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New Federal Bill Would Open More Estate Planning Options for Military Families

Local families with disabled children often have added complexities when conducting New York estate planning. Parents of children with special needs have a clear desire to ensure that estate plans are in place so their loved one will have necessary resources throughout their lives–even after the parents are gone. Fortunately, New York allows parents to set up trusts which provide benefits to children without disqualifying them from Social Security and Medicaid programs.

However, it is crucial to work closely with an estate planning lawyer on these “supplemental needs trusts,” because there are very specific rules about what can and cannot be purchased with the funds without risking benefit payments to the child. In particular it is usually best to make distributions from the trust “in kind” instead of direct cash payments to the child.

Military families with disabled children may have even more challenges when planning for the long-term well-being of their children. For example, as reported this week in Forbes, a military retiree can set aside up to 55% of his monthly stipend to provide for family members upon the retiree’s death. Yet, those benefits are counted as income when given to other family members. If the one who receives it is a dependent child with disabilities then the income may risk the child’s participation in Medicaid and Social Security Disability Insurance programs.

A piece of legislation has been introduced to help these families provide the resources to their children without forfeiting benefits: The Disabled Military Child Protection Act of 2012. The measure would allow retired servicemembers who participate in the set-aside program–known as the Survivor Benefit Plan–to transfer the disbursements into a special needs trust. A special needs trust is another name for the supplemental needs trust.

By allowing the military family to transfer Survivor Benefit plan funds into the trust, the families will be able to take advantage of the trust which provides resources to the child without compromising their program benefits. The military retirement benefit payments would not be considered an asset that counts toward the child’s qualification for Social Security or Medicaid. Instead, the resources can be used to supplement program support–the same rules about “in kind” payments would apply.

The bill is being pushed by the National Military Family Association. The measure has been introduced in the U.S. House of Representatives. Considering that this is an election year, it is unclear how much progress will be made on any legislation in the coming weeks and months. However, the bill does not invoke much of the partisan division of other legislation, so it might stand a chance of making it out of the Congress and signed into law.

See Our Related Blog Posts:

Special Needs Trusts for New York Families

New York Estate Plans Tailored for Those with Multiple Sclerosis

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