Dec 20, 2014

Good news for military families with a disabled child: Survivor Benefit Plan funds may now be left to Special Needs Trust

Congress has given military families and their disabled children an early holiday gift. Under the recently passed 2015 National Defense Authorization Act, servicemen and women now can name a Special Needs Trust as beneficiary of their Survivor Benefit Plan.

As I noted in my July 2013 post, until now military personnel could defer up to 55% of their retirement benefits and leave it to a surviving spouse or child. However, the benefits had to be left directly to the individual. This presented a vexing problem if the benefits were left to a special needs child: the very funds intended to assist with the child's long-term needs would disqualify the child from receiving essential supports through means-tested programs such as Social Security Disability and Medicaid.

Now, a provision in the 2015 Defense Authorization Act allows a deceased person's Survivor Benefits Plan to be put into a Special Needs Trust (also known as a Supplemental Needs Trust) for a disabled child. The funds in a properly drafted Special Needs Trusts are not counted when determining an individual's eligibility for means-tested programs, and thus will not jeopardize the child's government benefits. Well done, Congress.

You can read the text of the legislation here - it is very long, and you will need to scroll to page 264 for the section that concerns the new provision.

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