How to Plan for a Special Needs Spouse or Child During a Divorce

A number of studies have shown that the probability of a divorce is substantially higher in a family where a spouse or a child has special needs. That being said, many factors must be taken into consideration when going through a divorce, particularly what sort of affect spousal support and/or child support may have on the disabled spouse’s or disabled child’s eligibility for government benefits.

In a family where a spouse or a child has a disability and the parties choose to enter into a settlement agreement, the agreement must be structured in such a way that takes into account the current or potential need for government benefits. Otherwise, the disabled spouse or disabled child may find himself in a worse financial position than previously realized.

In awarding or denying government benefits, based on need, to a disabled person, the government takes into account the person’s income. When a spouse in a divorce action contracts to receive spousal support, the government counts that support as unearned income, potentially rendering the spouse ineligible for benefits like Medicaid, SSI, in home or nursing home care. Such ineligibility could certainly be devastating for a spouse who is unable to be self-supporting without that government assistance.

When it comes to a disabled child who is caught in the middle of his parents’ divorce, any child support payments received on behalf of the child under the age of 18 will actually reduce his SSI benefits by as much as one-third. When the child reaches the age of majority, the government then counts the child support as unearned income and reduces the child’s SSI check dollar for dollar for the amount of child support. If the child support is greater than the maximum allowable SSI payment, the child loses his eligibility for SSI and may even lose eligibility for Medicaid. Medicaid provides an adult disabled child with adult services and as such, is imperative for an adult child who ages out of the public school system. Losing eligibility for Medicaid after the child ages out of the public school system is disastrous because without it, the adult child will have no way of receiving necessary services.

What are some ways to work around this problem? As far as child support goes, the parties’ agreement can stipulate that child support will take the form of direct payment for things like child care, therapy, private school tuition, additional personal care, cable TV, and the like. Another alternative, is for the settlement agreement to provide for the set-up of a Qualified Special Needs Trust. Establishing a Qualified Special Needs Trust requires that the person who will benefit from the trust meets the definition of “disabled” pursuant to 42 U.S.C. Sec. 1382(a)(3). In order to draft a Qualified Special Needs Trust, an attorney must have knowledge of trust law, tax law, Medicaid and Guardianship Law.