Survivor Benefits Plan: Protecting Military Survivor Benefits for a Child with Disabilities
April 10th, 2017
Military families who stay in the service until retirement can easily provide survivor benefits for a child with disabilities without effect that child’s eligibility for public benefit programs. In December of 2014, the Disabled Military Child Protection Act was signed into law. Prior to the enactment of this law, a military parent had to choose whether to assign his or her Survivor Benefits Plan to a child with disabilities, thereby risking the child’s eligibility for public benefits. The prior law required that the Survivor Benefits Plan be paid to a person, and a special needs trust did not qualify as a person. If a military parent assigned his or her Survivor Benefits Plan to a child with disabilities, that child was unlikely to be or remain eligible to receive public benefits such as Supplemental Security Income (SSI) or MaineCare (Maine Medicaid) once the benefit began to pay. The Disabled Military Child Protection Act permits a military parent to assign his or her Survivor Benefits Plan to a special needs trust that benefits a child with disabilities. 1. Survivor Benefits Plan (SBP) The Act applies only to the military Survivor Benefits Plan retirement option. An SBP pays a portion of the military parent’s retirement pay to an assigned spouse and/or dependent child upon the death of the military parent. The military parent has the option to elect, or assign, his or her SBP retirement to the spouse, to the children, or to the spouse then the children. The Act does not apply to dependence and indemnity compensation (DIC) or any other veteran benefit, only the SBP retirement option. 2. Special Needs Trusts The Act requires that the SBP be assigned to a d(4)(A) first-party special needs trust, not a third party trust. First-party special needs trusts are established with the assets owned or controlled by the individual with disabilities. There are several restrictions placed on these types of trusts, but most importantly, the trust must include a “payback” provision to repay all state Medicaid agencies for any medical assistance received during his or her lifetime. 3. A Practical Application To take advantage of this change in law, the military parent must first have a special needs trust established for the benefit of his or her disabled child. Once this trust has been established, the military parent then signs the Letter of Assignment of SBP designating the trust as the recipient of the retirement benefit. A certification by an attorney should be attached to the Letter of Assignment in which the attorney would certify that the trust created and assigned to receive survivor benefits is the correct type of trust required under the Act. A military parent can do this at any time during his or her lifetime. The death of the military parent does not bar the assignment of the SBP to a trust for a disabled child. For example, if the military parent has died and the SBP assignment is to a surviving spouse and then to a child with disabilities but not to a special needs trust for the benefit of that child, the surviving parent or a guardian of the child can establish a special needs trust and assign the SBP to that trust. 4. Conclusion The Disabled Military Child Protection Act enables a military parent to provide for a disabled child without impacting that child’s eligibility for public benefits. A military parent can take advantage of the Act during his or her lifetime. Fortunately, even if the military parent dies before making the assignment to a special needs trust, a surviving parent or guardian can do so. For more information or to meet with an attorney who can assist you in establishing a first-party special needs trust for a child with disabilities, please call Maine Elder Law Firm, a practice of Rudman Winchell, at (207)947-6500.