Divorce Article

WHEN PARENTS OF CHILDREN WITH SPECIAL NEEDS DIVORCE

Few people question the commonly reported statistic that half of marriages in America end in divorce. People react differently to the numerous challenges and expenses that a child's special needs may bring to a marriage. While the situation may bring the parents closer together, many special needs organizations report that it is more likely to cause excess strain in the marital relationship.  The Wall Street Journal reported in November 2008 on recent research suggesting that divorce rates of couples raising a child with special needs are significantly higher than the national average.  Some non-profit organizations have reported divorce rates as high as 75 to 85 percent for this population. A 2008 study by the University of Buffalo cited by the Wall Street Journal which reported that parents of a child with special needs are nearly twice as likely to divorce before the child reaches 8 years old as a couple with a  child without special needs. 

In calculating child support the divorce settlement agreement usually provides specific details regarding how each parent will share in the financial responsibility for the child's care and education until the time the child reaches the age of majority or finishes college. In the case of a child with special needs, however, Illinois law provides for the ability to continue the support obligation of both the custodial and non-custodial parent for the lifetime of the child. In Illinois, we have a specific statute on this topic.  The statute is found at 750 ILCS 5/513 (P.A. 91-204, eff. 1-1-00; 92-876, eff. 6-1-03).  The Illinois law provides that the divorce court “may” award sums of money out of the property and income of either or both parties, or even the estate of a deceased parent, for the support of the child or children of the parties who have attained the age of 18, when the child is “mentally or physically disabled and not otherwise emancipated”.

Unfortunately, such child support payments will end up reducing or eliminating the child’s SSI benefit as well as Medicaid, unless the Court Order is written in a specific manner.

Divorce attorneys do not always know how child support payments made directly to a custodial parent interact with "means-tested" government benefit programs like SSI and Medicaid, or that the unintended consequences can be avoided.  This article discusses how child support payments for a child of any age with special needs should be handled in order to maintain existing or future eligibility for SSI and Medicaid for a child with special needs.

Government benefits can be protected if the divorce decree directs the non-custodial parent to make child support payments to a special needs trust for the sole benefit of that child.  The version of special needs trust that must be used under the Social Security Administration rules, is NOT the form of special needs trust used for leaving gifts and inheritances for the child.  That is, it is NOT the usual special needs trust that parents may have as part of their estate plan.  This trust, as of January 2009, must be what is referred to as a sole benefit, irrevocable, self-settled, also known as “pay-back”, or OBRA, special needs trust.   Support payments to such a special needs trust will not displace SSI, or jeopardize Medicaid.  The type of special needs trust that must be used to receive the child support payments must meet the requirements of Section 42 U.S.C. §1396p(d)(4)(A) of the Social Security Act.  This is because child support is viewed by Social Security as belonging to the child.  Among other features, the trust must provide that Medicaid is paid back at the child's death from any funds remaining.  As a practical matter, since the Trustee would likely spend all of the child support payments for the child's benefit on a regular basis, there is little chance that much would be left in the special needs trust when the child passes away. 

For a child on SSI who is under the age of 18, Social Security regulations specify that two-thirds (2/3) of a child support payment is "countable income," which causes a dollar-for-dollar reduction in the SSI benefit.  For a child age 18 or older, however, one hundred percent (100%) minus $20.00 of the child support payment counts as a reduction against SSI.  In other words, without a “self-settled” pay-back special needs trust, once child support payments begin, SSI will be reduced if not eliminated and Medicaid could also be at risk.

Social Security regulations require that all changes in financial circumstances of a person receiving SSI must be promptly reported by the person who receives the SSI check.  SSI recovers overpayments made in error. When a person with special needs is not  (or no longer) eligible for the full SSI amount he or she has already received, the overpayment must be repaid (sometimes by reduction of the future monthly benefits). 

Most children with special needs will not qualify for SSI or Medicaid if they are under age 18 because of the parents’ assets and income.  In that case it may be advisable to wait on having support payments assigned to a pay-back special needs trust until the child is 18.  Upon reaching age 18, the child may likely qualify for SSI when the income and assets of the parents no longer count.

Some children below age 18 do qualify for SSI, however.  The child may have a disability that prevents the custodial parent from full-time employment, so that earnings in the post-divorce, single-parent household are low enough for the child to qualify. 

It is far better to address these issues during the divorce process, rather than after discovering that SSI has been reduced or lost.  After the parents agree upon (or the court determines) the monthly contribution by the non-custodial parent for the child with special needs, the divorce lawyer(s) should contact an attorney with experience in drafting the appropriate special needs trust.  Again, this type of special needs trust differs from the more traditional type of special needs trust that a parent would normally establish to receive an inheritance intended for a child with a disability.  The divorce decree must direct the non-custodial parent to make a monthly payment for the child's "special needs" each month to the Trustee of the pay-back Special Needs Trust prepared for this purpose.  The custodial parent may serve as Trustee. 

It is important that the divorce lawyers and the court fashion the child support order in a manner to provide a specific dollar amount that will be paid each month for the child with special needs, not a formula tied to SSI, and should not be combined with the amount of child support to be paid for other children.  That is, it must be an allocated amount to that child, and not an unallocated amount for that child and others.  The Court Order must separately state the portion of support that is to be paid for the benefit of the child who has a mental or physical disability.  Further, the Court Order must require that all such payments of support be paid irrevocably, directly to the established “Self-Settled”, “d4A”, “1st Party”, “OBRA 93”, Irrevocable Discretionary Special Needs Trust, containing “pay back” provisions, for that child’s sole benefit, in accordance with 760 ILCS 5/15.1, to be administered in accordance with, and subject to the express limitations, requirements, and provisions of such Trust.  This is necessary in order for such support payments to supplement, and not supplant government benefits otherwise available to such child, such as Supplemental Security Income (SSI) and Medicaid.

Many divorce lawyers and judges do not know that SSI is a "means-tested" program and the impact of child support payments. Even if they know SSI is means-tested, rarely will they understand the complexities for the SSI and Medicaid programs and keep up-to-date on changes in these laws and policies governing eligibility for those programs. Thus, it is important to consult with an attorney experienced in the interrelationship of divorce law with special needs planning and means-tested public benefits eligibility requirements.  The regulations referenced in this article were added in February 2009 to Social Security's POMS (Program Operating Manual System) and can be found at POMS SI 01120.200 G.1.d., and e.