Update on the Military's Survivor Benefit Plan and the Disabled Child
About four years ago I posted a blog noting that there was a dilemma for military families planning for a disabled child through the use of special needs trusts and the military’s Survivor Benefit Plan (SBP). At the time, it was a problem that could not be reconciled because the benefit could not be assigned to a special needs trust for a disabled child. The only options were thus to elect to not name the disabled child at all as a beneficiary or to elect for the benefit to be paid directly to the child which would potentially interfere with the child’s eligibility for SSI and Medicaid.
I am pleased to report that Congress, with the passage of the Disabled Military Child Protection Act, has now authorized military members to name special needs trusts as beneficiaries of SBPs. Members of the military can choose from several options to provide for a spouse or dependent child at the member’s retirement or death. 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. In addition the military member may now also elect to name a special needs trust as beneficiary of the SBP, allowing the funds to be used for the benefit of the disabled child without harming his or her access to SSI or Medicaid. However, the funds must be assigned to a first-party or self-settled special needs trust that includes a “pay-back” provision to reimburse the state Medicaid program, upon the death of the disabled child, from the funds, if any, remaining in the trust at his or her death. This certainly is a welcome change for special needs planners.