As any parent of a disabled child can attest, healthcare for such individuals can easily exceed $100,000 per year. These expenses leave many families in the difficult situation of trying to provide for the futures of their special-needs children, even into adulthood. This has been particularly true for military families.
In December 2014, as part of the National Defense Authorization Act of 2015, Congress passed legislation to help veterans provide for their disabled adult children. Under the Disabled Military Child Protection Act, if a retired veteran is enrolled in the Survivor’s Benefit Plan (SBP), the veteran may choose to have a portion of retirement income withheld. After the veteran’s death, these withheld funds will be paid to the veteran’s spouse or dependent child.
Previously, the funds had to be paid directly to the disabled child. Many disabled adults, however, receive government benefits such as SSI or Medicaid, which are delivered with tight restrictions on assets and income. For these disabled people, a direct inheritance from a veteran parent could put those benefits in jeopardy. The new act changes this restriction and allows veterans to contribute their funds to a supplemental needs trust for the benefit of the veteran’s disabled adult child. It is important to note that the trust must be established for the sole benefit of a dependent child, and no other beneficiaries may benefit from the funds in the trust.
On the whole, this is good news for many military families with disabled children. But there are restrictions on the benefit. Funds must be contributed to ‘first-party’ supplemental needs trusts, which means that, if the trust beneficiary received Medicaid benefits, there is a Medicaid payback provision after the disabled person passes away. Additionally, the dependent child must have been incapable of self-support as a result of a physical and mental disability that occurred prior to the age of 22. If families do not meet these qualifications, then this opportunity is not available.
It is important to note that the Veteran’s Administration insurance program, TRICARE, does provide significant care to disabled children of veterans, including acute-care services. TRICARE, however, does not provide long-term care services under the Medicaid program. This has been a huge problem with the current laws, as a great many disabled adults require care throughout their lives, but often cannot afford it. Now, by directing Survivor Benefit Plan payments to supplemental needs trusts, those funds may be used for long-term care.
The National Academy of Elder Law Attorneys and the Special Needs Alliance were two organizations that were instrumental in advocating for passage of the bill. Some opponents of the bill feared it could lead to abuse of the system and even fraudulent actions. Supplemental needs trusts, however, have significant oversight at both state and federal levels, and appointed fiduciaries can be subject to audit. The bill’s sponsors were ultimately able to persuade Congress that the benefits to disabled military children far outweighed any concerns about hypothetical abuses.
While this is good news for military families, the issues here are still quite complex. Any veteran receiving retirement benefits, who also has a disabled child, should contact a qualified elder-law or special-needs-trust attorney for assistance in using their military benefits to provide for that child. v
Attorney Hyman G. Darling is chair of Bacon Wilson, P.C.’s Estate Planning and Elder Law departments. His areas of expertise include all areas of estate planning, probate, and elder law. He is a frequent lecturer on various estate-planning and elder-law topics at local and national levels; (413) 781-0560; hdarling@