We have discussed in previous articles which benefits Military Survivors can receive on an ongoing basis. In this article, we want to touch on a very specific benefit provided through The HEART Act. We think this specific benefit is an extremely powerful one and that ALL surviving spouses should be aware of it for reasons of both financial as well as tax planning purposes – definitely when or while living in Germany!
What is so special about The HEART Act? The HEART Act allows beneficiaries of the Servicemembers’ Group Life Insurance (SGLI) to invest some or all of the SGLI money into a Roth IRA, thereby allowing the funds to grow tax-free, including when they are withdrawn or passed on their beneficiaries. Withdrawals are allowed, tax-free and without penalty, at any time up to the amount of the initial investment. However, payments may be rolled over only if the contribution is made before the end of the 12-month period from when the beneficiary receives those payments.
This is an extremely potent tool towards financial security because a Roth IRA works the same way under German tax law as it does on the US side. Any funds inside grow tax-free, while distributions can be taken out tax-free up to the level of the contribution.
Since SGLI can be as high as $500,000 this can be the start of a real sizeable nest-egg if you give it some time to grow. Once you are at a point where you are comfortable taking funds out – regardless of your age – up to $500,000 can come out without worrying about penalties or taxes. There is nothing equivalent under both tax systems we are aware of.
We understand why especially from the perspective of a German tax man this is a pretty unique tool to provide for Military Survivor’s financial stability. No wonder he might not be able to figure out how to go about this in the German tax world.
Please let us know if you have questions about your HEART Act benefits while living in Germany or a German tax office has asked about them. We will make sure you are not missing out on the benefits you have paid for with your spouse’s life and fight tooth and nail to set the tax office straight if need be! Also, we will deliver any fight we have to put up over this on your behalf free of charge – we are standfast supporters of the US Military and believe your personal price tag has already been large enough!
