Couple of recent legislative changes were passed regarding SBP.

Beneficiary change from “Former Spouse” to current “Spouse”

If you were required to designate a former spouse as your SBP beneficiary due to a divorce court order, this may apply to you.

Previously, if a former spouse was designated as the beneficiary of the Service retiree’s SBP because of a divorce court order and the former spouse died, the SBP “died” with the former spouse. The SBP coverage was cancelled and the Service retiree permanently lost the SBP for future use.

Now if the former spouse dies as the beneficiary of the retiree’s SBP, the retiree can re-designate a current or future spouse as the SBP beneficiary.

Talk to your pay agency that administers SBP for details.

SBP can now pay a Special Needs Trust (SNT)

Previously, the SBP survivor annuity could only pay a person. This caused problems for retirees who had an incapacitated child as their SBP beneficiary.

You see, the SBP survivor income would count as income against financial need requirements that determine eligibility for state and federal assistance. SBP income would disqualify the beneficiary for critical state and federal assistance while at the same time the SBP income wouldn’t be enough to properly care for the child without the assistance.

Now, the SBP can pay a SNT established for an incapacitated child instead of a person. The new law only allows a SNT for an incapacitated child; no other beneficiaries like spouses.

The SNT negates SBP income from counting in the financial need requirements for state and federal assistance. The catch is that the SNT document must stipulate that residual assets in the SNT upon the beneficiary’s death are used to reimburse the governments involved for their extra costs incurred while the child was alive and receiving assistance.

Talk to your pay agency that administers SBP for details.