The recent passage of the Military Child Protection Act gives service members and veterans an additional tool to provide for their disabled children through their Survivor Benefit Plans. The Disabled Military Child Protection Act allows certain types of special needs trusts to be named as a beneficiary of a Survivor Benefit Plan. Previous law only allowed for the naming of persons as beneficiaries.
The problem with naming a disabled child as a beneficiary is that the payments could endanger the child’s eligibility for Supplemental Security Income (SSI) or Medicaid benefits. By directing payments to go directly to the child’s special needs trust instead of to the child preserves the child’s eligibility for SSI and Medicaid while providing assistance to the child through the special needs trust. However, to preserve a child’s eligibility for SSI and Medicaid, the special needs trust must either be a self-settled or a first party trust and must include language to reimburse the state’s Medicaid program after the death of the beneficiary. Please contact an Elder/Disability Law professional to make sure that these parameters are met.
Once the decision is made to name a trust as the beneficiary, that decision is irrevocable. The decision may be made by the service member during their lifetime, or if the service member has died, the designation may be made by the disabled child’s surviving parent, grandparent, or legal guardian.