Divorce Settlements Can Imperil Public Benefits

by Katherine N. Barr The prevalence of divorce for couples having a child with special needs is hotly contested. Some studies cite divorce rates up to 85 percent, while studies at the Kennedy Center at Vanderbilt University have reported significantly lower rates than the general population for couples having a child with Down syndrome. What’s […]


September 2011 - Vol. , Issue

by Katherine N. Barr

The prevalence of divorce for couples having a child with special needs is hotly contested. Some studies cite divorce rates up to 85 percent, while studies at the Kennedy Center at Vanderbilt University have reported significantly lower rates than the general population for couples having a child with Down syndrome.

What’s incontestable is that when divorce becomes an issue, financial support for a child with special needs requires careful attention. This is because child support payments made directly to the custodial parent are counted as the child’s income, with the result that eligibility for means-tested public benefits-Supplemental Security Income (SSI) and Medicaid- may be adversely affected. Since access to many programs that serve individuals with disabilities depends upon qualifying for Medicaid, there can be a particularly severe ripple effect to losing such eligibility.

This can become a significant issue regardless of whether the child has started receiving SSI or Medicaid. Often a child with disabilities will not become eligible for public benefits until the age of 18 because all household income is considered in determining eligibility until that age. If, however, the custodial parent suddenly becomes a full-time caregiver and is no longer able to work, household income drops, and eligibility may be within reach. Having SSI in addition to receiving child support may become an important source of financial security.

Unlike a typical divorce situation, in which support payments cease when the child reaches adulthood or completes college, support for a child with special needs often continues throughout life. So even if government benefits are not immediately at issue, those lifelong child support payments must be handled in a manner that will not imperil future eligibility.

The solution is to obtain a divorce decree that requires the payee of the child support payments to be the custodial parent as trustee of a self-settled special needs trust (SNT) created for the sole benefit of the child. Each situation is unique and must be evaluated in light of state laws and regulations relating to alimony, child support and Medicaid. Once the level of monthly child support has been established, the divorce lawyer should consult an attorney versed in drafting this particular type of special needs trust.


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2019-08-26T19:30:47+00:00

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