Considering the future of a special needs child in a divorce case

Medicaid eligibility requires divorcing parents to carefully consider child support arrangements

While all divorce cases involving children are bound to get complicated, parents of special needs children often have an extra burden of responsibility in deciding how the future needs of their children are going to be addressed. A recent article in Texas Lawyer looked at how child support payments to a special needs child could end up hurting that child's eligibility for Medicaid, Social Security, and other benefits without careful financial planning beforehand.

Child support and Medicaid

The reason child support can have a detrimental impact on Medicaid and Social Security is because child support is counted as a form of income if paid directly to the special needs child or that child's guardian or parent. Social Security has strict eligibility rules when it comes to personal income, and generally if a special needs person has assets in excess of $2,000 then he will not be able to qualify for benefits.

This eligibility requirement gets a bit more complicated depending on the age of the special needs child. Under the age of 22, two-thirds of child support payments are considered as income so long as the child is unmarried. After turning 22 or becoming married, all child support to a special needs child is counted as income, and if that income results in assets greater than $2,000 then the child's Medicaid and Social Security benefits could be at risk.

Supplemental Needs Trust

Divorced parents of a special needs child will want to consider setting up a Supplemental Needs Trust in order to ensure their child continues to receive Medicaid and Social Security benefits even after becoming an adult.

An SNT is meant to provide support for a special needs person for items not usually covered by Medicaid and Social Security. Distributions from the trust can be used for health and dental funds not covered by Medicaid, clothing, therapy services, medical insurance premiums, supplemental nursing care, and more. A first-party SNT can be set up by the parent, grandparent or guardian of the child, while any other family member or friend can set up a third-party SNT.

The main benefit of an SNT is that any money paid into the trust is not counted as income towards the special needs person. Therefore, divorcing parents can set up an agreement that child support payments be made into an SNT rather than to the child or the former spouse. By taking this route, parents will ensure that their child does not lose valuable support provided by Medicaid and Social Security simply because of child support payments.

Divorce cases

While not all parents will have to deal with the issues highlighted above, this article nonetheless shows why it is important for couples going through a divorce to consult with an experienced family law lawyer throughout the process.