Survivor Benefit Program and Special Needs Trusts

Jun 28 2011

Have you created a special needs trust to be the beneficiary of your SBP for your dependent adult child?  Hopefully not…

The SBP does not allow the survivor annuity to be paid to a special needs trust or any trust for that matter.  The beneficiary of a SBP annuity must be a person with a Social Security number.  If the person designated as the beneficiary cannot manage his/her financial responsibilities, then the SBP annuity must be paid to an approved third party for the benefit of the incapacitated beneficiary.

This third party person can be a court appointed guardian, custodian or fiduciary.  The annuity may also be paid to a representative payee who is responsible for the care of the beneficiary once approved by DFAS or your Service SBP administrator.  To appoint a representative payee, provide your SBP administrator (DFAS for military and your pay agency for other uniform services) with the proper documentation:

  • Determination of incompetency per a state court, doctor or psychologist.
  • Representative Payee Form (http://www.dfas.mil/dfas/retiredmilitary/forms.html) appointing the representative payee by the Service member.

The representative payee is required to use the SBP payments solely for the benefit of the beneficiary and must certify/report this fact regularly.

MOAA has ongoing efforts on the Hill to allow special needs trusts for SBP beneficiaries.  Until you read something official about the passage of a law from MOAA, please plan accordingly.  See your Pay Agent’s web site or call them for details.

4 responses so far

4 Responses to “Survivor Benefit Program and Special Needs Trusts”

  1. H. Rees James, CAPT USN(ret)on 14 Jul 2011 at 6:28 pm

    Thanks for the report. Would you please expand on the status of MOAA’s on-going effort? Eric Cantor had a bill in the previous Congress. Never got out of Sub-Committee. I figured as Majority Leader of this Congress he should be able to get a bill out of a Committee. I wrote and asked him if he was going to submit another bill. No reply. He’s not my Congressman. So I wrote my Congressman, Bob Goodlatte, who I have actually voted for three times. No response. I also wrote to Jim Webb, who I believe authored a bill in the Senate and who I did not vote for once. No response. My understanding is that the obstacles are finding offsets and the small number of voters impacted by this discriminatory law. I guess our issue must fall in the no man’s land between too costly (money) to support and not costly enough (votes) to require attention. I appreciate MOAA”s interest in this issue and if there is anything I can do beyond re-contacting non-responsive elected officials, let me know. Regards.

  2. John Sulfaroon 14 Jul 2011 at 8:09 pm

    I believe that the inequity is that civil sevants can designate a special needs trust as a “SBP” type benficiary. I, as well as several retired military types, had to submit BCNR paper work to remove our loved ones from the SBP program as they would lose all their support mechanisms if they received the SBP. Even is they have a designated payee, this would count against their $2000 worth limit.

    Let’s just fix this as it will not cost the DoD budget any major amount as the retiree pays a portion of th e costs.

  3. Bill Shirk, LCDR, CEC, USN (ret)on 23 Oct 2011 at 8:28 pm

    I too appreciate MOAA’s interest in this subject and if there is anything I can do to help, please let me know. In the mean time I will contact my elected officials.

  4. Roger Picqueton 26 Oct 2011 at 2:17 pm

    My wife and I are the parents of an adult child who is severely disabled. As part of our comprehensive estate planning efforts we created a Special Needs Trust (“SNT”) for our son’s future security and stability. I have a pension from my 33 years of state service that provides that a survivor’s benefit payment under the pension plan may be paid directly to the SNT. This is consistent with the well-established “best practices” throughout the country and allowed by almost all state laws. I was quite surprised to learn that SNT’s are not recognized under miltary retirement plans. Until this inequity is corrected disabled indivuals who are military dependants are deprived of a common-sense financial tool designed to help them. It is time to correct this problem. I have contacted my representative, Lois Capps (D-CA), and she has directed her office to actively support corrective legislation. Please contact your representatives and ask that they join in this effort.

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