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My almost 47 year old daughter is getting divorced from her 49 year old retired military husband. He wants her to drop the Survivor Benefit Plan which costs close to $400 monthly and he will get a 15 or 20 year term insurance policy for $500,000 for her benefit. She has been a stay- at- home mom so her career prospects are unclear. My concern is she could end up at 62 or 67 without the insurance or survivor benefits. Any suggestions?
I went through a military divorce. Unlike pension share distribution, which is pretty clear under the USSPA, the SBP is up to the judge’s discretion and depends on a lot of different variables. Obviously I would not waive it voluntarily but it is also important to properly value it in context of other property distribution in the divorce, i.e. there is a big difference for the judge if they were married only 10 years of active duty and she is eligible for only 25 percent of the pension based on a 20 year career vs if they were married 20 years of active duty and there is a 50 percent share of the pension for example.
This is a complex decision. Some things to consider before making a decision.
-Remarriage ends SBP benefits. Your daughter would lose SBP if she remarried.
-She would also likely lose SBP if the husband remarried and filled a form to redesignate the beneficiary. She would need to research this more.
-While the military advocates for people to take the SBP, most military men live longer than the general public shortening the payout of benefits. Something to consider given their similar ages.
-It’s hard to give advice without knowing the rest of the financial situation. SBP is mainly to get through the working years as the benefit lessens the less time that you can collect (based on SS benefits).
-SBP declination is completely up to the spouse, so it is her choice. However, divorce can cause people to do vindictive things (like marry a female friend just to remove her from SBP since she didn’t agree to his proposal he seems to be pushing), so she should weigh the risks. I doubt you can force him to agree not to remarry, but maybe not to remove her SBP or replace it with a life insurance policy if he chooses to do so.
-As a good faith she can agree to pay the monthly payments also, as part of a compromise, those monthly payments cease after 30 years.
Are you sure this is still true after passage of the Social Security Fairness Act? “SBP is mainly to get through the working years as the benefit lessens the less time that you can collect (based on SS benefits).”
In real estate, they say location, location, location! In divorce disputes, it’s attorney, attorney, attorney! Whoever has the best representation wins. The goal should be equality, but neither party will see the settlement as fair.
My free advice is to hire a lawyer who is also an accountant who can prepare a present value calculation to show that the survivor benefit is the only responsible choice.