It can be challenging to plan ahead for a child with special needs. One additional challenge faced by divorced parents of a special needs child is how to make sure that child support payments don’t impair the child’s eligibility for Supplemental Security Income (SSI) benefits.
Supplemental Security Income — and the Medicaid entitlement that goes along with it — is a needs-based governmental program for the disabled. As a minor, your disabled child may not be eligible for SSI and Medicaid while your marriage is intact due to the way that a portion of the parent’s income is “deemed” to the child. However, divorce often changes that situation. In many cases, the parent who takes custody of the disabled child is unable to work full time due to the child’s needs. With the other parent no longer in the household, that reduces the child’s deemed income considerably.
However, child support can become an issue. While the child is a minor, child support isn’t considered income paid to the custodial parent but income paid to the child. Supplemental Security Income will exclude one-third of the payment, but the rest is counted against the child’s eligibility for benefits. For a lot of parents and their disabled children, this is a huge burden since it can reduce or eliminate the child’s eligibility for important programs.
Fortunately, there are ways to legally circumvent the issue. One of the best methods that parents can use to maintain their disabled child’s eligibility for SSI, Medicaid and similar programs (including state-assisted work programs) is to create a special needs trust on the child’s behalf and have the paying parent pay the child support directly to the trust.
By setting up a special needs trust during the divorce, you set the stage for your disabled child’s future. In addition to capturing the child support payments, the special needs trust can be used to hold other assets that are left for the child’s care through gifts from grandparents, wills and other sources of income. It can also continue to collect any support payments that are paid to the child after the child turns 18 years of age.
If you’re going through a divorce and have a disabled child, consider the possibility of a special needs trust in order to fully protect your child’s interests.