The Effect of Divorce on Special Needs Planning

While the process of obtaining a divorce decree is rarely simple, the ordeal can become much more complicated when an involved family member, such as a spouse or child, has special needs.  Further, many attorneys who specialize in family law may not be aware of the estate planning strategies and protective measures that may be available to the family – a situation which can produce devastating results.

Download PDFpdf-icon

As with many areas of law, each special needs planning situation varies based on the facts and circumstances of the case.  However, when any special needs individual is involved, divorce negotiations and proceedings should always include planning for the well-being of such person.  The following is a list of examples of situations that can arise from such a case:

  • When a divorce involves a minor special needs child, spousal support payments made to the primary custodial parent and child support payments made to a child can be included in the total income computation of the household, which can result in ineligibility for government benefits (such as Social Security Income) which may have otherwise been available to the child.  Further, if benefits are received and the income is later disclosed, the family may be required to reimburse the government for past benefits received – most of which may have already been spent for support needs.
  • An award of spousal support directly payable to a spouse with special needs could result in increasing the recipient spouse’s income in excess of the limitations required for certain government benefits (such as Medicaid), thereby disqualifying the special needs spouse from continued eligibility.
  • A parent may still be required to provide support for an adult special needs child, which can reduce certain benefits on a dollar-for-dollar basis.  This can be avoided if the payments are made to approved recipients on behalf of the special needs adult child or to a special needs trust.
  • If a family with a special needs member properly plans during a divorce, the non-special needs person can agree to make support payments directly to certain creditors so that the direct receipt of the funds by the special needs person does not become ineligible for government benefits.  For example, in lieu of a cash payment, payments can be made directly to a caregiver.  (However, the paying spouse would not be able to deduct such payments, as he or she would when making direct spousal support payments – an issue which may reduce the agreed upon support payment amount.)
  • In cases where the divorcing parties are not amicable, one party can request that the court direct payments to be made in a manner that does not create ineligibility for benefits on the part of the special needs individual (such as establishing a third-party special needs trust).

A divorce settlement involving a special needs person should not be executed without consulting an attorney specializing in such areas.  When properly planned, potentially upsetting results can be avoided in favor of a well-crafted plan that benefits the family, and provides for the special needs person, for years to come.