A bill recently introduced in the U.S. House of Representatives would finally allow military retirees to name special needs trusts as beneficiaries of Survivor Benefit Plans, a change that could dramatically improve the lives of military children with disabilities.

Under the current military retirement system, a retired member of the military can elect to fund a Survivor Benefit Plan (SBP) that will pay the retirees survivors a monthly payment to help make up for the loss of retirement income. When the retiree dies, the SBP will pay up to 55 percent of his pension to his wife or children. But if a child with special needs receives the pension payment, she could lose other important government benefits like Supplemental Security Income or Medicaid because the income from the pension is counted as the child’s for purposes of calculating her eligibility for those other government benefits. Unfortunately for the child, as the law stands now, SBP payments cannot be assigned to a special needs trust that would protect both the pension payment and the child’s other assistance.

Virginia congressman Jim Moran (D) introduced H.R. 4329, also known as the Disabled Military Child Protection Act of 2012, to protect children of deceased members of the military who might face a loss of other government benefits if they receive payments from an SBP. Under the proposed law, military retirees could name a special needs trust as the beneficiary of an SBP instead of naming a child directly or skipping her altogether. Rep. Moran explained that “[t]he health of our special needs military children should not suffer due to this loophole in the military retirement system. When health care costs for disabled kids can top $100,000 a year, the military needs to give parents the opportunity to plan for their special needs children’s future.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.