What to do about the Survivor Benefit Plan in a Military Divorce

ADVANTAGES OF SURVIVOR BENEFIT PLAN (SBP)

 Your military retirement pay terminates when you die.  If you have elected SBP, your spouse or former spouse can continue receiving a portion of your retirement pay after your death.

  • The premiums you pay for SBP are withheld from the retirement pay and are not taxed
  • The government pays for a portion of the premium
  • The benefits are protected by inflation due to cost of living adjustments
  • The cost of SBP is generally recouped within a few years after the military member’s death; Often times the spouse or former spouse receives the benefits for many years and will receive several times the amount paid in premiums.
  • Even if the military member’s spouse dies first, you can resume coverage for a subsequent spouse without penalty based on several factors

     

 

DISADVANTAGES OF SBP

 

  • It is permanent and not many opportunities to discontinue the coverage past a special one year period.
  • Possible that the beneficiary may not recover the total costs of payments made
  • You may no longer need the coverage
  • The payments made to the beneficiary are taxable as income

     

Remember, once you discontinue participation, you cannot reenter the Plan. However, you have up to 30 days after submitting the required form to change your mind. You may withdraw your request to discontinue participation by sending a written request to the same finance center that you sent your original request for termination.

 

There are many variables in the SBP calculation, such as the amount of the benefit, what is the cost, who will pay for it, is it available for a subsequent spouse, illogical results for a benefit that will in essence provide a “raise” to the beneficiary after the death of the military member after a short term marriage.  There are other options, such as life insurance and don’t forget that the SBP is suspended if the recipient remarries before the age of 55.

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