Military Members and New Uses for Special Needs Trusts

Through Survivor Benefit Plans (SBPs) members of the military can elect to defer a portion of their retirement pay so that when they pass away a surviving spouse or dependent child will receive up to 55 percent of their retirement payments.  However, up until now, military members had to name individuals as the beneficiaries of these SBPs.  This rule created a dilemma for the parents of children with special needs.  On the one hand, the retiree could name a child with special needs as the beneficiary of his SBP and that child would receive much-needed income and monetary support.  However, receipt of the SBP funds could compromise the beneficiary’s ability to receive means-tested benefits like Supplemental Security Income (SSI) or Medicaid

With the passage of the National Defense Authorization Act of 2015, Congress has, for the first time, allowed military members to name Special Needs Trusts as beneficiaries of Survivor Benefit Plans (SBP).  This means that military families will finally be able to direct SBPs to their children with special needs without compromising the children’s ability to access government disability and medical benefits.  Although the bill is a great first step, military retirees now need to contact their estate planning attorney to make use of these new planning options for their children with special needs.

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