Under the Disabled Military Child Protection Act signed into law last year by President Obama, a military parent can now provide a survivor benefit for a disabled child and have the benefit paid to the child’s special needs trust. “Disabled child” includes an adult disabled child whose disability began while as a child. The result is that military survivor benefits can be paid to disabled child’s special needs trust without interfering with the child’s eligibility for governmental programs such as Supplemental Security Income (SSI) or Medicaid.
Military members have several options to provide for a spouse or dependent child at the member’s retirement or death. Under the Survivor Benefits Plan (SBP) one option pays up to 55% of the member’s retirement pay to a spouse and/or dependent child when the retiree dies. Until the passage of the above law, benefits could only be paid to a “person,” and the Department of Defense did not include within that word’s definition a special needs trust for a child with disabilities. The effect was that for disabled children on SSI or Medicaid, receipt of SBP income payments directly to him/her would offset the SSI benefit. If the SBP payment exceeded the SSI benefit the child would lose SSI and also much needed Medicaid health care and community support benefits.
The Disabled Military Child Act authorizes military parents to elect that SBP benefits for a disabled child be assigned to a special needs trust. The trust must be a first party (also known as a self-settled trust) and the trust must provide for reimbursement to the Medicaid program upon the death of the disabled child to the extent of Medicaid benefits received by the child during his/her lifetime.