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Survivor & Estate Planning

Widow’s Tax Eliminated: A Huge Victory for Survivors


Military survivors receiving both the Survivor Benefit Plan (SBP) and the VA Dependent and Indemnity Compensation (DIC) now receive an increase in their deposit, as of February 1, st 2023. The Survivor Benefit Plan offset, also known as the Widow’s Tax, affected survivors receiving both SBP and DIC from the same deceased servicemember. The SBP was reduced by the VA DIC and those survivors also received from the Federal Government a monthly Special Survivor Indemnity Allowance (SSIA), hence the name “Widow’s Tax”.

This SBP offset was established to prevent so-called “double-dipping”, which is identified and prohibited by federal law as receiving two separate benefits for the same reason. But SBP and DIC are paid for two different benefits, which caused the outcry of survivors and advocates to challenge Congress to recognize them as such. SBP is an election made by the Veteran at retirement, with a monthly premium to provide a percentage of a deceased Veteran’s retired pay on a monthly basis to a surviving spouse. DIC is a VA entitlement that is applied for by the surviving spouse of a Veteran who died on active duty or from injuries or illnesses that were a result of military service

Because of the persistence and determination of advocates, within the ‘2020 National Defense Act,’ Congress included the protection of survivors' rights to the benefits to which they are entitled. The Act allows spouses to receive the full amount of SBP and DIC with no reduction or penalty. The offset was phased out in three parts which began in January 2021 and ended in January 2023 with a full elimination of the offset. This change is automatic, but it is important to note not all survivors will see the increase. Only those who were receiving both SBP and DIC from the same deceased veteran will see the change.

Defense Finance and Accounting Services (DFAS) created a Survivor’s Newsletter as a guide to learn more about the offset and other benefits a survivor may be entitled to. DFAS can also be contacted directly at 800-321-1080 with any questions regarding the SBP/DIC offset.