One of your most valuable (but rarely discussed!) military benefits is access to free legal assistance from your local Legal Assistance Office. The Legal Assistance Office can provide an array of services. One of the most valuable services is estate planning advice and documents preparation.

What is Estate Planning and Why Should You Care?

Estate planning is the process of leaving directions for the disposition of your assets and obligations upon your death.  It can also include naming someone you trust to act on your behalf in the event you are not available or not able to make decisions for yourself.

There are countless stories of Service Members who did not update their estate documents after a marriage (or divorce). As a result, the Service Member’s family must deal with the additional stress and confusion of sorting out the Service Member’s legal affairs.

Even if everything you own fits in a standard issue footlocker, you owe it to your loved ones to reduce their burden in the event something happens to you.

How do you set up an Estate Plan?

Estate planning is not a “one size fits all” process.  Seeking legal advice from a competent estate planning attorney is the first crucial step in setting up your estate plan.  The Legal Assistance Office can help.

Find your local Legal Assistance Office

(https://legalassistance.law.af.mil/) and schedule an appointment. The Legal Assistance Office will provide a questionnaire to prepare ahead of time.  The questionnaire will help you think through all of the details they will need to prepare your estate plan documents.

With your completed questionnaire and a discussion with you, the Legal Assistance Office will usually prepare the following documents:

• Last Will and Testament (Will) –
  • Names your executor (the person responsible for implementing your wishes)
  • Directs how you would like your assets distributed
  • Appoints a guardian for your minor children (or pets!)
• Power of Attorney – a document that grants either General (broad) or specific authority to an individual to act on your behalf (this can include the ability to make healthcare decisions for you; speak with your attorney for more details)
• Advance Directive – communicates your wishes for medical care in the event you are not able to communicate with your medical care team. (Also called a living will)

In some cases, you may choose to use a Trust in your estate plan.  A Trust is a legal vehicle which allows you to transfer ownership of an asset while retaining some level of control over the asset. There are many different kinds of Trusts, and they all serve a unique purpose. Speak with an attorney to determine whether a Trust could be beneficial to your estate plan.

Who Can Access the Legal Assistance Benefit

In general, the following Service Members and dependents have access to free legal assistance:

• Active Duty Service Members, their Families and Survivors
• Retired Service Members receiving retirement pay, their Families and Survivors (this includes retired National Guard and Reserve Service Members)

The following Service Members generally have limited access to free legal assistance:

• National Guard and Reserve Service Members serving on active duty (does NOT include their Families). Access is available while on Title 10 or Title 32 active duty orders.
• National Guard and Reserve Service Members serving during periods of inactive duty training periods to prepare documents in the event of a call to active duty (does NOT include their Families)

National Guard Service Members serving on state active duty must refer to their state rules.

(Ref: https://myarmybenefits.us.army.mil/Benefit-Library/Federal-Benefits/Legal-Assistance-Services)

Beyond the Legal Assistance Office

Having an estate plan in place is no less important if you/ your family are not able to access free legal advice through the Legal Assistance Office. Find an attorney who is familiar with the estate planning nuances of your state (estate issues are governed at the State-level).

Even if you are able to begin your estate planning process at the Legal Assistance Office, certain situations may require more complex estate planning strategies or documents. You MAY need outside estate planning advice if you:

• Own property in more than one state
• Own a business or part of a business
• Have a special needs child who will require care for most/ all of their life
• Have a beneficiary who is not able to handle an inheritance or you want to control how a beneficiary may access the assets you plan to leave to them
• Want to keep your estate settlement affairs private. A Will almost always involves the probate process which is a matter of public record.
• Want to provide for pets that may outlive you
• Other unique situations

Your local Legal Assistance Office can advise whether you may need an outside estate planning attorney. There are many websites available to help you compile a list of estate planning attorneys to research and then interview:

• Your State Bar Association Member Directory
• Estate Planning Attorney trade associations
• Your favorite MFAA Financial Advisor: https://militaryfinancialadvisors.org/start-here/

Estate planning with a private attorney can be expensive. You should select at least three attorneys to compare services and costs.  Be sure you clearly understand their recommendations and the impact of implementing or not implementing their recommendations. From there you can decide how to proceed.

When to Update Your Estate Plan

Just as estate planning is not a “one size fits all” situation, it’s also not a once and done situation. After your initial documents are in place, you should review/ update your documents:

• At least every 1 to 2 years to ensure you are still happy with the plan
• When you have a change in marital status
• When you have a child
• When you change state residency
• Before you leave the military
• When you have a substantial change in your financial situation
• If one of your beneficiaries passes away

Keep in Mind

Estate planning is not a “one size fits all” situation. You may be incredibly well served by the free services offered at the Legal Assistance Office.  Or, you may need the advice of a private estate planning attorney who has experience with situations similar to yours. Start with the free legal advice at your local Legal Assistance Office and go from there.

The most important thing is to START.  Your loved ones are counting on you to protect them from the financial and legal challenges that may result from not implementing a suitable estate plan.

Side Hustle or Contractor – You have options!  Retirement savings options, that is.

Technology and post-Covid acceptance of remote work has created more opportunity than ever for military spouses to be gainfully employed.  PCS’ing to Germany?  Keep your job, work modified hours, and collect a tax-advantaged US-based salary.

Others are staying in the same industry, becoming 1099 contractors, and taking their skills and career with them when they move.  In other cases, we see transitioning service members and spouses opt for side gigs instead of traditional employment because of the flexibility it offers.  Often these “self-employed” opportunities generate very respectable income.  The additional income can fatten (early) retirement coffers, but can also leave folks hit by a surprise self-employment tax bill.

So what to do?

There are always pre-tax Traditional IRAs, but the contribution limits are so…limiting.  At certain income levels, you won’t even be able to deduct those contributions.

Enter the Individual 401k, SEP-IRA, or SIMPLE-IRA as retirement savings options.

Most know about the TSP and employer 401k tax advantages to reduce taxable income.  Contribute $22,500 ($30,000 if over 50)  and that same amount comes off your taxable income for the year.  For a two-income household, this could save $10,000+ at tax filing time.  However, if you have self-employed income, you need to know about these other plans.

What is an Independent 401k or SEP-IRA or SIMPLE-IRA?

Anyone with self-employment income (1099 contract work counts) who has no W-2 employees is eligible to open an Individual 401k.  The contribution limits for you as the employee are the same for anyone else contributing to a 401k:  100% of your earned income up to $22,500 if you are under 50, and an additional catch-up of $7,500 for a total of $30,000 if you are over 50.

Then things get interesting. As the employer, you may also contribute an additional 25% of your earned income (S Corp or LLC), or 20% of adjusted income if you are a sole proprietor. The combined total cannot exceed $66,000 if under 50 or $73,500 if over 50. You can make Roth contributions, too, if you are willing to pay the tax bill now. You can see how contributions as both the employee and the employer can add up fast.

The SEP-IRA (Self-employed Individual Retirement Account) is an alternative solution if you have W-2 employees, but it is limited to only employer contributions (see some exceptions) that must be made in equal percentages of salary for yourself and all employees.  Thanks to the Secure Act 2.0 in 2023, SEP-IRA plans will allow Roth contributions starting in 2024.  Both Individual 401k and SEP-IRA contributions can be made until your tax filing deadline.

If you own a business and have W-2 employees, you also have the option of a SIMPLE-IRA.  The rules are a little more specific for these plans.  See the link in the SIMPLE column below.

What’s the difference between the two?

The table below illustrates the major differences between the three plans mentioned above.

*under 50 years of age
**50 years of age or older

This calculator is also handy for seeing the differences in which plan to choose based on maximizing retirement contributions for your specific situation.

Retirement Savings Options Examples

Example 1 — Self-employed with no other employer-sponsored plan:

Sue is a 1099 contractor working from home for a big insurance company.  As a “sole proprietor”, she made $80,000 in 2022 and had only $2,000 in deductible expenses.  She is required to pay $11,934 in FICA payroll taxes (15.3% for SS and Medicare).

She contacts her MFAA financial planner about saving for retirement to save on taxes.  Her advisor helps her open an Individual 401k to which she contributes $22,500 (Sue is age 38) as her employee contributions, plus another $14,498 as employer contributions for a total of $36,998 in retirement savings for 2023.

She and her spouse are in the 22% federal marginal tax rate; Sue’s state tax rate is 3.5%.  The household will save $9,434 on its 2023 tax bill.

Example 2 — Having an employer-sponsored plan AND an Individual401k:

Sue’s spouse John decides to join her in the contract work after retiring from the military.  John can make contributions to the Individual401k under the same business tax ID number.  John makes $40,000 after retiring in July.  Self-employment taxes are $6,120; there are no additional deductible business expenses.

John had contributed $12,000 to his TSP account before retirement, and he is under 50 years old.  He can contribute another $10,500 to his Individual401k as the employee and approximately $7,000 as the employer.

Example 3 — Hiring employees who are 1099 contractors

Sue & John have more contract work than they want to handle after military retirement.  They hire two military spouses to work part-time virtually with them.  The two new hires are 1099 contractors for Sue & John.  Sue & John can continue to use their Individual401k.  They encourage both of their contractors to save for retirement in their own Individual401k.

Example 4 — Hiring employees who become W-2 employees

Business continues to boom.  Sue & John decide to make everyone a full-time W-2 employee.  The business now pays half the payroll taxes for both Sue & John and the two employees.  Because of this change of having W-2 employees, Sue & John can no longer contribute to their Individual401k.  They can either switch to a SEP-IRA or a SIMPLE-IRA.  Item of note:  you can offer and contribute to both a SEP-IRA and 401(k) in the same tax year, but the same is not true for a SIMPLE and another plan.  More details can be found on the IRS website.

How Do I Decide? What’s Next?

If the self-employment income is just you, or you and your spouse, the Individual401k will give you the most capacity to save for retirement.  If you need a plan for you and your employees, consider the SEP-IRA or SIMPLE-IRA.  Consult your tax professional for definitive advice for your situation.  Need more help understanding your retirement savings options and deciding which is right for you?  Reach out and connect with an advisor at the Military Financial Advisors Association!

Just as you wouldn’t want a plumber wiring the electricity in your new home, you don’t want just anybody guiding you in your financial life. With something as important as your finances, you want to experience the peace of mind that comes from entrusting your money to someone who has knowledge and experience that relates to your unique situation.

Our goal at Red Clover Financial Planning is to build strong, trusted relationships with our clients, tailoring our services to fit their needs so they can experience fulfillment now and throughout their lives. We focus our services and attention on two specific groups of clients—veterans and federal employees. Here’s why.

A Personal Link

My choice to cater to military families and government employees is deeply personal. How personal? My husband served in the Army and, after his transition out of the military in 2016, he became a government contractor. My experience as the spouse of a veteran has given me an up-close and personal perspective of the challenges and opportunities military families face. That experience, coupled with many years of serving government employees, gives me not only an understanding of your lifestyle, but also the knowledge and expertise to help you navigate your unique life.

Honoring The Sacrifice

The time, energy, and sacrifice our veterans and government employees give to serve our country cannot be put into words. Regardless of your role or position, you are doing work for a higher purpose and serving your fellow Americans. My desire is to give you a place where you can work with an advisor to secure your future without being sold a product or required to move your investments. I want to serve you with my skills and dedication as you have served me with yours, providing you with financial advice and guidance so that you can experience financial confidence and the future you dream about.

Support & Advocacy

Military life is hard to describe to those not in it. Government employees generally earn less than civilians and need to be prudent in terms of how and where they save and spend their money. Military families don’t have much control over their lives, like where they will live, how often they will uproot, and when deployments will happen. Despite the challenges, they also have benefits they can take advantage of, such as pensions and continuing health coverage that, when optimized, can help them achieve financial independence or retire early.

Whether you have questions about the Thrift Savings Plan, GI Bill education benefits, supplementing your pension with personal savings, insurance options, or survivor benefits, you need someone who has not only walked in your shoes but helped others in the same circumstances. My focus for all my clients is to help you live your best life, and for military and government employees wanting to make the transition into civilian life, I want to come alongside you so you can make this an opportunity to pursue the life you’ve always wanted.

Let Us Help You

Because of your different obstacles and benefits, lifestyle, values, and decisions, you need the specialized touch of someone who understands you and can innately grasp what you face, both practically and financially.

I encourage you to find a financial advisor who specializes in serving veteran and government clients. Take advantage of the Military Financial Advisors Association or search for fee-only advisors based on their area of expertise through the XY Planning Network. To learn what it’s like to work with Red Clover Financial Planning and how we can help you, I invite you to schedule a no-obligation, introductory zoom meeting or reach out to me at 703-677-4587 with your questions.

In the fall of 2022, my mother had a mini-stroke.  It was a wake-up call for my siblings and me when we realized she couldn’t communicate with us.  I thought we had done a good job creating a long-term care plan for the time when my mother would move to a continuing care community.  We had all the proper paperwork, including her medical directives and healthcare power of attorney (POA). My mom even has a comprehensive coverage long-term care policy. The problem was even though we had been working with my mom on her long-term care plans, we were not ready when it looked like she would need care.  Here are three lessons learned from my experience.

Frequent Communication

One of our biggest concerns was not knowing where my mother would want to live if she required continued long-term care after the stroke.  I have worked with my mother on her long-term care plan since we moved my father into a nursing home 16 years ago.  My mom has spent the last 13 years splitting her time between a 55 and older community in Massachusetts and a second home in Florida.  As she has aged, she decided that she would eventually like to live in a continuing-care retirement community.  She began looking into these communities in 2018 but a health issue followed by the COVID pandemic, put her search on hold.

We are very fortunate that my mother recovered quickly after her stroke and did not need long-term care.  We have now made it a point to have regular conversations about what she wants for the next phase of her life, and she is beginning to explore the various options around her.  Our current goal is to help her decide where she wants to live once she requires more assistance.  If I had to do it over again, I would have encouraged my mom to start exploring these communities when she was 70 with her making a decision about where she would want to go by 75.  That would not only have given us peace of mind knowing where she wanted to go but given her more time to get over the mental hurdles you go through when preparing to move to one of these communities.

Making The Transition Is Difficult

It takes time to both physically and mentally prepare for the big move into a long-term care community.  There are several hurdles your parents will have to get over before they permit themselves to make a move. Here are the three main hurdles I have found so far.

1. Even in independent living, your parents will most likely end up downsizing their living space.  This can create a lot of stress around letting go of personal effects they have accumulated over their lifetime.  A whole new business industry exists to help you figure out what to keep, sell, donate, or throw away.  But it will still take patient encouragement from you to help your parents get to a point where they are ready to go through this process.
2. Moving into a new community means relocating to a place where your parents might not know anyone.  Fortunately, many of these communities allow you to spend the night in one of the models to experience what living there is like.  A kind of try “before you buy,” if you will.  This gives your parents a chance to discover some of the daily social activities and what it would be like to live there. These places understand the importance of socialization and make it easy for their members to make new friends within the community.
3. You may find that your parents think moving somewhere else isn’t worth the money.  And yes, moving into a community like this is expensive, but will it improve the quality of life in their later years?  If the answer is yes, you have to assume it will be worth the cost.  All we want is for our parents to live their best lives up until the end.  We’ve been reminding our mother about how living in one of these communities could improve her quality of life whenever she brings up an obstacle that she is dealing with living on her own.  Last week she told me that her friend’s 85^th birthday party would be after 5 pm.  My mom can’t drive at night anymore.  My brother-in-law will drive her to the party, but I mentioned that one of the communities we looked at offers free car service within a 5-mile radius of the community.  That would be a perfect ongoing solution for her.

Searching For A Community Is Easier Than You Think

https://www.aplaceformom.com is a wonderful resource.  I was able to fill out a form online and was contacted by the company within the hour.  They asked detailed questions about the location my mom would want to live in, the kind of support/services she would want, what type of place she would prefer, and what hobbies and activities she would like to have available.  They sent a list of four great communities to check out within minutes.

The next step was asking my mother to think about what elements would be important for the community to have. This helped us define the type of living space she would want, such as one or two bedrooms, a full kitchen or kitchenette, etc.  It also helped us define the types of social engagements she would want access to like; book club, trips to museums and the symphony, painting classes, scrabble club, author visits, etc.  Armed with this information, My sister and I toured the different communities to narrow down the options before bringing our mom along to visit the top two choices.

If you find yourself in a similar situation, now or in the future, I hope this information can provide some insight and guidance on how to build a long-term care plan. The most important thing is always to have an open line of communication with your parents about what comes next. They want to maintain as much independence for as long as they can. And you want peace of mind knowing they are always living their best life. A retirement community might be the place to ensure that both your goals are reached.

Do you or your parents have long-term care plan questions?  Contact a an MFAA planner to discuss your specific situation.