Divorce and Special Needs Planning: When a party in a divorce has a disability or has a child with a disability

| Jan 19, 2015 | Disability, Special Needs Child |

Parents who are disabled, as well as parents of children with disabilities, have special planning needs which need to be addressed if the parties are in the midst of a divorce.

When a party in a divorce has a disability or has a child with a disability who is receiving Supplemental Security Income (SSI) and/or Medicaid or who may need these benefits in the future, the divorce agreement needs to be structured so that the divorcing spouse or child does not lose his or her eligibility for SSI, Medicaid or other needs based benefits.

SSI and Medicaid may be affected if the custodial parent receives alimony or if the custodial parent receives cash child support for the benefit of the special needs child.

In the case of minor disabled children, if the custodial parent receives alimony in the form of a monthly cash payment, SSI will count the amount of the alimony received in determining the allowable family income allowance.  If the alimony exceeds the family income allowance, which is based on a sliding scale fee, the child may be ineligible for SSI.  Once the child reaches the age of 18, cash alimony to the custodial parent is no longer countable income for SSI purposes.  That is because income received by a parent is no longer available to a disabled child who is 18 years or older.

Child support is treated differently than alimony.  Assuming the family income is below the family income allowance, prior to the age of 18, child support will reduce the child’s SSI check by one third.  However, once the child is 18, the receipt of cash child support will result in a dollar for dollar loss of SSI.  In many cases, child support disqualifies the adult disabled child from being eligible for SSI and Medicaid.  This is because child support is treated as “unearned income” and no longer counted as in-kind support once the child reached the age of 18.  Under SSI rules, unearned income has a $20 limit.  Anything in excess of $20 results in a dollar for dollar loss in SSI.

Alimony paid to a spouse who is disabled also counts as unearned income and may place the disabled spouse in a worse off position if critically needed government benefits are reduced or lost as a result of the alimony.  

Under current regulations, SSI will not count the value of alimony received as unearned income if it is not received in the form of a cash payment. The non-custodial spouse or the non-disabled spouse could agree to pay the amount each month in the form of goods and service.  

If the goods and services received include basic shelter expenses such as rent, mortgage, taxes or utilities, this will result in a one third loss of SSI, but at least the disabled spouse or parent of the special needs child will continue to receive SSI even though in a reduced amount.

Goods and services such as after school child care, additional therapies, private school tuition, automobile expenses (car payments, insurance, and gas), housekeeping services, telephone, cable tv, internet are not counted by SSI as income.

Another option for parties who are disabled or who have a children who are disabled is to use a qualified special needs trust to receive funds that would ordinarily be distributed to the disabled spouse or to the custodial parent.

For those for whom it is appropriate, a qualified special needs trust, may allow much greater flexibility in structuring a divorce settlement agreement so that the spouse with a disability or custodial parent of a special needs child can better protect assets and income.

The Law Offices of Renee Lazar is quick to respond to your needs with the knowledge necessary to find solutions to your legal concerns.

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