VA VETERANS INSURANCE COVERAGE RAISED

A change in law allows service members to buy up to $250,000 in government life insurance coverage while in the military, up from the previous limit of $200,000. Similarly, when they leave service, they now can have a policy under the Veterans' Group Life Insurance (VGLI) program at the same higher ceiling, but only if they had that top level while in uniform.

The Department of Veterans Affairs (VA) supervises both VGLI as well as the program for military members, the Servicemembers' Group Life Insurance (SGLI) program. Both are operated for the government by a contractor. Along with other insurance programs directly administered by VA, these make VA the fourth largest insurer in the country with 5 million individuals insured for $570 billion.

This change generally does not affect existing VGLI policyholders because the maximum coverage permitted under VGLI is limited to the amount the service member had under SGLI when he or she separated from active duty or the reserves.

Veterans generally must choose VGLI coverage within 120 days of discharge, although with evidence of good health that sign up period may be extended another year. Rules are more liberal for military members who are totally disabled at the time of separation.

Veterans take VGLI coverage in five-year renewable terms. Payments are made through a monthly premium that varies by the amount of life insurance and age at each renewal. Veterans also can convert VGLI to a commercial life insurance policy offered by one of 91 participating commercial insurance policies.

The SGLI and VGLI programs supervised by VA provide insurance coverage to approximately 2.7 million veterans, active-duty members, reservists and Guardsmen. Other VA insurance programs for disabled veterans, for mortgage insurance or for veterans who served in earlier time periods have 2.2 million policies in force today.

More information about VA insurance policies and special provisions affecting reservists and disabled persons can be obtained from VA's Web site at http://www.insurance.va.gov or by calling 800-669-8477.

YOUR IRA IS STRETCHABLE

Most people think they don't have to worry about being subject to estate taxes if they die because their estate is worth less than $675,000.00. They are probably right, but that may be only a part of the problem.

Let's get personal here. You may have accumulated a large Individual Retirement Account (IRA). You retired and started taking minimum distributions. If you die before you spend it all, and you leave the balance to your children, the IRS (unless it 's a ROTH IRA) will be entitled to tax it at your children's tax rate. The children can't even reduce the tax bill by spreading out withdrawals from the IRA. So, if your children inherit your IRA as part of your estate, they will have to take it all out in less then five years after your death.

Example: If your child who is in the top tax bracket inherits a $200,000 IRA and decides to take out $40,000.00 a year for five years, he/she will have to shell out to the IRS over $15,000 in taxes on each withdrawal. A bitter pill, right?

If you plan properly in advance, however, you can avoid this and arrange for your children to receive distributions over the rest of their lives. Not only will that reduce taxes, it will increase the period in which the savings will compound and grow. This means more money for your heirs. Here's one way to do it. Typically the surviving spouse takes the inherited IRA into her own account and names a new beneficiary, usually one or more of the children. When this is done, minimum required distributions are determined on the joint life expectancy of the surviving spouse and the new beneficiary or beneficiaries. When the surviving spouse dies, the account can continue to be paid out over the life expectancy of the child or children.

Of course, there are many other eventualities to consider and in order to get it right, guess work and hope are not the answer. The general idea is that IRA distributions can be stretched out so as to minimize the tax burden and preserve as much of your IRA balance as possible for the benefit of your surviving family. However, to be sure of the best result, it's certainly worth the time, money and effort to consult a qualified , experienced financial advisor to ensure that the "plan" fits your particular situation.

Your move.

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