No one can dispute servicemembers and their families' sacrifices to support our country, but there are many financial advantages one is entitled to by serving that should not be overlooked. Understanding the unique planning considerations for active-duty service members is crucial for financial planners and one way to celebrate Military Appreciation Month. Advisors who work with military personnel should be well-versed in the Servicemembers Civil Relief Act (SCRA) and the Military Spouse Residency Relief Act (MSRRA), as these laws provide significant financial advantages that can significantly impact the planning process for servicemembers and their families.

The SCRA has many protections. Many of these protections may not apply to the population of servicemembers who work with financial advisors, but one protection in particular, is noteworthy. Any debts incurred pre-service still being paid after entering the military on active-duty status are entitled to a 6% interest rate cap on credit cards and other unsecured debts, auto and student loans, and mortgages. Reservists and members of the National Guard are also eligible for SCRA when on active-duty status for 30 or more consecutive days. The interest rate cap is also eligible for joint debts owned by the servicemember and their spouse. Even better is that companies must back-date the interest paid above the 6% cap to the entry date.

Other SCRA protections include:

·   Protections against default judgments in civil cases

·   Protections against foreclosure and repossessions

·   The ability to terminate a residential or auto lease without penalty with Permanent Change of Station (PCS) or deployment orders

To be eligible to terminate an auto lease, one must PCS from the continental U.S. to outside the U.S. or deploy for greater than 180 days. To be eligible to terminate a residential lease, one must deploy for a minimum of 90 days. To access the SCRA's benefits and protections, the servicemember must initiate the process by contacting their lender and providing a certificate that verifies their active-duty status and potentially PCS or deployment orders. The verification certificate can be obtained at

The Military Spouse Residency Relief Act (MSRRA) is a potentially valuable entitlement that allows active-duty spouses to avoid paying state taxes on wages earned in a state that is not their state of domicile as long as they are residing in the state for the sole purpose of being with their servicemember spouse who is on orders to be there. An example is a servicemember stationed in California who maintains Texas as the home of record or domicile. The spouse's domicile before marrying was South Carolina. In this situation, the spouse may choose to use their state of domicile (South Carolina), or they may match the home of record of the servicemember (Texas). The decision to match a servicemember spouse's state of domicile is a one-time election and will perpetuate going forward. Since Texas does not have a state tax, but South Carolina does, it would be advantageous for the spouse to use Texas as the state of domicile. The ability to match the service members' state of domicile is valuable because if the spouse works in California while stationed there, any earned income will not be taxable at the state level due to using Texas as the state of domicile. If California state taxes are withheld during the year, they will be refunded once the couple files their income taxes.

Servicemembers and their families can leverage these advantages to optimize the management of their finances and build for their futures. As such, any financial advisor working with servicemembers should be familiar with these policies and how best to incorporate them into a financial plan.

Loren Flood is The American College assistant program director, retirement and economic Security, WMCP® adjunct instructor.