McAndrews shows HEART to Military Family With Free Legal Services
by Crystal L. Welton, J.D., LL.M.
Each and every day, American men and women throughout our great nation and abroad agree to defend and serve this country. Some soldiers ultimately give the greatest sacrifice to protect the United States and her citizens – their lives. Many of us feel we would like to be able to do more than simply say “thank you”. Recently, McAndrews Law Offices had the privilege of being able to give back and assist a military family free of charge. This family’s loved one and soldier lost his life defending our country while on active duty.
Prior to his passing, the soldier purchased Servicemembers Group Life Insurance, naming his two children as the beneficiaries. Because these children were minors and were receiving a significant amount of money at the soldier’s passing, McAndrews Law Offices needed to obtain a court order, appointing a guardian for the estates (finances) of the minor children. In addition, there is important legislation that significantly benefits this family, specifically: the Heroes Earnings Assistance and Relief Tax Act of 2008, which is often referred to as the Heroes HEART Act or, simply, the HEART Act.
The HEART Act provides certain noteworthy tax and pension benefits to Service members who are disabled while performing their military obligations and to the survivors of Services members who die during active duty. In our case, the HEART Act permitted the survivors to direct their benefits into either a (1) Roth IRA or (2) Coverdell Education Savings Account (ESA). Distributions from ESAs are, generally, tax-free to the extent that such funds are used for the beneficiary’s qualified education expenses. Similar to other qualified plans, distributions that are not used for qualified education expenses are subject to penalties and taxation.
Traditional and Roth IRAs typically have contribution limits, which provide that an individual under the age of 50 can only deposit up to $5,500.00 per year, and an individual who is 50 years or older, can only deposit up to $6,500.00 per year. Under the HEART Act, however, an individual can invest some or all of the survivor funds into the Roth IRA, even if the amount deposited exceeds the allowable amounts. This is a substantial benefit. The contribution to a Roth IRA of a military death gratuity or SGLI payment is treated as a qualified rollover contribution if the contribution is made within a narrowly defined window of time. Funds held in a Roth IRA can then be invested and grow tax-free, including when they are withdrawn or passed on to other beneficiaries. Moreover, withdrawals are allowed, tax-free and without penalty, at any time up to the amount of the initial investment.
The HEART Act provided an important, substantial benefit to our client. McAndrews Law Offices was proud to have donated its legal services in this matter, and to have played a role in obtaining this benefit for the children of a military hero.