Parents of a child with special needs know that they must plan for the child’s care and support way into the future. This is especially so if the individual is unlikely ever to be able to earn an income.
But what happens in cases of divorce? How does the issue of child support come into play, now and in the future, when the child is no longer a minor? Before you start the separation process, be sure to understand the answers to the following key questions.
What is the role of child support? Any divorce involving children must take their needs into account. Usually, the noncustodial parent is required to provide money to the parent who has custody of the children. The purpose of this support is to provide the same degree of financial security that the children had prior to their parents’ separation.
How long does child support last for a child with special needs? In most cases, child support ends when children reach the age of majority and can earn their own living. But for those who will never be able to earn an income due to a permanent disability, support obligations can continue into the future, beyond childhood.
Although family law varies from state to state, in most cases courts will recognize the parents’ obligation to support their special needs child even in the event of a divorce. This extends beyond childhood for those who require money for their care and support throughout their lives, and a portion of this funding is supplied by the noncustodial parent per the original divorce settlement.
Are there exceptions to child support once the person with special needs becomes an adult? Yes, depending on when the disability occurred. If the person became disabled as an adult, no child support payment would apply as part of a divorce settlement.
Courts will also look at the financial resources of the child with special needs. If these are sufficient to pay for that person’s care and living expenses into the future, the noncustodial parent may not face support obligations, unless the assets are all held in a special needs trust.
How would a special needs trust affect child support requirements? Courts generally don’t take income and assets in a special needs trust into account when determining the amount of child support to award the custodial parent.
Will ongoing child support affect the individual’s eligibility for Supplemental Security Income (SSI)? Because access to SSI depends on a beneficiary's income and resources, even small increases in income can cause a reduction or loss of SSI benefits. Unfortunately, when an SSI beneficiary’s parent is ordered to pay child support, those payments can end up ruining the beneficiary’s access to government benefits. To protect against this outcome, it may make sense to create a special needs trust for the child’s benefit. The court can then order the non-custodial parent to make support payments directly into the special needs trust. The trust will shelter the income and allow the beneficiary to retain SSI benefits, and, in many cases, the support payments can be retained in the trust if not immediately used.
How might estate planning figure in? In many cases, courts will require that the noncustodial parent provide for the special needs child in his or her will.
If you are in the beginning stages of separation or divorce, and you have a child with special needs, it is important to plan long into the future. Make a point to fully understand these key questions as you talk to your special needs planner and your divorce attorney.
Like millions of other Americans, recipients of Medicaid and Supplemental Security Income (SSI) have received or should soon receive a one-time $1,200 coronavirus relief payments from the federal government. And, if Congress can come to an agreement, a second round of economic impact payments will be coming. (If you haven’t received your payment and did not file a 2019 tax return, click here to access the IRS’s page for non-filers.)
Although this money does not immediately affect eligibility for means-tested programs like Medicaid and SSI, if the money is not spent within 12 months it will count as an asset and could affect eligibility.
One solution is to put the funds in an Achieving a Better Life Experience (ABLE) account, where it can remain without affecting eligibility for programs like Medicaid and SSI. Authorized by Congress in 2014, ABLE accounts are a tax-advantaged way to put money aside for dependents with disabilities. Funds in the accounts can be spent on a wide range of disability-related expenses without compromising eligibility for government benefits. Unlike a special needs trust, an ABLE account can be managed and controlled by the beneficiary.
Not everyone with a disability can qualify for an ABLE account, however. Eligibility is limited to people who developed their disability before age 26. Also, total contributions to ABLE accounts are limited to $15,000 per year, although beneficiaries who work can make ABLE contributions above the $15,000 annual cap from their own income up to the Federal Poverty Level. If the value of the account exceeds $100,000, any SSI income is suspended until the account dips below that limit. These savings plans may be used for a broad array of products and services related to the eligible individual’s disability.
For help opening or investing in an ABLE account, please give us a call.
Among the challenges of raising a child with special needs is figuring out how to provide for that child once you’re gone. If the child will never be able to earn a living, how can you determine how much of your own money to set aside for her care and support, and for the rest of her life?
One way to answer this question is through a free online calculator launched this summer by Harty Financial, a Boston-area financial services firm that focuses on planning for families of special needs children. Utilizing a three-minute questionnaire, the calculator is designed to guide parents through the estate planning process by assessing the cost of everything their child with special needs is likely to need for the duration of his life, anything from medical assistance to food and shelter, clothing, physical therapy, education, and entertainment.
Planning the long-term future of a child with special needs can be the source of enormous stress for parents embarking on the estate planning process, the company’s principals note. And while the calculator is not designed to replace one-on-one consultation with an experienced special needs planner, it can help answer some basic questions and move the process forward, they say.
What we think is really helpful about this calculator,” says Harty Financial co-founder Brendan Harty, “is that it utilizes our own observations about actual costs that parents face, such as housing and lifestyle preferences, rather than asking parents to supply those numbers themselves.”
The calculator, available at www.specialneedsmap.com, asks the user a series of questions about the child’s needs as well as the parents’ expected longevity and financial profile.
Though there is no substitute for planning with a family on an individual basis, we believe that this calculator has the potential to be transformative to the millions of Americans with a child with special needs,” says Caleb Harty, Brendan’s brother and a co-founder of the firm. “Our objective is to help parents check off the peace-of-mind box, and getting an idea of how much money parents may need to leave behind is one step toward that goal.”
Once the parents of a child with special needs have a clearer idea of this figure, they can begin their planning. They can set money aside in a special needs trust, for example, or apply for life insurance to make sure there will be adequate funds should they die unexpectedly. They may want to make decisions about ongoing care and housing for their child with special needs based on what they can afford now and into the future.