Source: https://www.snydersarno.com/attorneys/jerry-daniello/divorce-case-involving-children-with-special-needs
Timestamp: 2019-04-26 09:39:52+00:00

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Children with special needs may qualify for and receive much-needed government benefits. As matrimonial attorneys, first we need to determine if the matter involves a child with special needs. This can be achieved in an initial consultation by asking the right question: Do any of the children have special needs? However, that question alone may not suffice, as some parents may not consider their child as disabled or having “special needs.” Ask follow-up questions such as:Do any of the children have any learning disabilities or problems in school? Is there an individualized education program (IEP) in place for any child? Do any of the children have physical impairments, hearing or vision problems, psychological issues, autism spectrum disorders, etc.? Asking a variety of questions is better, since some parents may not know or think their child has special needs.
Once it has been determined the matter involves a child with special needs, the issue must be examined thoroughly.This article will discuss and explain some of the prominent government benefits, and will provide a critical analysis of the important issues.The article also will offer practical tips and considerations when dealing with a divorce involving a child with special needs.
The above is one of many considerations that surface when dealing with a divorce affecting a child with special needs.This article will examine special needs trusts and supplemental benefits trusts and explain how their use can aid in settling the divorce case while not disrupting any government benefits available to the child with special needs.
The state and federal governments offer several programs designed to assist special needs individuals, including Supplemental Security Income (SSI) and Medicaid. Special needs children may be eligible for SSI and Medicaid. As SSI and Medicaid are means-tested programs, payment of child support, obtaining private health insurance coverage, or payment of life insurance proceeds to a disabled beneficiary can disqualify the beneficiary from receiving these valuable government benefits.
The New Jersey Child Support Guidelines presume that every dollar of child support is broken down into 38 percent for fixed costs such as housing, 25 percent for controlled costs such as clothing, and 37 percent for variable costs such as transportation and food.9 Those are the same ‘basic needs’ covered by SSI. There also is an assumption that the custodial parent always has responsibility for the controlled costs, and that the variable costs move with the child.
Payment of child support the conventional way, directly to a parent, will diminish a child’s SSI benefits. This can be illustrated as follows: When determining a child’s monthly SSI benefit, program rules under the Social Security Act exclude from countable income one-third of the monthly child support payment. The remaining child support payment is subject to a $20 general income exclusion. The balance reduces the child’s monthly SSI benefit dollar for dollar. For example, if a minor child who receives SSI also receives $600 per month in child support, the $600 is reduced by one-third, to arrive at $400. The $400 figure is further reduced by the $20 general income exclusion, resulting in total countable income of $380. In this example, the child’s SSI monthly benefit would be reduced by $380 due to receipt of the $600 in monthly child support. However, with proper planning, there is a way to retain all the governmental benefits.
New Jersey has a separate program though the Division of Developmental Disabilities (DDD), which provides day and residential services to people with developmental disabilities originating prior to age 22.15 DDD requires contribution of income to an individual’s care and maintenance for residential services only; otherwise all other support services are fully subsidized by the state.
One priority of a divorcing parent of a special needs child should be to revise his or her estate plan and to update beneficiary designations on retirement accounts and insurance policies. Any gifts or bequests to a special needs child should be directed to a supplemental benefits trust rather than outright to the child or into an ordinary trust. Properly drafted trusts can hold assets, including child support, insurance proceeds and inheritance, for the disabled child’s benefit, while ensuring that such assets will not be counted as available resources that would disqualify the child from means-tested benefits such as Medicaid and SSI.
A supplemental benefits trust (sometimes called a third-party special needs trust) is an excellent vehicle to hold lifetime gifts or inheritance from parents, grandparents and other family members, life insurance benefits and retirement plan benefits. A special needs trust (also called a first-party special needs trust) is needed to hold child support payments and any other assets owned by the child. Because the supplemental benefits trust is created by and funded with the assets of a third party, upon the death of the disabled child, there is no payback provision as there is with a special needs trust.
Often, children with special needs require special therapy or extracurricular activities to help them thrive and achieve the most they can despite their disability. These ‘extras’ can be costly. The assets contributed to these trusts can be spent on extra therapies such as elective surgery, dental care, supplemental medical insurance,transportation,recreation, and other enhancements to the child’s life, such as summer camp, airline tickets for travel, sporting events, concerts, electronics/video games, sporting equipment (such as trampolines), sport shoes (such as golf/bowling shoes), bowling balls, basketballs, tennis equipment, swimming or horseback riding lessons, supplies for hobbies and interests, and grooming. Since these extras are not specifically provided for by any government benefits, as they are not ‘basic needs,’ they may be paid for with trust assets without affecting a child’s governmental benefits.
Because outright child support payments to a former spouse may trigger the disabled child’s ineligibility for means-tested programs, the matrimonial settlement agreement should direct that child support payments be made to the special needs trust. As the disabled child will be the sole beneficiary of the trust and the custodial parent will serve as trustee, the support monies will be used for the child without disqualifying him or her from benefits.Also, the matrimonial settlement agreement should memorialize the parties’ understanding that the child support paid into the trust might not be used entirely each month and could accumulate, but that such accumulation should not be used by the payer as a basis to seek reduction of child support payments in the future.
The special needs trust generally provides that the trustee has complete discretion to distribute trust income and principal to or for the sole benefit of the child to provide for his or her supplemental care and support.The trustee must give notice to Medicaid when a distribution in excess of $5,000, or representing a significant portion of trust assets, is to be made to the child or for his or her benefit.19 Upon the child’s death, the trust will terminate, and any governmental agencies which at that time have a valid right of recovery will be entitled to reimbursement from the trust proceeds for amounts expended on behalf of the child.20 To the extent the trust funds exceed any such reimbursements,or if no reimbursements are required, the trust property may be distributed pursuant to the will of the disabled individual, if he or she has the capacity to make a will. If the individual does not have the capacity to make a will, or does not have one,then any remaining funds would be distributed under the laws of intestacy of the state where the child resides at the time of his or her death.
A supplemental benefits trust, also sometimes called a third-party special needs trust, is designed to receive lifetime gifts or inheritance, including life insurance proceeds, from a divorcing parent or any other person, such as grandparents or other family members, made for the disabled child’s benefit. Gifts or inheritances the child receives outright could trigger his or her ineligibility for government benefits. Instead, gifts or inheritances made to the trust may then be paid or applied in the discretion of the trustee to or for the child’s benefit to provide for his or her supplemental care and support without jeopardizing benefits eligibility.
Life Insurance is frequently used in a matrimonial settlement agreement to secure the child support obligation of a parent in the event of that parent’s untimely death. Naming a disabled child as a beneficiary of the life insurance policy can trigger the termination of means-tested government benefits and claims for reimbursement by the agencies providing services. Accordingly, divorcing parents should have a supplemental benefits trust in place prior to finalizing the matrimonial settlement agreement, which should direct that the insurance proceeds be paid directly to that trust.In this case,the beneficiary designation for life insurance must name the trust as the life insurance beneficiary.
Divorcing parents also should execute new wills directing that any assets passing to the disabled child upon the parent’s demise be distributed to the supplemental benefits trust. Each parent should review the beneficiary designations on retirement accounts, such as individual retirement accounts (IRAs) and qualified retirement plans, to be sure the supplemental benefits trust, and not the child, is named as beneficiary of the plan.
Since a supplemental benefits trust is funded with assets owned by third parties and not assets of the child, there is no requirement that the trust pay back any government benefits on the death of the disabled beneficiary. The parent or parents creating the trust can direct that upon the disabled child’s death, any trust assets not expended on the child’s care during his or her lifetime will be paid upon his death to the child’s descendants, if any, or otherwise to the child’s siblings, other family members, or even to charities. If the divorcing parents cannot agree on the contingent beneficiaries of the supplemental benefits trust, then separate trusts should be established.
For a child whose disability is likely to preclude him or her from making important decisions upon reaching age 18, the divorcing parents should consider which parent, if not both, will become the child’s guardian. Depending on the extent of the disability, the child may require the appointment of a general or limited guardian.21 A general guardian is appointed if the individual is incapacitated, meaning without the ability to govern himself or herself, or manage his or her own affairs.22 A general guardian has the legal responsibility to make decisions regarding healthcare, welfare, finances, living situation and other reasonable areas of concern.A limited guardian is appointed if the individual is incapacitated and lacks the ability to do some,but not all,of the tasks necessary to care for himself or herself, such as manage his or her finances, or make medical decisions.23 A guardian can be a parent of a special needs child, another family member or a third party.
The divorcing parents also should nominate guardians of the disabled child in their wills, in the event either or both parents pass away while the child is a minor or an incapacitated adult.
The custodial parent should draft a letter of intent or letter of instruction for a future guardian. The letter holds no legal authority, but in the best interests of the special needs child it should list factual information about the child such as educational and medical history, location of vital records, their aspirations for the child (i.e., goals and living arrangements), and day-to-day information such as bedtime rituals. The letter also should list contact information for the child’s doctors, regularly scheduled appointments, medications, results of testing, routines and any other important healthcare or personal information about the child.
Federal law provides that children ages three to 21 with disabilities affecting their learning are entitled to special education services at no cost to parents.24 In New Jersey, local school districts are responsible for special education, with the oversight of the New Jersey Department of Education.25 Federal law provides that each child must receive a program that meets his or her unique needs, and school districts must develop a written individualized education program (IEP) that includes goals and details of services to be provided.26 A copy of the child’s IEP will provide information about the child’s diagnosis and therapies, and is crucial to the custody case.
In situations of divorce or separation, disputes may arise as to which school district is financially responsible for educating a special needs child. Such disputes can lead to a disruption in educational and busing services for the child,or may cause an issue when one school district seeks reimbursement from another school district for educational costs and services. The resolution of this issue centers on the child’s “domicile.”27 Parents can agree on the best school district to educate the child. Such an agreement should be memorialized in the matrimonial settlement agreement by use of a provision stating that the residential parent will not move out of the district absent mutual consent.
Family law attorneys need to take into consideration educational services and school district responsibility for those services when negotiating and finalizing custody and parenting time arrangements in matrimonial settlement agreements. A special needs child may need to be in the primary residential care of one parent over the other based on the school district paying for the educational services. Custody evaluators,if any,should be provided with this important information so that it may be considered as a factor in their evaluation. This may also be a factor to consider in allowing one parent to remain in the former marital home and basing support accordingly.
Often in a family with a child that has special needs, one of the parents has more information than the other regarding medical conditions, benefits information, etc. In preparation for settlement negotiations leading to the finalization of a matrimonial settlement agreement, it is important to obtain from the other party detailed information concerning the government benefits and programs for which a special needs child is eligible or is receiving benefits. The discovery process should focus on these areas prior to resolving support. Below is a list of sample discovery questions to include for cases with special needs children.
• Eligibility requirements and restrictions of the program.
• Please produce any and all documents related to the programs and benefits.
3. Itemize and identify any and all prescription and over-thecounter medications of the child, including brands and dosages,medical devices used by the child and other therapies.
4. Itemize and identify any and all sources of income or assets of the special needs child.
1. POMS SI 01120.200(G)(1)(d); POMS SI 01120.201(C)(2)(b).
3. 42 U.S.C. 1381 et seq.
4. 42 U.S.C. 1382f(a); 74 Fed. Reg. 55,614 (Oct. 29, 2009); SSA Publication No. 05-11148.
5. 42 U.S.C. 1382(a)(1); 74 Fed. Reg. 55,614 (Oct. 28, 2009).
6. 42 U.S.C. 1382b(a); 20 C.F.R. 416.1205(c); 20 C.F.R. 416.1210. UGMA accounts and §529 college savings plans in the disabled child’s name are considered assets of the child and are countable assets that could disqualify the child from meeting the means-tests of SSI and Medicaid. Be sure to ask your client if his or her special needs child has either type of account.
8. 42 U.S.C. 1396k(a); 42 C.F.R. 435.610. If the child receives $1.00 of SSI, he or she qualifies for Medicaid.
9. New Jersey Court Rules,Appendix IX-A(14)(g)(1),(2011).
10. 42 U.S.C. 1396 et seq.; N.J.S.A. 30:4D-1 to 52.
11. 74 Fed. Reg. 55,614 (Oct. 28, 2009).
12. 42 U.S.C. 1396(a)(10)(C); 42 C.F.R. 435.310(a).
14. 42 U.S.C. 402(d); 20 C.F.R. 404.350.
15. N.J.S.A. 30:6D-1 et seq.
16. 142 N.J. Super. 325, 330 (Ch. Div. 1976).
17. 42 U.S.C. § 1396p(d)(4)(A); N.J.S.A.3B:11-36;N.J.A.C.10:71- 4.11.
19. 42 U.S.C. § 1396p(d)(4)(A); N.J.S.A.3B:11-36;N.J.A.C.10:71- 4.11.
24. 20 U.S.C. 1400 et seq.
25. N.J.A.C. 6A:14-1.1 et seq.
28. Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 48, 109 S. Ct. 1597, 1608, 104 L.Ed.2d 29, 46 (1989).
29. Roxbury Bd. of Ed. v.West Milford Bd. of Ed., 283 N.J. Super. 505, 521-22 (App. Div. 1995), cert. denied, 143 N.J. 325 (1996);West Windsor Bd. of Ed. v. Delran Bd. of Ed., 361 N.J. Super. 488, 502, (App. Div. 2003), cert.denied,178 N.J.454 (2004); N.J.S.A 18A:7B-12.
30. Somerville Bd. of Ed. v. Manville Bd. of Ed., 332 N.J. Super. 6, 17 (App. Div. 2000), affirmed, 167 N.J. 55 (2001).
Jerry S. D’Aniello is a Partner of Snyder Sarno D'Aniello Maceri & da Costa LLC. A. Nichole Cipriani is an associate with Norris McLaughlin & Marcus, P.A., focusing her practice on tax, trust and estate law.

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