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PERSONAL FINANCE

Military Families Prepare for the Fiscal Wages of War

December 29, 2002|Kathy M. Kristof | Times Staff Writer

When duty calls, Navy SEAL David H. hangs his life insurance policy on the refrigerator before heading out to deploy with his unit.

Going to war forces you to face the prospect of not coming back, said David, who asked that his full name not be used for security reasons. Though HE'S trained to handle fear of his own death, he doesn't want to worry about whether his wife and three children will face an economic crisis if he's killed in action.

"My mother-in-law thinks it's morbid, but it's something you have to think about," he said. "God forbid that you would leave your wife hanging."

Thousands of military families in California and around the country are "buttoning down" their finances as the nation braces for a possible war in the Middle East.

Many of the preparations fall under the category of basic training in terms of financial planning. But they take on added significance for military families, whose primary breadwinner can be called away on short notice for weeks or months at a time. In addition, military personnel, depending on the job they perform, can face greater risk of injury or death than civilian workers.

There are two federal laws specifically designed to help military personnel when they are deployed away from home, said Christopher Michel, chief executive of Military.com, a Web site that caters to members of the armed forces.

The Soldiers and Sailors Civil Relief Act requires lenders to cut interest rates on existing loans to active duty military members to 6% or less from the date that they deploy to when they are discharged from active duty. It also protects the service member from foreclosure or some other legal proceeding while he or she is away. To receive these benefits, military personnel must notify their lenders, Michel noted.

The Uniformed Services Employment and Reemployment Rights Act ensures that reservists and National Guardsmen will have jobs to return to when they've completed their military service.

Otherwise, military personnel must consider the same issues as anyone else who wants to make sure that their spouse and children would not be left in the lurch if something unexpected were to happen to them.

"They need to review their finances with their family, identify the potential risks and put in place solutions," said Susan Pamerleau, vice president of member services with USAA, a San Antonio-based financial services company that specializes in serving the military.

Here are some issues for military families to keep in mind:

* Budget, balance sheet and bills: It's not necessary to have a detailed budget showing where every dollar is spent. But it's important to have a broad-brush budget that indicates how much money is coming in -- and from what sources -- and how much is going out.

A budget provides a basis for other pivotal calculations, such as a family's life and disability insurance needs. A balance sheet spells out what assets a family has and where they are -- especially cash -- in case one partner needs to tap assets in the absence of the other.

For service members who are about to be deployed overseas, the most immediate concern is making sure the bills get paid. Navy SEAL David addresses this by charging all of his family's bills to one credit card, which he has arranged to pay electronically. Automatic bill payment services also are available. Another option: Going over the process with your spouse, a friend or another relative who is able to pay the bills on your behalf.

* Power of attorney: This legal document gives a trusted friend or family member the ability to act as your proxy -- paying bills and handling financial transactions, such as the sale of a house or a car, in your absence.

A power of attorney may not be necessary if you have carefully structured ownership of assets and payment of bills in advance. But it provides security in case some detail was overlooked.

Executing this document is simple -- the forms are readily available in many office supply stores, as well as from lawyers and sellers of legal documents. USAA offers a printable version on its Web site, Pamerleau noted. A big caveat: Make sure you choose someone trustworthy to serve as your proxy. That person will hold the legal right to take control of your finances. If he or she isn't trustworthy, it could be a disaster.

* Life insurance: Anyone with dependents should have life insurance, but determining the right amount of insurance is tricky. It hinges on how much the family spends, their other resources and a variety of other variables, including the ages of children, the amount of debt and the family's contingency plans. Questionnaires are available on the Internet, including one at www.aafmaa.com, which can help determine a reasonable amount.

* Will: Legal experts estimate that 70% of the population doesn't have a will. People who die without a will leave their survivors to rely on state laws to distribute their assets and assign guardians for minor children.

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