Inheritance Services for Military Personnel and Families

Inheriting wealth from a military servicemember or Veteran arrives in two very different moments. For a surviving spouse, it arrives alongside grief, paperwork, and decisions that need to be made before the year is out. For an adult child or other heir, it arrives later — with its own questions about taxes, accounts, and what to do next.

AAFMAA Wealth Management & Trust (AWM&T) provides inheritance services for military personnel and families navigating either situation. Our work begins where most plans end — helping you understand what you’ve received, what decisions are time-sensitive, and what can wait.

What Does a Military Inheritance Typically Include?

A military inheritance is rarely a single check. Most arrive in five or six streams that show up on different schedules and follow different rules. Common components:

A Survivor Benefit Plan (SBP) annuity — may provide a surviving spouse a lifetime monthly income based on the elected coverage; inflation-adjusted and generally taxable to the recipient.
Dependency and Indemnity Compensation (DIC) — a tax-free VA benefit for surviving spouses when death is service-connected; under current law, eligible survivors can receive both DIC and SBP.
Life insurance proceeds — SGLI, VGLI, or a private policy; generally exempt from federal income tax, though estate tax may apply to larger estates.
Final retired pay — paid through the month of death; may require administrative processing before survivor benefits begin.
An inherited Thrift Savings Plan (TSP) — follows its own beneficiary and distribution rules that differ from many civilian 401(k) plans and from inherited IRAs.
Inherited IRAs, brokerage accounts, and real estate — each with its own tax treatment, distribution requirements, and planning considerations.

Knowing what you’ve received — and how each piece is taxed — is the first step in any inheritance conversation.

First Decisions a Surviving Military Spouse Should Make

The weeks after a spouse’s death are not the time for portfolio strategy. They are the time for sequencing the administrative items that protect the larger plan — in an order that doesn’t require everything at once. A typical first-90-days sequence:

Obtain certified copies of the death certificate — most institutions require originals; order 10 to 15.
Notify DFAS and apply for SBP annuity payments — no urgency in week one; the process simply needs to start.
File for DIC with the VA if the death may have been service-connected.
Locate and document life insurance policies (SGLI, VGLI, commercial) — SGLI claims through the VA typically pay within 60 days.
Confirm continuation of TRICARE coverage as a surviving spouse — tier may change, but coverage typically continues.
Pause major financial decisions until the immediate paperwork is in motion — inheritance isn’t a same-week investment emergency.

AWM&T sequences these items for surviving spouses on a routine basis. For broader context, see our article on key moments when a military financial advisor can help.

What Do Adult Children Inheriting from Military Parents Need to Know?

Usually the same as any inheritance

Inherited IRAs and brokerage accounts — generally the same tax/distribution rules as other beneficiaries; for many non-spouse heirs, the SECURE Act’s 10-year withdrawal requirement.
Real estate — often a stepped-up cost basis at death, reducing future capital gains if sold.
Personal property and tangible assets — distributed per the will or trust; tax implications depend on asset type and estate size.

Military-specific

An inherited TSP — its own beneficiary rules, distribution elections, and rollover options that differ from civilian plans.
An SBP annuity — may be payable to dependent children under certain elections, though most adult children will not receive it.
VA benefits — more complex; some continue for surviving family members, many end at the Veteran’s death.

For many adult heirs, the biggest decisions are about timing — when to withdraw inherited retirement assets, when to sell inherited property, and how to fold it into their own long-term plan.

How Are Inherited TSP & IRA Accounts Different from a 401(k)?

Inherited retirement accounts are the single most common point of confusion in military inheritance planning. Three rules to know:

Inherited TSP has its own beneficiary rules. A surviving spouse can keep it as a beneficiary participant account with continued tax deferral; non-spouse beneficiaries typically must roll it to an inherited IRA within a defined window.
The SECURE Act 10-year rule applies to most non-spouse inherited IRAs. Adult children generally have 10 years to fully distribute — no annual minimum, but the full balance out by end of year 10.
Surviving spouses have more flexibility. A spouse can treat an inherited IRA as their own, use the 10-year rule, or in some cases take life-expectancy distributions — depending on age, other income, and tax bracket.

Which option fits depends on your overall household balance sheet, not just the inherited account. See our Investment Management page or reach out to our team.

What Tax Implications Does a Military Inheritance Carry?

Generally not taxable

Life insurance proceeds — generally exempt from federal income tax when paid to beneficiaries.
DIC benefits — typically tax-free at both federal and state levels.
Inherited investments and real estate — often a stepped-up basis at death, reducing future capital gains if sold.

May create taxable income

SBP annuity payments — generally taxable to the recipient.
Distributions from inherited IRAs and TSP accounts — typically subject to income tax when withdrawn.
Inherited property or investments — may generate capital gains if sold above stepped-up value.

Estate tax considerations

Larger estates may owe federal estate tax above the applicable exemption; some states impose their own estate or inheritance taxes.

Because rules vary by asset and circumstance, a tax professional should review any significant inheritance. AWM&T works alongside your CPA to coordinate investment management, distribution timing, and tax-aware withdrawals.

How AWM&T Helps Military Families Through an Inheritance

Receiving an inheritance from a military servicemember or Veteran isn’t just a financial event. It carries weight, history, and paperwork the family is often encountering for the first time. AWM&T provides inheritance services for military personnel and families with three things in mind:

We have been in this room before. Many AWM&T professionals are military spouses, surviving children of military parents, or former servicemembers — we know what the first conversation feels like and pace it accordingly.
Trust, planning, and investment management live under one fiduciary roof. The inherited TSP rollover, the SBP annuity coordination, and any trust now holding inherited assets are designed together, not handed across three firms. For a primer on the different types of trusts, see our article.
One Relationship Manager across decades. The person who helps you sort the first 90 days is the person who manages your portfolio for the next 30 years.

Frequently Asked Questions About Military Inheritance

A few items are time-sensitive: obtain certified death-certificate copies, notify DFAS to begin SBP processing, and file SGLI claims if applicable. Most everything else can wait until you have time and energy to think clearly. There is no financial urgency that should add to your grief.

SBP coverage usually begins at retirement. For active-duty deaths, a separate program — SBP coverage under DD Form 1883 or active-duty death gratuity provisions — applies. We help surviving spouses understand which applies.

For most non-spouse heirs, the SECURE Act requires the inherited IRA to be fully withdrawn within 10 years of the original owner’s death, with no annual minimum. Surviving spouses generally have more flexibility, including treating the IRA as their own. The right choice depends on your tax picture and household needs.

Yes. Many surviving spouses come to AWM&T after a death, even if the household previously used a different advisor. We help with what’s in front of you now — SBP coordination, inherited accounts, immediate planning — without requiring you to move everything at once.

If you’re named as a trust beneficiary, the trustee is required to notify you. If you suspect a trust but haven’t been contacted, an estate attorney can investigate. We work alongside estate attorneys on the investment-management side once a trust is identified. For background, see whether a will is enough or you need a trust.

For a meaningful inheritance, usually yes. AWM&T focuses on the investment, planning, and trust side; a CPA or tax attorney focuses on tax filings and strategy. We coordinate directly with your tax professional rather than working in parallel.