The Montana Estate Lawyer

Wednesday, July 6, 2011

The Military’s Survivor Benefit Plan and the Disabled Child – Elect with Care

Great Falls is blessed to have Malmstrom Air Force Base as part of its community. Not only does the base support active personnel, but many military retirees have opted to live in the Great Falls area.  That being the case, I want to address an issue that is unique to military families. 

When retirement looms, a military family with a disabled child must carefully decide whether to name the child under the retiree’s Survivor Benefit Plan (SBP).  The SBP will pay up to 55% of the military member’s retirement pay to a spouse and/or dependent child. The military member can elect between coverage for a spouse only, a spouse and children, or children only.

While the SBP can be a significant benefit for the spouse, it can be problematic if there is a disabled child involved.  In most cases, a disabled child over age 18 can be designated an Incapacitated Dependent (DD Form 137-5) and, thus, be permanently eligible for Commissary and Exchange privileges as well as Tricare health care.  In addition, assuming the disabled child over age 18 has assets of less than $2,000 and minimal income, the disabled child will usually be eligible for Supplemental Security Income (SSI) and Medicaid.  

SSI benefits ($674 per month in 2011) are offset by unearned income to the disabled child.  Any unearned income over $20 per month offsets the SSI benefit dollar-for-dollar. Once the SSI benefit reaches $0, SSI, and in most cases, Medicaid, is lost.  If the member dies having chosen the SBP for the child only, the disabled child will receive 55% of the member’s income.  If that amount exceeds $674 per month, the disabled child will lose SSI and Medicaid.  If the member and spouse both die after having chosen the SBP for a spouse and child, the same thing happens.

What about having the SBP payments go to a Special Needs Trust for the benefit of the disabled child?  Would this “prevent” the child from having received the SBP payment and avoid the SSI offset?  Unfortunately, Social Security considers it to have been received by the child whether it goes directly to the child or to a special needs trust for the child, since by express federal statute the beneficiary is the child for SBP purposes.  What about just canceling the SBP payments?  Again, unfortunately, once they start, there is no way to stop them.

It is critical that the military member be aware of the impact of the SBP on a disabled child’s SSI and Medicaid benefits. To prevent the loss of SSI and Medicaid benefits, there are actions the member may take.  The first is to select the spouse only when making the SBP election when there is a disabled child.  The second option, if the member has a disabled child and has already made an SBP election that includes the child, is to apply to the Board for Correction of Military Records to modify the SBP election.  This option must be completed while the member is still alive since the SBP beneficiary payments to the disabled child start upon death.  The member must complete DD Form 149 justifying why the SBP selection option must not include children.  For example, the member might tell them he or she did not understand when originally making the selection that including children would have a severe negative impact on the disabled child’s other benefits.  

Thus, if you are eligible for the SBP and have a child with a disability, please take care in making your election, or take appropriate action if the election has already been made, to insure your child remains eligible for current/future SSI/Medicaid benefits.

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