What Divorcing Parents of Special Needs Children Need To Know

Divorcing parents of minor children are faced with many hard decisions that must be addressed while separating. These considerations include resolving custody, parenting time and support for their children, which are often much harder and more emotionally charged than the issues involving dividing assets and calculating financial support between spouses. When there’s a child with special needs in the family, there are additional decisions to be made surrounding their continued care, often well past the time that other children would be deemed to be emancipated, and the finances surrounding the support they’re receiving. Special needs children are best served when their parents fully address these issues during the divorce proceeding and are able to focus on the best interests of the children, and the divorcing parents are best served by attorneys who fully understand the issues and can offer practical solutions based on the specific circumstances.

Child Support

In any divorce involving children, the parties need to resolve custody, which involves both the legal and physical sharing of their children. In most cases, parties will agree or a court will order that the parties share joint legal custody of their children. Joint legal custody generally means joint decision making for all major decisions in a child’s life. These major decisions typically fall into three larger categories, which are the child’s: (1) health, (2) education, and (3) well being. For example, both parties would need to participate in the decision-making process and agree on whether the child will attend public or private school or whether the child will have their tonsils removed on a nonemergency basis. If parents are unable to agree on these decisions, they can enlist the help of attorneys, mediators or the court, who will help decide these issues with or for them. For parents of a child with special needs these decisions may involve the continuation of certain therapies or treatments or their continued care if they’re no longer able to reside at home.

In addition to custody, parents need to develop and agree on a parenting time schedule whereby they’ll share time with their child once they no longer are an intact family unit. There’s no cookie cutter model for these time sharing arrangements but rather the best interests of the child should be the focal point in determining what makes sense for that specific family. A child’s special needs will be considered in these decisions as the issue of accessibility of each parent’s new home may be a factor if the child is in a wheelchair or walks with assistance or if their special needs affects their ability to transfer between locations.

A family with a special needs child needs to consider where the child will continue to attend school after the family is no longer intact. If the child is already in a public school setting, the family may have already had to go through the process of implementing an Individualized Education Program, more commonly known as an IEP, for a child. An IEP is a program or plan that’s established for a child with a disability that enables them to receive tailored instruction and services as a result of their disability. This includes services to help assist the child and monitor benchmarks and progress to ensure that the services provided are meeting the child’s needs and concrete objectives to allow for confirmation that the IEP is in fact being implemented by a school district. Many districts have reputations for providing better services for certain disabilities that may strongly favor keeping a child in that district over another. After a divorce, it’s important that each parent explicitly preserves their ability to attend any and all educational meetings and receive their child’s educational records. Schools will often cooperate in producing duplicate records so each parent receives their own copy, however, if not, a provision should be added into the parent’s settlement agreement that provides which parent will receive the records and create on obligation for that parent to duplicate and provide to the other parent a copy of what’s received by them.

If, after the intact family dissolves and the parents no longer reside in the same district as they did when they were an intact family, it’s important to decide in which district the child will continue their education. Assuming the parents have agreed to joint decision making for educational purposes, they’ll need to agree and designate which parent’s address will be used for educational purposes. If a child with special needs moves to another district, the new district can take the prior district’s IEP under advisement, but the new district will have to develop and implement a new IEP. If there’s no agreement as to which district a child will attend, state law would determine in which school district the child will be educated, which may or may not be more favorable to the child’s special needs.[1]

On the dissolution of an intact family, one parent will typically pay child support to the other parent for the benefit of any children born to the parents during their relationship. The amount and way in which child support is calculated varies by state, but factors such as each parent’s income, the number of overnights spent with each parent and any spousal support being paid by one parent to the other are generally considered. Child support payments are intended to only cover certain expenses incurred on behalf of children. Therefore, in addition to child support, it’s common for there to be additional expenses shared by the parents. A special needs child often will have reoccurring expenses for therapies, tutoring, additional appointments with specialists or medications that need to be shared by the parents.

The payment of child support ceases on the emancipation of a child. Emancipation is generally tied to the earliest occurring of several larger life milestones for a child, for example graduation from college or a trade school, graduation for high school and obtaining full time employment instead of going to college or a trade school, enlisting in the Armed Forces or marriage of the child.[2] For some special needs children, their limitations may never allow them to achieve any of the traditional milestones, and instead, parents may agree that due to these limitations they’ll have to be continue to financially support their child indefinitely.

In a situation in which a child’s limitations will result in the need for indefinite financial support, the necessity for government benefits becomes a crucial next step. When a child turns 18, certain other issues are triggered as a child reaches age of majority at that time. Child support is considered income to the child. This is important for a child with special needs, as this support would be considered income for purposes of qualifying for means tested benefits, such as Supplemental Security Income. These benefits are important for a family with a special needs child as these benefits enable them to ultimately qualify for Medicaid and services through other agencies servicing individuals with special needs. There’s a threshold amount whereby if a child’s income exceeds that figure, they won’t qualify for these benefits, and therefore, parents should consult with an attorney specializing in Medicaid regarding the drafting and preparation of a special needs trust into which a certain portion of the child support is deposited so as to not jeopardize the child’s qualification for these benefits. This threshold amount is subject to change and therefore, specific language regarding the payment of a certain amount of child support each year to a trust should be inserted into a settlement agreement negotiated at the time of the divorce.

Special Needs Trusts

Parents or other family members of individuals with special needs often set up a special needs trust (SNT) for the disabled person. An SNT is a type of trust designed specifically for beneficiaries who are mentally or physically disabled and who are, or who in the future may be, eligible to receive government assistance as a result of that disability.  The primary purpose of the trust is such that the individual beneficiary remains eligible for Medicaid or other means-tested government benefits despite the fact that the assets of the trust can be used for their benefit under certain circumstances.

An SNT is a type of trust that includes at minimum these  provisions: (1) clear evidence that the grantor’s intention is to supplement rather than “supplant, impair or diminish” government benefits for which the beneficiary is now or may in the future be eligible; (2) a direction that the trustee can’t use trust assets in such a way that would supplant, impair or diminish such benefits, unless the trustee determines that the beneficiary’s basic needs (food, clothing, shelter, or health care) would be better met if a distribution is made, and that “it is in the beneficiary’s best interests to suffer the consequent effect, if any, on the beneficiary’s eligibility for or receipt of government benefits or assistance;” and (3) the beneficiary can’t “assign, encumber, direct, distribute or authorize distributions from the trust.”[3]

When the SNT is established and funded by someone other than the disabled person, the trust is referred to as a “third party SNT.” In this type of SNT, the grantor can direct what happens to the remaining trust assets on the death of the beneficiary. This is the type of SNT typically set up by parents that this article contemplates. (In contrast, in a “first party SNT,” the beneficiary creates the trust for themself using their own funds, or someone else creates the SNT on behalf of the beneficiary using the beneficiary’s assets – for example, a legal settlement from a personal injury lawsuit that left the beneficiary disabled. A first party SNT must comply with stricter rules, most notably having a payback provision that requires the government to be paid back for the services it provides to the beneficiary during their lifetime before the remaining funds, if any, are distributed to others after the beneficiary’s death.[4])

Like any other type of trust, there are three main parties to an SNT: the grantor, the trustee and the beneficiary. The beneficiary is the disabled person for whom the trust property is to be used. The SNT will also identify remainder beneficiaries to receive assets on the beneficiary’s death. The grantor is the individual who creates the trust, and often the one who funds it. The trustee is the person who manages the trust investments and determines when and how much to distribute on behalf of the beneficiary.

In the case of an SNT created for a disabled child of divorced parents, who serves as trustee is often a touchy subject, because of how much control the trustee can wield. Because of the requirements of how the SNT funds can be used, it’s  imperative that the trustee is in frequent contact with the beneficiary so the trustee acutely knows the needs of the beneficiary.

If the divorced parents don’t get along, then having them serve as co-trustees is likely inadvisable, as co-trustees must work together or a stalemate will result. Likewise, if only one parent is the trustee, this could lead to problems if the trustee-parent applies the funds in ways that the other parent doesn’t agree with or refuses to apply funds when the other parent believes it necessary to do so.

A corporate trustee could be a solution, although most banks and trust companies have minimums that many SNTs wouldn’t meet. Moreover, corporate trustees are less likely to be intimately involved with the beneficiary and understand their needs. Such inaction could land a corporate trustee in hot water, which is what happened in a New York case concerning an autistic boy. The boy’s mother named a large bank as corporate trustee of his SNT, but several years into the administration of the trust, the court discovered that although no funds had been disbursed on behalf of the beneficiary, the trustee had taken its full commission, and the court wasn’t pleased.[5]

Which parent serves as grantor of the SNT could also be a potential issue. The options are likely limited to both parents serving as co-grantors, or one parent serving as sole grantor. Typically trusts authorize anyone, not just the grantor, to contribute funds so it’s possible for the non-grantor parent to nevertheless make contributions to the trust to benefit the disabled child. However, the grantor often has some controls over the trust, which is why serving as grantor could create a power struggle for divorced parents that don’t get along.

For example, a trust often authorizes the grantor to nominate a successor trustee if the trustees named in the document cease serving as trustee or to permit the grantor to remove a trustee and replace it with another one (although this removal and replacement power is often only available in the case of corporate trustees). Despite the problems that could result in a power struggle between the parents if only one parent is the grantor holding these powers, not including them in the trust could be an even bigger problem, as it could necessitate having to go to court to change trustees later on, which could be costly and result in unnecessary delays to the trust administration.

Under some circumstances, statutory provisions could avoid a court proceeding. For example, NJSA 3B:31-49, which is part of New Jersey’s version of the Uniform Trust Code, authorizes the “qualified beneficiaries” of a trust to appoint a successor trustee. NJSA 3B:31-27 allows an irrevocable trust to be modified or terminated by  the consent of all trustees and beneficiaries, “if the modification or termination is not inconsistent with a material purpose of the trust.” With respect to an SNT, the problem is often whether the disabled beneficiary is able to participate in such actions, and if not, whether someone else can do so on their behalf.

Ultimately, when divorcing parents are establishing an SNT for their child’s benefit, they should look past their differences and focus on the best interests of the child so that the trust and the money contributed to it will be used to benefit their child. If parents truly can’t agree, and depending on how much money is at stake, the best course of action might be for each parent to create a separate SNT for the child’s benefit that each parent can control.

Guardianship

When a special needs child reaches the age of majority, parents will need to consider initiating the process of obtaining a guardianship over that child. A guardianship is necessary if the child is incapacitated, meaning that they’re not able to make legal decisions for themselves due to their disability or other reason.[6] The guardian(s) will step into the shoes of that child and be legally authorized to make decisions on that child’s behalf. Not all children with special needs require the appointment of a guardian. There are cases in which a limited guardianship may be more appropriate. A limited guardianship carves out and reserves specific areas whereby the child is still permitted to make certain decisions on their own. A common decision that’s carved out in a guardianship is allowed the alleged incapacitated individual the right to vote.

When parents divorce, it’s important to determine which parent will apply to be appointed as the guardian of the child. This agreement can be part of the negotiation of a settlement agreement during the divorce process. In many instances of an amicable separation, it is possible for both parents to serve as co-guardians, whereby they would each be afforded the legal right to make decisions on behalf of their child. However, in those instances, it will be important that the parents remain aligned in agreeing and making the decisions jointly.

[1] See example N.J.A.C. Section  6A:22-3.1

[2] See example N.J.S.A. 2A:17-56.67

[3] N.Y. E.P.T.L. Section 7-1.12(a)(5). New York refers to these trusts as “supplemental needs trusts,” but they function the same as a “special needs trust.”

[4] See, e.g., 42 U.S.C. 1396p(d)(4)(a)

[5] In re Mark C.H., 906 N.Y.S.2d 419 (Surr. Ct., N.Y. Cty. 2010)

[6] N.J.S.A. 3B:12- 24.1(d)