Survivor Benefit Plan Payments for Disabled Dependents
Many retirees have been hesitant to select a disabled adult child as their beneficiary because they feared any extra income would disqualify the child from receiving other government subsidies for disabled adults, such as housing assistance and Medicaid.
A new law allows servicemembers or retirees to contribute their SBP payments to a Special Needs Trust to avoid this problem
What is a Special Needs Trust?
A Special Needs Trust or SNT is a trust designated for beneficiaries who are disabled, either physically or mentally. It is written so the beneficiary can enjoy the use of property that is held in the trust for his or her benefit, while at the same time allowing the beneficiary to receive essential needs-based government benefits.
Under the new law, the SNT would receive any SBP annuity payments that would otherwise be payable to or on behalf of the disabled dependent child. This irrevocable decision may be made during the life of the member through a written statement that designates future SBP payments to the SNT (designation in Section X- Remarks of the DD Form 2656 Data for Payment of Retired Personnel will also suffice). In situations where SBP payments are made to more than one dependent child, the SNT shall be treated as a dependent child for purposes of determining the shares payable to each of the children.
To irrevocably elect to substitute a SNT for the benefit of a disabled dependent child as a SBP beneficiary in lieu of the dependent child, the member or retiree must submit a statement that they wish to have the annuity paid to the SNT and include the name and tax identification number for the SNT. The the member or retiree must either submit a separate statement using a form available on the DFAS website or a legal statement from a lawyer certifying that the trust is a SNT created for the benefit of the disabled dependent child and is in compliance with all applicable Federal and State laws or a certification from the Social Security Administration that the trust qualifies as a SNT pursuant to title 42 of the U.S.C.
If the member or retiree dies without making an election to have the SBP payments go into the SNT the disabled dependent child's surviving parent, grandparent, or court appointed legal guardian may irrevocably elect to have SBP annuity payments made to the SNT.
If the member dies on active duty in the line of duty and SBP coverage for the dependent child is granted by the military, then a disabled dependent child's surviving parent, grandparent, or court appointed legal guardian may irrevocably elect to have SBP annuity payments made to the SNT.
If the member dies during inactive duty training with no surviving spouse and the SBP becomes payable to the surviving dependent children, then the disabled dependent child's surviving parent, grandparent, or court appointed legal guardian may irrevocably elect to have SBP annuity payments made to the SNT.