Solutions for maintaining family members’ public benefits in divorce proceedings.
Divorce can be a complicated, painful and expensive process. Unfortunately during the divorce process, protecting the public assistance eligibility of a child or a spouse with special needs is frequently overlooked. However, with simple planning during this critical time, you can ensure that family members with special needs will maintain eligibility for public benefits such as Supplemental Security Income (SSI) and Medicaid, leading to a better quality of life.
Child Support and Alimony
When it comes to child support or alimony with a family member receiving public benefits, extra care must be taken to ensure the support payments do not eliminate the public benefits that are currently being received. SSI and Medicaid both have strict income and asset tests.
For SSI, child support payments made by a parent will count as the child’s income. Because the payments count as income, the child’s SSI payments will be reduced or eliminated altogether. In addition to the loss of SSI, the support payments will also cause the child to lose Medicaid in most cases.
With alimony, the same holds true for a spouse who receives SSI or Medicaid. Under those programs, alimony payments will count as income to the ex-spouse resulting in a loss of SSI and Medicaid.
Preserving SSI and Medicaid
Special Needs Trusts and Pooled Special Needs Trusts may be used as a valuable tool to preserve SSI and Medicaid eligibility for children and spouses in divorce settings. Both types of Trusts are exceptions to the rules that apply to trusts. Normally, SSI and Medicaid eligibility is not possible if someone has a trust, but the beneficiaries of Special Needs Trusts and Pooled Trusts can continue to receive SSI and Medicaid with no interruption. While establishing a Special Needs or Pooled Trust does not need to be complicated, it is important to observe the technical requirements for establishing and administering these trusts to preserve public benefit compliance.
The benefit that SSI provides is never enough by itself to meet the needs of a special needs child or adult. However, the proper establishment and administration of a Special Needs or Pooled Trust during a divorce ensures that the SSI payments being received may be supplemented by child support and alimony payments without eliminating the eligibility for public benefits programs.
In addition to preserving SSI and Medicaid, the parent making child support payments is assured that the funds will be used directly for the needs of the child. This is because Special Needs Trusts and Pooled Trusts can only make payments for goods and services that directly benefit the child. It is clearly better to address the impact that child support and alimony will have on eligibility during the divorce process instead of learning afterwards that benefits have been lost or reduced. The appropriate use of a Special Needs Trust or Pooled Trust can give trust beneficiaries and their families the peace of mind that comes from knowing benefits will be preserved and that quality of life will be enhanced.