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Gays and Lesbians in the Military – A Financial Planning Perspective

It’s been a year since the military repealed the “Don’t Ask Don’t Tell” policy at the direction of Congress — formally ending the prohibition of gays and lesbians from serving openly in the Armed Forces.

While the actual members of the services — particularly the Marine Corps — strongly opposed the measure, headlines today are trumpeting the move as a success. However, when you read into the comments of stories posted across the internet, you can see that a lot of actual servicemembers, when they can write anonymously, are still bitterly opposed to the law.

Nevertheless, the repeal happened — and it happened in the best way possible: At the direction of Congress, with the support of the Commander in Chief, rather than in some questionable and hotly debated opinion by a single judge or three-judge en banc panel or even the nine judges on the Supreme Court.

So for good or for ill, the direction came from right authority — our elected leaders in the legislative and executive branches. And the military is subordinate to the rule of our elected leaders — as it should be.

But although we now have gay servicemembers, and by extension, gay military families now, Congress has not repealed the Defense of Marriage Act, or DOMA, which prohibits the federal government from redefining marriage to include arrangements other than one man and one woman.

This law, in turn, prohibits the Department of Defense from granting military benefits to same sex spouses of military members. So a woman’s wife, or a man’s husband not only is not entitled to an interest in a retired servicemember’s pension, but also does not qualify a servicemember for BAH Type II. Same-sex spouses can’t shop at the Commissary or the PX. They can’t get treated in military hospitals, they can’t sign up for TRICARE, and they can’t live in base housing.

Is this an injustice? Perhaps. Even if one is bitterly opposed to the open service of gays and lesbians, one can still make the argument that once they are in, it is destructive to the morale of the military to have two classes of military families, and separate support structures for each.

But until the DOMA is repealed or modified, that is the law of the land.

So what can same-sex couples do?

Well, from a financial planning perspective, there’s not much difference between planning for straight unmarried couples than planning for same-sex couples. If you are a gay or lesbian servicemember — or you are in a committed relationship — either a legal marriage or something as close to it as you can get in your jurisdiction — here are some things you should consider:

1. Life insurance. If you are reliant on the military member for their income, you need to get life insurance. If you would suffer financial hardship from the death of your military loved one, life insurance is designed to help you through the financial side of that problem. That doesn’t mean it won’t be emotionally devastating; but it does mean you can pay off the house, keep food on the table, put the kids through school, take a bit of time off to grieve, and still be ok.

Fortunately, same-sex partners can qualify to receive a death benefit under SGLI. And with the repeal of DADT, the servicemember doesn’t have to be shy about listing a same-sex partner as a beneficiary. Indeed, if you are in a committed relationship with a same sex spouse or life partner, this is exactly what you should do.

If you need more life insurance, you can generally get it from private companies, provided you can demonstrate a financial interest in one another. Most life insurance companies understand same sex marriages and committed partnerships, and are happy to sell policies to same-sex couples, as long as there’s a reasonable insurable interest. If you live together, or own property together, that’s usually enough, even if your state doesn’t recognize same-sex marriages.

2. Death gratuity benefit. If a servicemember dies, the family receives a free $100,000 death gratuity, tax-free, from the military. This is in addition to SGLI. If your same sex partner is the person who should receive it, feel free to list that person as the beneficiary on Form DD 93.

3. Do you have a TSP? You should name your partner as the beneficiary. Don’t leave it blank, because the courts may not recognize a same sex marriage. The assets would go through probate, any creditors would take their cut first – and then the balance would go to your heirs according to your will, or your state’s intestate laws. You can use your will to do this, but the IRS any creditors would get first crack and it would likely take months before your loved one can touch the money, as it would still be hung up in probate court. But if you name your loved one as a beneficiary, that money passes to your loved one under contract law, as opposed to probate law. They get the money in days, not months, and it bypasses creditors and probate fees.

4. Retiring? You can name your same-sex partner as a beneficiary for the survivor benefit plan. This is crucial, because if one member of the couple retires and draws a pension, that pension dies with the servicemember, unless you make other arrangements. The SBP is the standard arrangement — it recalibrates your pension payment based on your spouse’s and your actuarial joint life expectancy. So you get a lower payout each month, but retired pay will continue until the second death. So if the non-member survives the servicemember, he or she won’t be left without retirement pay. Note that you cannot elect a same-sex partner as a beneficiary under the SBP if you are already in a traditional marriage. That benefit must go to your opposite sex spouse first, or no one.

5. Children of gay and lesbian servicemembers are fully eligible for military benefits of course. But not your spouse’s children, unless you formally adopt them.

For those interested in a fuller, more detailed discussion of administrative, benefits and legal issues specific to same-sex military families, the Servicemembers Legal Defense Network — now merged with another organization called OutServe, has put out a booklet called Freedom to Serve – The Definitive Guide to LGBT Military Service.

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