Home > New Information! > Department of Defense Releases Regulation Pertaining to Survivor Benefit Plan (SBP) Annuity to Special Needs Trusts

Original post from the HOOK Law Center:

by  Shannon A. Laymon-Pecoraro, Esq.

On December 31, 2015, the Department of Defense (DOD) released a memorandum relating to the implementation of the Military Child Protection Act that was enacted by Congress in December of 2014. Pursuant to the Military Child Protection Act, which was incorporated in the National Defense Authorization Act for Fiscal Year 2015, military members and retirees may elect to have their pension annuity, the Survivor Benefit Plan (SBP), paid to a special needs trust for the benefit of a child satisfying the Social Security’s definition of “disabled.”.

The awaited policy indicates that a member or retiree who elects SBP coverage for their dependent child may, at any time, irrevocably decide to substitute a self-settled special needs trust (SNT) created for the benefit of a disabled dependent child, during the lifetime of the member, via a written statement that designates future SBP payments to the SNT. The Secretary of Defense has not indicated that a specific form is necessary, but has indicated that Section X of DD Form 2656 will suffice. The DOD has indicated that the writing must also contain the trust’s name and tax identification number, and that the member or retiree’s statement must accompany a statement from an actively licensed attorney certifying that the trust satisfies the requirements of a self-settled special needs trust pursuant to federal and state law, or in lieu of such an attorneys certification, a certification from the Social Security Administration.

The DOD has also provided very specific provisions for assignment after the death of a member or retiree. Specifically, in the event a retiree died prior to making the assignment, or a member dies in line of duty while on Active Duty or during inactive duty training such that the SBP will fall to a dependent child, the DOD has indicated that the surviving parent, a grandparent, or a court appointed guardian may make such an election.  That said, no provisions have been made for retirees who have not previously elected dependent child coverage.

In the event the SNT fails to qualify as a valid special needs trust, the  SBP will revert  to the dependent child, impacting that child’s public benefits such as Supplemental Security Income (SSI) and Medicaid. The DOD has indicated that as a result, those making the assignment need to ensure that the attorney selected to draft the SNT is experienced in this “specialized and complex area of law.”

Hook Law Center is the only firm with a member in the Special Needs Alliance, an invitation-only organization dedicated to legal issues faced by individuals with special needs. As a result, Hook Law Center has extensive experience relating to special needs trusts and public benefits. If you are interested in assigning the SBP to and SNT, please contact [Hook] to setup an appointment.