Military retirees should be allowed to better provide for a surviving child who is disabled. Right now that planning is made difficult because of the restrictive rules that apply to Survivor Benefit Plans.
A Survivor Benefit Plan (SBP) is an insurance plan that military retirees can use to protect their surviving spouse or dependent child. In the event of the death of the retiree, the SBP can pay an annuity to the surviving family member to help make up for the loss of the veteran’s retirement income.
Many military retirees choose to protect their dependent children with an SBP. In most cases a surviving child beneficiary receives annuity payments until they reach age 18 or 22 (if a full-time student). However, an incapacitated child can receive the annuity for life provided the child never marries.
But it turns out that a SBP is not a particularly effective way for military retirees to provide for their disabled children. Under current law, the annuity payments must be left directly to the child. This can create problems for a child who is necessarily reliant on means tested public benefit programs. For more on the problems with direct inheritance by special needs children see my earlier post: Inheritance can create problems for grandchild with special needs.
Non-military families can provide for special needs children by having their insurance and retirement benefits paid to a special needs trust. Careful planning is required for IRAs, 401k and other qualified retirement plans, but it can be done. Why do we deny military retirees the same opportunity to use their SBP insurance to protect their disabled children?
Legislation has been introduced in Congress which would enable veterans who invest in a Survivor Benefit Plan (SBP) to transfer their benefits to a Supplemental Needs Trust for their special needs children (instead of leaving the benefit directly to the disabled child). S. 1076, the Disabled Military Child Protection Act, is unfortunately given only a slim chance of making it out of committee by GovTrack. Similar legislation (H.R. 2249) has been introduced in the House of Representatives with even slimmer prospects.
However, in the Senate, Senator Kirsten Gillibrand (D-NY), a co-sponsor of the Disabled Military Child Protection Act, successfully added the Act’s language to the National Defense Authorization Act for Fiscal Year 2014 (S.1034) (NDAA). S. 1034 was passed through the Armed Services Committee this month.
The current situation is a shameful way to treat both our military retirees who have served our country so well – and their disabled children. If Congress would just turn its attention to this legislation, it’s hard to imagine there would be significant opposition. Let’s get this legislation enacted and allow our veterans to plan for the special needs of their disabled children.
If you have a child with a chronic condition or disability, Marshall, Parker and Weber can help you plan to protect them from the legal, financial and other problems that may arise when you are gone.