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Understanding the Disabled Military Child Protection Act and Special Needs Trusts

For many years. military members and retirees who had special needs children were not allowed to select a Special Needs Trust as a beneficiary under their survivor benefit plan (SBP). This was a large problem for special needs children because receipt of their parent's SBP could easily disqualify them from SSI and Medicaid eligibility for developmentally disabled benefit programs. Under the Military Child Protection Act, which Congress passed as part of the National Defense Authorization Act for 2015, military members and retirees can now elect to have their pension annuity paid to a special needs trust for the benefit of a child satisfying the Social Security's definition of 'disabled.'

Recently the Department of Defense (DOD) released a memorandum on the implementation of the Child Protection Act. A member or retiree who elects SBP coverage for their dependent child may irrevocably decide to substitute a first party special needs trust (SNT) through a written statement that designates future SBP payments to the SNT. The DOD memorandum states the writing must contain the following:

  • The trust's name and tax identification number
  • A statement from a licensed attorney certifying that the trust satisfies the requirements of a First Party or also called a Self-Settled special needs trust pursuant to federal and state law. In lieu of an attorney's certification, a certification from the Social Security Administration will suffice.

In the event a retiree dies prior to making the assignment, or a member dies in the line of duty or during inactive duty training, a surviving parent, a grandparent, or a court appointed guardian may make such an election.

Among the requirements for a First Party or Self-Settled special needs trust is the payback provision to Medicaid should any funds remain in the trust upon the death of the beneficiary. By requiring attorney certification, the DOD wants to assure that the member or retiree has designated the right kind of SNT trust to receive the SBP. In the event that the trust fails as a valid SNT, the SBP will revert to the dependent child impacting the child's eligibility for public benefits.

This will typically mean that a member or retiree with a special needs child may require two special needs trusts. They will require a Third Party Special Needs Trust for their own estate and a First Party Special Needs Trust to receive the SBP.

Of course, you may have additional questions. Edward Zetlin Law would be happy to discuss. Please contact us at 703-379-0442 or e-mail at ed@zetlinlaw.com.

Contact us at (703)379-0442; ed@zetlinlaw.com


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