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thedrifter
03-06-07, 06:50 AM
Death benefits may not go to dependent children
By Karen Jowers - Staff writer
Posted : March 12, 2007

Lillian Rentschler has a message for service members deploying to war: Make sure your young children will be cared for if you die.

"Don't assume that your wife will take care of her stepchildren. It's hard on her, too," said Rentschler, who became legal guardian of her grandson Scott after her son George, an Army staff sergeant, was killed in Iraq on April 7, 2004.

George's wife - Scott's stepmother - got his $400,000 life insurance policy and $100,000 death gratuity, and has given none of it to support Scott, according to Rentschler.

On behalf of her grandson, Rentschler gets about $1,300 a month in other government benefits. Children, whether they are from a deceased service member's current or former relationship, are entitled to the federal monthly benefits, which vary depending on the rank of the service member and his years of service. Payments decrease when the child reaches 18 and stop when the child graduates from college.

Still, Rentschler, 58, said she has had to leave retirement to go back to work part time to support the two of them.

Even in cases in which military life insurance and death gratuity payments are designated for orphaned children, the extended family members who often end up as guardians say the money, which is put into trust funds, still can be difficult to access on behalf of the kids.

Two years ago, Congress increased the military's "death gratuity" - paid to families of service members who die on active duty - to $100,000 from the previous level of $12,000.

When that happened, the payment morphed into something well beyond its original intent - a financial bridge to help families in the interim after military pay stops and before other federal benefits start.

"When Congress raised the death gratuity from $12,000 to $100,000 two years ago, it began to look more like a free life insurance policy," said retired Navy Cmdr. Wayne Johnson, an attorney who worked as a contractor in the Army's Casualty Assistance Office in 2004 and 2005.

Currently, spouses of service members are first in line for the gratuity. If there is no spouse, the money is divided among all the member's children in equal shares.

If the child is a minor, the Defense Finance and Accounting Service requires an adult, usually the one with custody, to be named by a state court as legal guardian of the child's assets. Then, the guardian must set up a trust account for the child for the money to be paid. Procedures vary from state to state.

The heart of the matter, many say, is ensuring that someone is looking out for the best interest of the child.

"What's causing the problem is not the benefits, it's the nonparental relationships," said Brad Snyder, president emeritus of the Armed Forces Services Corp., which closely tracks such benefits for service members.

"It works just fine if guardians understand their fiduciary responsibility and use the money for what it was meant - the children. If a trust is set up, it's going to do its job," he said.

The guardian can use some of the money for the expenses the child would incur in the household, such as a share of the rent or mortgage, education, health care, clothing and entertainment, as long as it is used on the child's behalf.

Johnson said the trust accounts generally serve the best interest of the child, but the procedures could be tweaked.

Johnson also contends that all minor children should be considered for a share of the death gratuity along with the surviving spouse, and that they all be treated the same by Congress, regardless of how the military member treated them while he was alive.

One legislation proposal would allow service members to designate parents or siblings as recipients of the death gratuity.

The National Military Family Association would support that plan if it came with a guarantee that the payment would be used as a financial bridge for the minor child until other benefits are awarded, with the remainder placed in trust for the child.

"The protection of the financial future of the child is paramount," said Kathy Moakler, government relations director for the NMFA.

The danger in allowing the service member to make that determination, Johnson said, is that the child may not end up in the legal custody of the person getting the death gratuity. The relative could end up using it for his own purposes, he said.

"And the money, if not properly placed in some form of trust account for the child, could be subject to seizure by the relative's creditors, or if they are sued," Johnson said.

Scott, now 15, lived with his father, brother and stepmother. But after his father's death, the family agreed that Rentschler would become his legal guardian.

And Scott received none of his father's death gratuity. His grandmother considers it a question of fairness.

"There's no one to protect the kids, or grandparents or aunts. There's no one to advocate for them," Rentschler said.

By leaving just a portion of his benefits to Scott, "my son could have helped take it out of this realm," Rentschler said.

thedrifter
03-06-07, 06:51 AM
Kids need death benefit

Sen. Chuck Hagel, R-Neb., and Rep. Tom Latham, R-Iowa, have introduced legislation that would provide, in cases where a minor is the next of kin, the ability for the service member to designate the grandparents, siblings or guardian to receive part or all of the $100,000 death gratuity benefit to care for the child.

This sounds good but is fraught with dangers. The relative might not be the one who ends up with custody after the service member dies — that is up to a court.

The relative may end up wasting the money or use it to run a business. The money, if not properly placed in some form of trust account for the child, could be subject to seizure by the relative’s creditors.

The above are some of the reasons why the Defense Finance and Accounting Service requires the death gratuity to be placed in trust for the minor child.

Before Congress rushes to change the 99-year-old law, it needs to conduct hearings so interested parties and those with experience in this area are heard. Things do need to be changed, but only after careful deliberation.

Congress needs to do something to make sure minors get some portion of the gratuity, particularly when the children are not from the service member’s current marriage. Right now, the surviving spouse gets it all, and minors from other relationships get none of it.

Navy Cmdr. Wayne L. Johnson (ret.)
Alexandria, Va.