DOD Releases Important Regulation Pertaining to Survivor Benefit Plans

Just before the New Year, The Department of Defense (DOD) released a memorandum regarding the implementation of the Military Child Protection Act that went into law in December of 2014. As a part of the National Defense Authorization Act for Fiscal Year 2015, The Military Child Protection Act will allow military members and retirees to elect to have their pension annuity, also known as the Survivor Benefit Plan (SBP), paid into a special needs trust for the benefit a child that satisfied the Social Security’s definition of “disabled.”

The much awaited policy allows Active Duty or retired service members who elect SBP coverage for a disabled dependent child to: “permanently 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.”

What Forms do you Need?

The necessary forms and procedures have not yet been specified by the Secretary of Defense, but the DOD has indicated that Section X of DD Form 2656 will most likely suffice. Furthermore, the DOD has indicated that:

• The writing must contain the trust’s name and tax identification number
• The member or retiree’s statement must be accompanied by a statement from a licensed attorney that certifies the trust satisfies the requirements of a self-settled special needs trust according to federal and state law
• A certification from the Social Security Administration may be used in lieu of an attorney certification

Provisions for Assignment after Death

To eliminate any confusion, the DOD has detailed the exact provisions required for assignment after the death of a member or retiree. The legislation states that a surviving parent, a grandparent, or a court appointed guardian may make such an election if:

• The retiree died prior to completing the assignment
• The member dies on Active Duty
• The member dies on inactive duty, during training for example

As of yet, no provisions have been made for retirees who have not yet elected dependent child coverage. If the SNT does not qualify as a valid special needs trust, the SBP in question will revert to the dependent child and impact public benefits like Medicaid and Supplemental Security Income. Those responsible for making the assignment should work with an attorney who has experience drafting SNTs, as it is a complex area of law.

Cohen & Burnett: Trusted Washington, D.C. Estate Planning Attorneys

Over the past 25 years, Cohen & Burnett has earned a reputation as a trusted Washington, D.C. law firm for estate planning and administration, tax law and preparation, retirement planning, and more. If you have questions about special needs trusts or private benefits, please visit our homepage today.

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