When you lose a family member in the line of duty serving in the U.S. Armed Forces, you then become known as a Gold Star family.
For a bit of background, since World War I, the term Blue Star family has been around. The Blue Star Service Flag was patented and designed by Army Captain Robert L. Queisser who, at the time, had two sons serving on the frontline. Therefore, one or more Blue Stars at the center of the flag came to represent an immediate family member who was currently serving in a war.
If the soldiers represented by the Blue Stars died in active duty, the star was covered with a Gold Star; on the flag, you can still see the blue outline around the gold. Gold Star pins were also eventually issued to family members of fallen soldiers. President Wilson is believed to have coined the term “Gold Star Mother” in 1918.
It’s a designation no family member wants to bear. However, Gold Star families do get benefits because of their unfortunate circumstances. Similar to life insurance, we’re explaining the benefits available to Gold Star families, and who is eligible.
Benefits of Gold Star Family
Although no one wants to gain from the death of a loved one, it’s important for family members (especially those who relied on the service member for financial support) to understand the benefits available to them.
Both the Department of Veterans Affairs and the Department of Defense distribute benefits to Gold Star families. The VA provides Dependency and Indemnity Compensation (DIC) and the Department of Defense provides the Survivors Benefit Plan (SBP).
DIC is considered a benefit so it is tax-free and comes out to around $1,300 per month. SBP is considered retirement compensation so it is taxable and is up to 55% of the deceased service member’s pay rate.
Since there are two ways to receive Gold Star family benefits, the law prevents double-dipping. This means you can only choose one of the payment options. Most often, survivors choose to receive SBP payments, even though they’re taxable. Unless the deceased service member was ranked below an E-4, SBP will be higher than DIC, even when accounting for taxes.
Gold Star Family Benefits for Cousins
You might be wondering the exact stipulations regarding Gold Star family benefits and who exactly counts as an immediate family member. Do siblings count? What about cousins?
Well, the short answer is no, they’re not covered. When it comes to DIC, surviving spouses are the main recipients. However, SBP is more of a life insurance plan and recipients can include surviving spouses, former spouses, children, disabled dependents, or a person with a natural insurable interest.
In most cases, siblings and cousins of a fallen military member won’t be covered by either of these benefits. To find out more, let’s go over who’s eligible for DIC and SBP.
Military Gold Star Family Benefits
Monthly DIC benefits are paid to eligible survivors of:
- A military member who died on active duty
- A veteran whose death occurred due to a service-related injury or illness
- A veteran who was receiving VA disability compensation, even if their death was not service-related:
- For at least 10 years immediately before death.
- Since being released from active duty and for at least 5 years immediately before death.
- For at least one year immediately before death if they had been a POW and died after September 30, 1999.
A surviving spouse is eligible for DIC benefits if they:
- Married the veteran before January 1, 1957
- Were married to a service member who died on active duty
- Married a veteran whose death was service-related if they were married within 15 years of the service member’s discharge
- Were married to a veteran for at least one year
- Had a child with the veteran and continuously lived with the veteran until the veteran’s death or, if separated, was not at fault for the separation and hasn’t been remarried
A few things to note about DIC:
- A surviving spouse can still be eligible for DIC if they remarried on or after December 16, 2003 or they turn 57.
- Surviving children are eligible if they are unmarried and under 18, if they’re between the ages of 18 and 23 and attending school, or, in some cases, if they’re a helpless adult child.
On the other hand, monthly SBP payments are payable to surviving family members if the service member was enrolled in an SBP, which is an insurance plan to make up for the loss of military retirement payments.
For an SBP, you’ll pay a monthly premium that will start automatically upon retirement unless you elect (with the approval of your spouse) to forgo the premiums. The most your SBP payments will be after your death is 55% of your pay rate.
You can elect to have your SBP cover your:
- Spouse only: Available to the spouse you were married to when you enrolled. You can add a spouse if you remarry after enrollment and they will receive benefits if you were married for at least one year before your death.
- Spouse (or former spouse) and child: Available to your spouse and then to your children if your spouse dies before you.
- Child only: Available for children up to age 18, or age 22 if they are unmarried and in school full-time, or to a helpless adult child for as long as they are incapacitated.
- Disabled dependent: Your SBP benefits will be put into a Special Needs Trust (SNT) if your disabled dependent was receiving federal benefits at the time of your death.
- Former spouse: You can elect to have your former spouse receive your SBP benefits but if you have more than one former spouse, you can only elect one.
- Person with a natural insurable interest: Available if you don’t have a spouse or children and is usually a business partner.
- Gold Star Family Children Benefits
As previously mentioned, the law prevents double-dipping and surviving family isn’t able to receive both DIC and SBP benefits. But people were finding a loophole.
Many surviving spouses would designate their children as the recipients of the taxable SBP payments, since the earned income of a child is usually taxed at a lower rate than adults. Then, the spouse would receive the tax-free DIC.
In 2017, a provision in the Tax Cuts and Jobs Act effectively prevented this from happening; now, benefits to a child from a fallen military member are taxed as unearned income instead of earned income. Therefore, it’s taxed in the highest bracket which includes trust funds and estates at 37%.
As always, it’s best to speak with a professional financial advisor before you make any big decisions about your DIC or SBP. Still, hopefully the information you found here has improved your overall understanding of Gold Star family benefits.
