PROTECTING YOUR MILITARY BENEFITS

Our continuing series Preserve, Protect and Defend continues to grow as we continue to become more involved in Operation Financial Freedom and helping to pass along financial education along to members of the armed services. This month, we thought it fitting to have a special article covering many of the financial benefits now offered to military members and their families that are not be available to everyone. Some of this information can be found in other places, but it isn't always easy to pull out or understand. We hope our analysis helps.

The men and women of the military, now called Servicemembers, have always had some special financial benefits given to them as part of their compensation package. In December 2003, the president signed into law the Servicemembers' Civil Relief Act, (SCRA) which replaces and expands the previous Soldiers' and Sailors Civil Relief Act. The new law expands both benefits and protections to Servicemembers.

Who is Covered Under the Act?

The SCRA is very broad and covers all members of the Navy, Marine Corps, Army, Air Force and Coast Guard on active duty (including reserves who have been ordered to duty). The act also includes National Guard members called to active duty in excess of 30 days and U.S. citizens who serve with a U.S. ally. There are also sections that apply to Servicemembers' dependents and people they provide support to. There are also some very specific protections that prohibit lenders, creditors and insurers form retaliation against you, should you exercise your rights under this act. We encourage you to use your benefits and to complain to your military legal assistance attorney, should any financial problems arise while you are on active duty.

You are Protected on Leases You Terminate.

If you enter into a lease for residential, professional, business, agricultural or similar purpose and intend it to be used for occupancy by you or your dependents, you are protected if you must terminate the lease. You may terminate your lease if you:

1) Enter a lease and thereafter enter the military service 2) You execute a lease during military service and thereafter receive permanent change of station or deployment orders for 90 days or more. The termination of your lease will be effective 30 days after the date the next rent is due. Security deposits must also be returned according to state law. A motor vehicle lease may also be terminated if it is a preservice lease and you are later called to duty or receive orders for a period of not less than 180 days. You can also terminate a lease if you enter into it while you are in the military and you later receive a permanent change-of-station order outside the continental U.S., or deployment orders, for a period not less than 180 days.

In order to terminate the lease in either of the cases described, you must return the vehicle to the leaser no later than 15 days after your written notice to terminate is delivered to the leaser. No early termination charge may be imposed, but you can be charged for reasonable wear and tear, use, mileage and taxes.

Should you need to terminate your lease, we encourage you to handle notification with care. You should do so in writing and it is always best to send your notification certified return receipt so you have formal copy and proof of the notification. This receipt with the letter can serve as proof of your timely notification. If you owe any money for time on the lease prior to the notice, you are liable for that amount on a prorated basis. However, any advanced rents or prepaid lease amounts must be returned to you within 30 days of the lease termination's effective date. It is likely that many landlords will not know about this law, so we recommend that you get a copy your rights from your legal aid office.

Your Interest Rates are Capped on Debts

Creditors must reduce the interest rate on debts that you incur before active duty to 6 percent per year during your term of service. All interest in excess of 6 percent is forgiven and may not be postponed or deferred by the creditor. **Note, this cap does not apply to debts you incur while on active duty. There are also some exceptions if the creditor can prove to a court that your ability to pay a higher interest is not materially affected by your military service. We think a creditor protest will only come up in extreme circumstances and encourage you to seek the discount.

Housing Eviction Protection

You and your family cannot be evicted from housing for nonpayment of rent without a court order no matter what your rental agreement or local laws say. You must be given a hearing. If your family's ability to pay rent is materially affected by your military service, you may apply to the court and the court must grant at least a 90-day stay in the proceedings. Additionally, the court is empowered to adjust the rent to an amount that is fair to both parties under the circumstances.

Pre-Service Real and Personal Property Repossession

If you made a deposit or an installment payment on a contract for the purchase or lease of property prior to active duty, your contract cannot be terminated or property repossessed for nonpayment or breach by you prior to or during your military service. The law does allow the creditor the opportunity to go to court and seek termination or repossession through court order.

Mortgage Foreclosure Protections

An action to enforce a storage lien or to enforce pre-service mortgages or deeds of trusts, during or within 90 days after the end of your military service must be stayed or your debts must be "equitably" adjusted. You must show the court that your ability to pay was materially affected by your military service. Sale, foreclosure or seizure of your property during the same period will be invalid unless by court order based on a waiver signed by you.

Income and Property Taxes Can Be Deferred.

If you are unable to pay your income taxes, you can seek a deferral on the payment of those taxes until up to 180 days after you return from active military service if you show your ability to pay has been materially affected by your service. During that period of deferral, no penalty or interest can be added to the income tax due. Your property cannot be sold or foreclosed upon for unpaid taxes unless a court determines that your military service did not affect your ability to pay. Courts have been given the ability to stay the proceedings or any tax-related sale until 180 days after you are released from military service. Penalties under this case are capped at 6 percent a year.

Life and Health Insurance Protections

Insurance companies cannot decrease your coverage or require additional premiums for your engagement in military service (except for regular age increase). Life insurance policies up to $250,000 may even be protected if you cannot make the premium payment, but to get this added protection, you must apply for it and received a specific grant from the Secretary of Veterans Affairs. Do not just simply stop making payments. Health insurance must be reinstated if it was canceled during your active duty. And there are specific protections for health conditions that arose during the period of active duty that may give you protection outside the normal language of preexisting condition.

The new law gives you some very important benefits. You should not wait to make a claim if the circumstances fit your situations. In addition, it should be noted that there is an additional very general provision that allows Servicemembers relief from various financial hardships caused by your military service. If you find yourself in any financial hardship during your active duty, we encourage you to seek assistance.

The Veterans Benefits Act of 2004

Your VA benefit to help you buy a home is one of the best plans Servicemembers can use to build assets for their future. While the VA does not loan money directly, it does guarantee a lender against loss on the first 25 percent of the loan amount up to $89,912. This guarantee allows veterans to qualify for higher loans than normal, and in most cases, you can do so for nothing down. Under the new act, the maximum loan meeting this standard would be $359,650 in most parts of the country.

Because a veteran can essentially buy property for nothing down, the VA benefit offers an unusual opportunity for vets to buy a home and then as the home increases in value, build equity for the future. Since the veteran has very little of his own money in the property the return on investment is infinite, and any cash normally used for a down payment can now be redirected toward other investment programs.

Free Medical Benefits Package

There has always some criticism about medical benefits offered by the VA and the quality provided. Whether this criticism is legitimate or not is unimportant for our discussion because there is equal criticism about the care and quality of treatment in all medical plans. The important point is that medical benefits are provided to veterans and they can be a tremendous asset if you need them and a real cost saver. Medical benefits were last addressed in 1996 with the passage of the Veterans Health Care Eligibility Reform Act. The law provided an enhanced program of benefits, both preventive and primary, plus inpatient and outpatient care. Unfortunately, the law is vague on exactly what you are entitled to, relying on words such as "needed" care, which they define as care that will promote, preserve and restore health. Rather than get frustrated by the confusion, we encourage you to inquire for yourself about the benefits. We have heard both good and bad comments, but the real issue is that the care is available and you should try to get what you worked for. For more information you can contact the VA toll free at 877-222-8387.

New Education Benefits For Service Members

The education benefits offered for military service have changed over the years, like everything else. While they have been somewhat reduced, they are still a powerful weapon that will offer you an opportunity to get the education you need for a long-term career after your military service. The Montgomery GI Bill is available for active duty and veterans, offering up to 36 month's of education benefits and up to $36,000. In addition to accredited colleges and universities, the money can be used with vocational courses, technical and other job training.

Take Advantage of New Retirement Benefits

Servicemembers are now qualified to participate in the federal government sponsored retirement plan called the Thrift Savings Plan (TSP). This plan, which was formally available only to government workers, is now open to the military and works similarly to private corporations' 401(k) plans. Unfortunately, unlike the plan for government workers, the military TSP does not allow for "matching contribution." That is not an excuse not to participate, however, and we encourage all Servicemembers to start investment programs like the ones discuss throughout this magazine. Some of the benefits under the TSP include: -You can contribute as little as 1 percent or as much as 9 percent of your pay including incentive or special pay -Your contributions are taken out before taxes are computed so you pay less withholding tax now -All earnings are tax deferred until you take the money out just as it is with regular 401(k) plans -You can diversify your TSP under a selection of five different investments -You can transfer your retirement balance to another plan outside the service if you leave the military

SUMMARY

We hope those of you in the military find this article to be helpful in exploring your benefits of military service. It was amazing how much research it took to piece all of these items together and sort through the important points. However, now that you have them in one place, we hope you will review them from time to time to make sure you are taking advantage of all of your benefits. You have earned them. se Your VA Mortgage Benefit To Start a Home Buying Plan