With many people divorcing later in life, establishing arrangements for elder care has become increasingly important. But what about situations where divorcing couples have special needs children?
Our guest, Linda Anderson, a certified elder law attorney, will help us understand how to navigate these issues. Linda is one of approximately 50 certified elder law attorneys in the Commonwealth of Pennsylvania. Her practice, Anderson Elder Law, specializes in the legal issues affecting elders, the disabled, and their families. We are thrilled to have her as a guest for this podcast to help us share the information necessary for families with special needs children who are divorcing to do so with clarity and confidence.
The statistics are not clear on whether the risk of divorce increases in families with special needs children. One report states the while the average divorce rate is 50%, the divorce rate for couples with special needs children is 85%.
The most common struggle for these couples facing divorce is how to meet the requirements of their special needs children, now and in the future.
Your Team of Experts
You are likely working with your family attorney as you begin divorce proceedings. You want to ensure that the family law attorney is bringing in a special needs attorney, who has the expertise as it relates to special needs planning and the role of public benefits, and a financial planner, to ensure the structuring of the estate plan for the child is established to determine the rest of the financial settlements.
There is an overlap between understanding the public benefits for both seniors and special needs children and the uses of trusts in both cases. It is a body of knowledge that applies not just to people over a certain age but anyone of any age struggling to maintain control of their medical, legal, and financial issues. When caring for the welfare of special needs children – in a divorce situation or not – there must be an understanding of the public entitlements and benefits.
Educate Yourself about Public Benefits
SSI (Supplemental Security Income) and Medicaid: these are means-tested; they are determined based on income and assets.
SSD (Social Security Disability) and Medicare: these benefits are not means-tested.
Let’s take the example of applying for SSI for a 12-year-old special needs child in a situation where the parents are not divorcing. How do parental assets/income affect eligibility? They may choose not to apply for SSI because their resources might exceed eligibility. That does not mean, however, that they will not be eligible for Medicaid. So, it is not a mistake to not apply for SSI.
If the child is on SSI when the parents choose to divorce, there are two important issues to consider:
SSI and Medicaid are based on income/assets, so when child support enters the picture, it will be considered income. When the custodial parent receives alimony, that is considered income.
In most cases, parents choose not to rely on SSI until the child is 18. For a special needs child, child support may never end and will be held dollar-for-dollar against the SSI, in some cases eliminating that payment. The solution? Parents could seek out in-kind distributions or alternative payments, but most will establish a first-party, self-settled Special Needs Trust, aka a D4A trust. That way, the support payments are placed in this trust, and the SSI eligibility is not harmed. Know, however, that with a first-party trust, when the child dies, Medicaid gets paid back.
When parents proactively set up a third-party trust for their special needs child, there is no payback to Medicaid. In this type of trust, they need to make sure the beneficiary designations are drafted properly. The TRUST is the designated beneficiary.
Establishing a first-party trust is fine when the parents remain married. A third-party trust is the better option should the parents divorce.
The Special Needs Alliance (www. specialneedsalliance.org) provides a free trustee guide to help fully understand how to administer special needs trusts.
Linda Anderson’s firm is located in Media, PA and serves the five-county area. Visit AndersonElderLaw.com or call 610-566-4700 for more information.
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