Depending on which statistics you believe, between 40 and 50 percent of American marriages will end in divorce. While there is no such thing as a “typical” divorce, a divorcing couple that has a child with special needs faces an even more complicated series of decisions and choices than most.
Family law attorneys, while often well trained in the complicated and emotionally charged world of divorce settlement, may not have all of the answers for the divorcing parents of a child with special needs. In these cases, it is important to meet with an attorney who has a background in special needs planning to discuss the best options. One important consideration is the impact child support payments will have on a child’s eligibility for Supplemental Security Income (SSI).
Divorce attorneys typically focus on obtaining the largest possible child support award from an absent parent, since this is typically in the child’s best interest. However, if a child receives SSI, child support payments count as unearned income and reduce a child’s SSI benefit on a dollar-for-dollar basis. If the SSI award is reduced to zero, a child will lose SSI as well as the important Medicaid benefits that come with it. There is an important caveat to this rule, however: Until a child with special needs becomes an adult, one-third of a child support payment from an absent parent is disregarded for purposes of SSI. (A special needs child is considered an adult either when he turns 18 or up to when he turns 22 if he is still in school and not considered a head of household. However, should the parent move in with the child, this one-third reduction disappears.)
What does all of this mean for a parent of a child with special needs? In short, you may need your family law attorney to work with an estate planning attorney who regularly works with special needs families to ensure your child is able to receive child support and still maintain his or her SSI and Medicaid.
One option to achieve this result is the creation of a first party special needs trust to hold the child support payments. Such a trust is designed to supplement, not take the place of, government benefits. If you establish a special needs trust, funds in that trust cannot be paid directly to a special needs child, but must be paid to third parties for goods and services for that person’s benefit. The funds can be used for a wide variety of things, for instance, out of pocket medical and dental expenses, education, rent or utility payments, specialized equipment, vacations, and entertainment.
In planning with a special needs trust, you can also leave more of your assets to a special needs child with more need than others who may inherit from you. If no planning is in place, those who inherit from you will likely share assets equally, and the special needs person may be left with insufficient assets for their care. You should also consider options like life insurance to provide additional resources for the special needs child, naming the trust as beneficiary of a life insurance policy.
Finally, when the parents of a special needs child divorce, they should update the beneficiary designations on all of their retirement plans, annuities, and life insurance policies. This is an often overlooked item that can wreak havoc if the special needs child receives this money outside of a special needs trust.
As you can see, when planning for divorce with a special needs child in mind is no small task. Ensuring that your child is provided for, but not disqualified from any benefits can be a tricky line to walk. Obtaining help from a qualified estate or special needs planning attorney can make the process less stressful knowing that they understand how to preserve the most for your child and can craft a plan for whatever other situations a divorce might bring forward.
The information provided is not intended to be legal advice and does not constitute any attorney/client relationship. You should consult with an attorney for individual advice regarding your own situation.
Ms. Melancon is an attorney with Legacy Estate & Elder Law of Louisiana, LLC with offices in Baton Rouge and Lake Charles, LA. The primary focus of her practice is estate planning, probate, special needs planning, and elder law. For more information or to attend an upcoming estate planning seminar, call her office at (225) 744-0027
