“But What About my Dogs and Cats?” Incorporating Concerns for Pets in an Estate Plan

Persons who are disabled, as well as parents of children with
disabilities, have special planning needs which need to be
addressed if the parties are in the midst of a divorce.
When a party in a divorce action has a disability or has a child
with a disability who is receiving Supplemental Security Income
(SSI) and/ or Medicaid or who may need these benefits in the
future, the divorce agreement needs to be structured so that the
divorcing spouse or child does not lose his or her eligibility for
SSI, Medicaid or other needs based benefits. SSI and Medicaid
may be affected if the custodial parent receives alimony or if the
custodial parent receives cash child support for the benefit of the
special needs child. In the case of a spouse who is disabled, he
or she will want to be sure that the receipt of alimony or split in
assets does not disqualify him or her from continued receipt of
needs based benefits.
In the case of minor disabled children, if the custodial parent
receives alimony in the form of a monthly cash payment, SSI will
count the amount of the alimony received in determining the
allowable family income allowance. If the alimony exceeds the
family income allowance, which is based on a sliding scale fee,
the child may be ineligible for SSI. Once the child reaches the age
of 18, cash alimony to the custodial parent is no longer countable
income for SSI purposes. That is because income received by a
parent is no longer deemed as available to a disabled child who is
18 years or older.
Child support is treated differently than alimony. Assuming the
family income is below the family income allowance, prior to
the age of 18, child support will merely reduce the child’s SSI
check by one third. However once the child is 18, the receipt of
cash child support will result in a dollar for dollar loss of SSI. In
many cases, child support disqualifies the adult disabled child
from being eligible for SSI and Medicaid. This is because child
support is treated as ‘unearned income’ and no longer counted as
in-kind support once the child reaches the age of 18. Under SSI
rules, unearned income has a $20 limit. Anything in excess of $20
results in a dollar for dollar loss in SSI.
Alimony paid to a spouse who is disabled also counts as unearned
income and may place the spouse who is disabled in a worse off
position if critically needed government benefits are reduced or
lost as a result of the alimony. As in the case of a special needs
child who is over the age of 18, alimony for a disabled spouse
will result in a dollar for dollar loss of SSI and may keep the party
from being eligible for either SSI or Medicaid.
Under current regulations, SSI will not count the value of alimony
received as unearned income if it is not received in the form of
a cash payment. The non custodial spouse or the non disabled
spouse could agree to pay the same amount each month in the
form of goods and services. If the goods or services received
include basic shelter expenses such as rent, mortgage, taxes, or
utilities, this will result in a one third loss of SSI but at least the
disabled spouse or parent of special needs child will continue to
receive SSI even though in a reduced amount. This is because if
the alimony is used toward basic living expenses, it is counted
as in-kind income which, as stated above, results in a loss of one
third of the SSI monthly payment.
Goods and services such as after school child care, additional
therapies, private school tuition, automobile expenses (car
payments, insurance, and gas), housekeeping services, telephone,
cable tv, internet, etc. are not counted by SSI as income.
Another option for parties who are disabled or who have children
who are disabled is to use a qualified special needs trust to receive
funds that would ordinarily be distributed outright to the disabled
spouse or to the custodial parent. A properly drafted special needs
trust may allow, in some circumstances, for a party in a divorce
who is disabled to receive a split of assets and/or alimony income
as long as the income and assets are placed in a trust. This type
of trust is different than the typical 3rd party special needs trust
which is often used to protect an inheritance or gift for a disabled
individual. Not all persons with disabilities can use these type of
qualified special needs trust. For those for whom it is appropriate,
it may allow much greater flexibility in structuring a divorce
settlement agreement so that the spouse with a disability or
custodial parent of a special needs child can better protect assets
and income.
Divorce And Special Needs Planning:
Issues When a Party In a Divorce Has a Disability
or Has a Child With a Disability
By Theresa M. Varnet, M.S.W., J.D.
RESPONSIVE SOLUTIONS
This material is intended to offer general information to clients and potential clients of the firm, which information is current to the best of our knowledge on the date
indicated below. The information is general and should not be treated as specific legal advice applicable to a particular situation. Fletcher Tilton PC assumes no responsibility
for any individual’s reliance on the information disseminated unless, of course, that reliance is as a result of the firm’s specific recommendation made to a client as part of our
representation of the client. Please note that changes in the law occur and that information contained herein may need to be reverified from time to time to ensure it is still
current. This information was last updated September 2007.The average family law attorney is not likely to be familiar
with qualified special needs trusts. Lawyers drafting these
trusts require knowledge in trust law, tax law, Medicaid law
and guardianship law. My recommendation is that all parties
in a divorce who are challenged with a disability or who have a
child with a disability ask their family law attorney to consult an
attorney who is familiar with this special type of special needs
trust. If you cannot find an attorney in your community familiar
with qualified special needs trusts, you can contact the Arc of
MA (781-891-6270) for a list of attorneys who have a working
knowledge of special needs planning in divorce situations.
RESPONSIVE SOLUTIONS
Two simple words that explain our commitment to you. Being
responsive is a critical element in building a strong attorney-client
relationship. Whether you are a new or existing client, we’ll be
quick to respond to your needs with the knowledge necessary to
find solutions to your legal concerns.
WE HAVE ANSWERS
To learn how we can assist, contact our Special Needs Practice
Group Leader Frederick M. Misilo, Jr. at 508.459.8059 or
fmisilo@fletchertilton.com.