who enter God’s rest also cease from their labors as God did from his.” From a commentary in Forward, God’s rest is not the opposite of work. The rest God offers us gives our work meaning, just as silence between musical notes gives music meaning. Rest is about balance, harmony and order. We will miss the girls, but we will enjoy a well-earned rest, as most of you grandparents will understand.
Although this information has been gathered from sources believed to be reliable, it cannot be guaranteed. This material is intended for informational purposes only and should not be construed or acted upon as individualized tax, legal or investment advice. FSC Securities Corporation does not offer tax or legal advice. The views expressed are not necessarily the opinion of FSC Securities Corporation. Financial Solutions Group is a marketing name. Financial Solutions Group is located at 128 Versailles Blvd, Alexandria, LA 71301. We can be reached at (318) 448-3201. Securities, insurance and advisory services offered through FSC Securities Corporation, member FINRA/SIPC.