Estate planning for families with a special needs family member – someone who is physically or mentally disabled or intellectually limited – is critical because many assistance programs are facing cuts or benefits cut-backs.
The easiest form of planning is to create either a testamentary (inherited) special needs trust (SNT) as part of your Will or Living Trust, or a ‘stand alone and waiting’ special needs trust to receive gifts as well as inheritances.
For persons with disabilities who inherit property or funds outright, there is still the opportunity to legally protect these funds with a payback SNT. But for many years, veterans-related survivor benefits could not be legally sheltered in an SNT for a disabled child. Members of the military can elect to defer a portion of their retirement pay so that when they pass away, a surviving spouse or a dependent child can receive a significant portion of the retirement payments. But, for a disabled child receiving SSI or Medicaid, this could jeopardize eligibility.
But all that changed in January 2016, when part of the National Defense Authorization Act of 2015 (NDAA) made it legally possible to shelter the retirement pay for the benefit of a disabled child. The NDAA allows a payback SNT (or a nonprofit’s pooled trust) to be designated to receive the benefit for the special needs child (or special needs child who is now an adult).
NDAA policy guidelines were released on December 31, 2015. The statute does not apply to disabled spouses.
If the military member already selected the disabled child as beneficiary (prior to the 2015 NDAA law), he or she is now permitted to make a one-time election to change the child beneficiary to a supplemental needs trust or pooled community trust (a substitution of beneficiary election).
If the military member died during active duty (or inactive duty but in the line of duty) but had not yet made the beneficiary election, a parent, grandparent or court-appointed legal guardian may make the election to have the benefit paid to the SNT for the child.
Members of the military and their families can find instructions and directions at http://www.moaa.org.
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