Q. My friend, Kim, lost her husband Brian in a helicopter crash in Iraq 15 years ago while he was serving our country. After he died, she was told that she would have to forfeit benefits that her husband had paid into for years, because she already receives other benefits for survivors through the Department of Veterans Affairs. The forfeit was due to what was known as the “widows tax.” I heard that after 40 years, the widows tax was recently eliminated. How did this finally happen and what does it mean for military widows?
Thanks for your help!
A. After 40 years, lawmakers have finally eliminated the military widows tax, which cost some families of deceased service members, such as your friend Kim, tens of thousands of dollars annually in lost benefits payments. Advocates hailed the move as a major step forward for military spouses who have faced frustration and financial hardship for years.
Advocates have been engaged in a decades-long battle to provide surviving spouses the benefits they paid into and have earned. The cause was led by Edith Smith, a military widow trying to undo the law that cut assistance to widows who qualified for benefits through two different government programs. (The law required survivors of deceased military members to forfeit part or all of their survivor’s benefits that come from the Department of Defense when they also receive benefits through the Department of Veterans Affairs.) Smith worked for 20 years to educate legislators and work toward the elimination of this unfair financial offset. Another long-time advocate, Kathy Prout, made nearly 100 trips to Capitol Hill. Over 25 years, the offset has cost her and her children benefits which would’ve totaled $350,000; while it cost Smith more than $300,000 in potential benefits that she had to forfeit.
In April 2019, 150 military widows came together in Washington D.C. as part of a “Storming the Hill” event to meet with legislators. The culmination of the combined effort of the groups and legislators resulted in the elimination of the widows tax.
“I was so excited and so relieved that we changed a law,” said Smith. “It’s honoring our husbands’ service to our country.” She noted that “(t)here will be military spouses that benefit from this for years to come.”
How the Widows Tax was Eliminated
Widows tax was a nickname given to an unjust federal law (10 USC 1450) passed in the 1970’s. The problem rested with how the government treated two separate military survivor payouts. The first, the Dependency and Indemnity Compensation program, awards around $15,000 a year to survivors of veterans or troops who die of service-related causes. There is no cost to troops or families to enroll.
The other, the Survivor Benefit Plan, gives families of military retirees who enroll up to 55% of their loved ones’ retirement pay after the veteran dies. The life insurance-type payouts are subsidized by the Department of Defense, but require enrollees to pay-in part of their own retirement benefit to be eligible.
Under the old law, military survivors who took advantage of one benefit could not take advantage of the other, so they were forced to forfeit tens of thousands of dollars over the years. Some families were able to avoid the offset penalty by transferring benefits into their children’s accounts, but that created other complicated planning and tax issues. The problem affects about 65,000 military families.
The issue had been before the Senate and Congress for 18 years, but at times was stripped out of bills or provided only a small percentage of compensation to the survivors. Until military widows formed together and fought hard, the effort was treading water.
In a bipartisan effort, leaders of the House and Senate Armed Services Committees, led by Sen. Doug Jones and Rep. Joe Wilson of South Carolina, joined together to pass the FY 2020 National Defense Authorization Act, a provision of which was the Widow’s Tax Elimination Act of 2019. The president signed the 2020 National Defense Authorization Act (NDDAA) into law on Dec. 20, 2019, saying that the law improves education, childcare, and private housing for military families, and that it ends the widow’s tax, which blocked benefits from families of fallen heroes.
What the Repeal of the Widow’s Tax Means
The Survivor Benefit Plan was restored to military survivors whose spouses paid into the plan and died from service-connected causes. Here’s what that means:
• Spouses will receive the benefits in increments over three years beginning in 2021. They will receive full benefits starting on Jan. 1, 2023. Even more important than the money is that it restores dignity to the service of deceased military servicemembers, who gave their life for their country.
• Survivors will receive their full benefits by Jan. 1, 2023. For many survivors it will mean receiving up to an extra $1,200 per month, which is at least a portion of money that their spouses paid into the SBP.
• The bill will drop the option to transfer those benefits to children after 2023. Survivors who took the child-only option will continue to receive both the SBP and Dependency and Indemnity Compensation from the Department of Veterans Affairs. And they can re-select to receive the survivor benefit plan in their name permanently Jan. 1, 2023. That is the date when the child option will be phased out.
• Spouses whose children have aged out of the benefits will also be able to re-select to receive full benefits beginning Jan. 1, 2023.
• Survivors will not be able to recover funds retroactively.
“It is heartening to know Congress maintained their commitment to repeal the widows tax in spite of having to weigh the many competing priorities presented in conference,” said retired Air Force Lt. Gen. Dana Atkins, president of Military Officers Association of America.
VA Benefits for Surviving Spouses and Dependents
As the survivor of a veteran or service member, you may qualify for certain benefits, including help with burial costs and survivor compensation. Find out which benefits you may qualify for and how to access them here.
If you’re caring for a veteran with disabilities, you may also qualify for support to help you better care for the veteran—and for yourself. Veterans Aid and Attendance or Housebound benefits provide monthly payments added to the amount of a monthly VA pension for qualified veterans and survivors. If you or a loved one need help with daily activities, or you’re housebound, learn more about the Aid and Attendance benefit here.
Veterans: Plan for your Future and Your Loved Ones
Here at the Farr Law Firm, we work with veterans and their spouses to evaluate whether they qualify or may potentially qualify for Aid and Attendance and/or Medicaid in the future, and we deal with all the paperwork. As a Certified Elder Law Attorney and an Accredited Attorney with the U.S. Dept. of Veterans Affairs, I understand both the Aid and Attendance Benefit and the Medicaid program and the interaction between both entitlement programs — and this interaction between the programs is of crucial importance because most veterans who start off needing Aid and Attendance and will eventually need Medicaid. This is why all asset protection planning that is done to make a veteran eligible for Aid and Attendance must take future Medicaid benefits into account. Please call us at any time to make an appointment for an initial consultation:
Aid and Attendance Attorney Fairfax: 703-691-1888
Aid and Attendance Attorney Fredericksburg: 540-479-1435
Aid and Attendance Attorney Rockville: 301-519-8041
Aid and Attendance Attorney Washington, DC: 202-587-2797
About Evan H Farr, CELA, CAP
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