For military retirees raising a child with special needs, a recently passed law brings a much-welcomed opportunity for protecting hard-earned savings for their child. Last month, the Department of Defense released a policy implementing a new way for retirees to designate a Special Needs Trust as the beneficiary of their Survivor Benefit Plan. In the past, retirees were only able to designate a spouse or child as the beneficiary, and leaving benefits to a child with special needs would likely mean that the adult child would become ineligible for government assistance programs, namely Medicaid, which can be invaluable to many who live with a lifelong disability. Last year, as part of the National Defense Authorization Act, the law was changed to permit a Special Needs Trust to serve as the beneficiary of the survivor benefit plan, which allows for the beneficiary of the Trust to remain eligible for Medicaid. The Survivor Benefit Plan gives those who have retired from the Armed Forces or civilian roles with the Department of Defense the option to leave up to 55 percent of their full retirement pay to a named beneficiary.
I spoke with Richard Sears, a retired naval aviator, parent of a special needs child and board member of Easter Seals Hawaii, about how this change will impact his family. Sears retired from the Navy in 2006, after decades of frequent travel with his wife and two children, including a son who has been disabled since birth. He talked about how the military has the Exceptional Family Member Program, which helps with reassignment issues and support coordination, but how financial planning was usually out of reach. "I don't have a financial planner, and when I ask a financial planner, they don't know the answer," Sears said, discussing the all-too-common need for parents of special needs children to go it alone when it comes to financial and retirement planning. "When I retired, I realized I needed to set up a Special Needs Trust," he said, which meant going to a lawyer, but even the lawyer could not provide guidance on what would happen to his survivor benefits with a special needs trust. Legislation to allow retirees to designate a special needs trust floundered for a decade. With last year's law and the recent implementation, military retirees are now on a footing more similar to civilians who have long had greater discretion on designating the beneficiary of retirement benefit plans.
Why did this seemingly intuitive change take so long? Oftentimes, when Congressional staffers write legislation, there are drafting errors, and this appears to be among them. The original language in the law authorizing Survivor Benefit Plans referred to a "person" rather than a broader reference to an entity or trust for the benefit of a person. Congressional gridlock unfortunately delayed the correction.
What's next for military retirees who are caregivers of a loved one with special needs? Education and awareness. According to Sears, "it's overwhelming just trying to understand this stuff, so having a source that is knowledgeable would be a huge benefit to people with disabilities."
The full policy guidance from the Department of Defense can be found here.