The Disabled Military Child Protection Act, signed into law by President Obama in December, 2014, changed the law affecting retirement benefits for military personnel – and opened the door to improving the financial futures for military dependents with special needs.
No longer an either/or choice
Before this legislative change, a military parent, through his or her military retirement plan, could provide survivor benefits for a child with special needs. It could supplement the child’s income, though likely would not be enough to meet his or her lifetime financial needs.
However, that monthly income could jeopardize the child’s eligibility for government benefits if his or her total assets exceed $2,000. Supplemental Security Income, Medicaid, and waiver programs available through Medicaid (related to housing, employment support, caregiving, mental health services, and other aspects of life), which could enhance the child’s personal, medical, and financial wellbeing, would be out of reach.
“With this legislation, a child’s special needs trust can now be named as beneficiary of a Survivor Benefit Plan (SBP),” says Jerry Hulick1, CLU, ChFC, CLTC, ChSNC a Special Care Planner who’s earned the Chartered Special Needs Consultant (ChSNC) designation2 and is associated with MassMutual Greater Washington3 in Fairfax, Virginia, a general agency of Massachusetts Mutual Life Insurance Company (MassMutual). “Since the child isn’t receiving the money – the trust is – it protects the child’s eligibility for government benefits should they ever be needed.”
How SBP works
When you participate in SBP4, you select a benefit level you wish your beneficiary(ies) to receive when you die and are no longer receiving your retirement benefit yourself. You pay a monthly premium for the benefit level you’ve chosen. The levels, or base amounts, range from the full monthly retirement payment you received during your retirement to as little as $300. Upon your death, your beneficiary(ies) would receive monthly annuity payments equal to 55% of your selected base amount. The premium, base amount, and annuity payment may be adjusted annually for inflation.
Beneficiaries can include a spouse or former spouse, a spouse and child(ren), or a child/children only. Additionally, your beneficiary may be a person with an insurable interest, defined as someone who “has a reasonable and lawful expectation of financial benefit” from your continued life or anyone who has a reasonable and lawful expectation of financial benefit from your continued life based on the “relation of parties to each other, either financial or of blood or affinity.” This individual might be a parent, sibling, cousin, or other individual. Certain documentation may have to be submitted to prove the person has an insurable interest.
And now, of course, the list of beneficiaries includes a special needs trust for a child with special needs.
Establishing a special needs trust
If you don’t already have a special needs trust for your child, meet with an attorney who has the training and experience to serve people with special needs. “A special needs trust differs from other types of trusts and must be structured in a particular way,” explains Hulick. “It must then work in conjunction with other financial measures you’ve put in place, such as life insurance, other savings and investment products that have named beneficiaries, and your will.” To ensure this, the attorney and a financial professional, such as a Special Care Planner will work with other experts, such as your accountant, tax advisor, personal attorney, social service representatives, and benefits managers (in the military and/or civilian employers).
Military benefits are not enough
If you’re an active or retired service member and have a child incapable of self-support who meets the Department of Defense’s criteria to qualify as an Incapacitated Child, your child is eligible for TRICARE5-administered health care and military base privileges. You must complete the required paperwork to apply for these benefits (and reapply every four years), and if you’re retired, your child must purchase Medicare Part B benefits to receive TRICARE services.
These benefits6, together with the monthly Survivor Benefit Plan benefit paid to a special needs trust, are a good beginning for acquiring the support and services your child will need over his or her lifetime. But your child will need more. The government benefits mentioned above will help your child access additional programs and support services your military benefits can’t provide.
Put all the pieces together
Striving for the best possible financial future for yourself and your family is more than planning for your retirement and the wellbeing of your family when you die. “It’s important to create a full financial strategy that serves the entire family through life,” says Hulick. “And when you have a child with special needs, so many facets of that strategy are impacted by financial and legal aspects that apply to people with special needs.”
Special Care Planners and attorneys who are knowledgeable about those aspects can help you integrate them — along with your military benefits, government benefits (SSI, Medicare/Medicaid, etc.), and other estate planning measures (long term care and life insurance, trusts, wills, investment/savings products, etc.) — into a strategy that aligns with your financial goals for your family. And with regular reviews, these specialists will help you stay on track, especially when new legislative bills affecting you and your family become law.
2 The Special Care Planner is a title used by MassMutual financial professionals who have received advanced training and information in estate and tax planning concepts, special needs trusts, government programs, and the emotional dynamics of working with people with disabilities and other special needs and their families. The certificate program was offered by The American College in Bryn Mawr, PA, exclusively for MassMutual financial professionals. Additionally, a designation of Chartered Special Needs Consultant (ChSNC), which evolved from the certificate program, is now offered through the American College for financial professionals. MassMutual financial professionals who have completed the certificate program, or received the ChSNC designation can use the Special Care Planner title.
4 This site provides information about how SBP works, though at the time of this article’s publication, the info had not been updated in regards to recent legislative changes:
5 TRICARE is the health care program for uniformed service members (active, Guard/Reserve, retired) and their families around the world. http://www.tricare.mil/
6 Learn more about benefits available to military personnel and their families at
www.military.com/benefits. You may also find helpful information by browsing the National
Military Family Organization website (www.militaryfamily.org) and on the U.S. Department
of Veterans Affairs website (www.benefits.va.gov).
* The Special Care Planner, a title used by MassMutual financial professionals, who have received advanced training and information in estate and tax planning concepts, special needs trusts, government programs, and the emotional dynamics of working with people with disabilities and other special needs and their families. The certificate program was offered by The American College in Bryn Mawr, PA, exclusively for MassMutual financial professionals. Additionally, a designation of Chartered Special Needs Consultant (ChSNC), which evolved from the certificate program, is now offered through the American College for financial professionals. MassMutual financial professionals who have completed the certificate program, or received the ChSNC designation can use the Special Care Planner title.
A Special Care Planner through MassMutual’s SpecialCareSM program can assist parents in drafting Letters of Intent and can help make a difference in the quality of life for an individual with special needs, their caregiver and other family members. Through SpecialCare you will learn valuable financial strategies, identify financial strategy solutions, access vital information, and meet certified specialists who will work with you and your professional advisors – your banker, accountant or financial planner, lawyer, social workers and health care providers – to review your financial picture and offer options to fit the needs of each situation. For more details, visit MassMutual’s website at http://www.MassMutual.com/specialcare, or call 1-(800)-272-2216.
Founded in 1851, MassMutual is a leading mutual “http://www.massmutual.com” life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of “http://www.massmutual.com/aboutmassmutual/financialinfo/strength” financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders consistently since the 1860s. With “http://www.massmutual.com/productssolutions/individualsfamilies/producttype/lifeinsurance/wholelife” whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as “http://www.massmutual.com/productssolutions/individualsfamilies/producttype/lifeinsurance” life insurance, “http://www.massmutual.com productssolutions/individualsfamilies/producttype/disabilityincome” disability income insurance, “http://www. massmutual.com/productssolutions/individualsfamilies/producttype/longtermcare” long term care insurance, “http://www.massmutual.com/retire/plansponsors” retirement/401(k) plan services, and “http://www.massmutual.com/productssolutions/individualsfamilies/producttype/annuities” annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, Member “http://www.finra.org/” FINRA and “http://www.sipc.org/” SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.
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