NAMING YOUR SPECIAL NEEDS TRUST AS BENEFICIARY OF YOUR MILITARY PENSION

by Adam Cohen, Esquire

For active and retire service members, pay of all benefits generally stops upon the service member’s death. However, Survivor Benefit Plan (SBP) is an additional benefit which provides monthly, cost-of-living-adjusted income to certain members of the service member’s family. The SBP is a program which service members may elect to participate in as part of their retirement pay package. An added benefit is that under the SBP, the service member may elect to provide a survivor’s benefit to a spouse, former spouse, dependent children, or the spouse or former spouse and dependent children. The service member will receive a reduced amount during lifetime, but will be able to provide an annuity to his or her family members after death. This can be a significant benefit.

The SBP’s purpose is to provide replacement of income to the family members of a deceased service member. Typically, the annuity is paid directly to the spouse and/or dependent child, increasing their income. For most people, this is a seamless process. However, for military families with disabled children, this caused tremendous problems. The SBP income would be attributable to the disabled child, often compromising their eligibility for critical programs such as Supplemental Security Income or Medicaid. Congress created a solution.

The National Defense Authorization Act for Fiscal Year 2015 allowed, among other things, the service member to irrevocably assign the SBP annuity to a Special Needs Trust for the sole benefit of the child with a disability. This provided relief for military families with disabled children. Service members could now be assured that their SBP annuity would be there to benefit their child, while also allowing their child’s other benefits to remain in effect.

To make the required designation, the service member must have previously elected Spouse and Child, or Child Only as the recipient of the SBP. The Special Needs Trust must be properly drafted. Upon execution of the Special Needs Trust, a written statement to the Defense Finance and Accounting Service assigning the SBP to the trust is required, along with an attorney’s certification as to the validity of the Special Needs Trust.

A service member who has a child with disabilities should consult with an experienced attorney to determine whether assigning their SBP annuity to a Special Needs Trust would be appropriate for their disabled child.  Begley Law Group specializes in Special Needs Trust and its attorneys are readily available to assist any service member with the planning for his or her child with disabilities.