Special Needs Trust Update

January 8, 2016

Last year's defense bill gave military members and retirees the option to direct Survivor Benefit Plan (SBP) payments to a Special Needs Trust (SNT) for permanently disabled children. A SNT is a legal instrument designed to manage money that was set aside for assisting a disabled person, and is governed by State and Federal law. Once created, a SNT is irrevocable.

On December 31, 2015 DoD finally issued guidance to the Services and DFAS on how to implement the authority to make SBP payments to a legally established SNT. Affected military members and retirees will need a practicing attorney to establish a SNT and to certify that the SNT is in compliance.

Prior to this change, DFAS required payments go to a natural person. Without the ability to use a SNT, DFAS used a "Representative Payee" to accept payments on behalf of the adult child.

Allowing SBP to be deposited in a SNT allows permanently disabled military children to avoid having SBP counted against means-testing requirements for certain state and federal assistance programs. Before enactment of the recent law, military children suffered financial penalties not imposed on other similarly disabled non-military children who could have assets placed in a trust for them.

MOAA worked with Congress to include this much-needed provision in last year's defense bill and is thankful that this option is now available to families.

“The ability to use a SNT for a disabled child provides important protection for the child after the servicemember parent has passed away,” said MOAA deputy director of Government Relations, Col. Phil Odom, USAF (Ret.).

To see a copy of the directive memorandum and the specific guidance it provides click here.

 

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