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By Tracy Young, Dina De Giorgio, and Eric Jorgensen

Individuals going through a divorce usually experience a sense of apprehension about all the anticipated changes they may face during and after the divorce. Many have financial questions about their future expenses, relocating, retiring, co-parenting, and decision making. Going through a divorce is a stressful life event for everyone involved. The good news is that you do not have to go through this alone. You can find professionals with the knowledge and experience to support your individual challenges. Examples include divorce attorneys, mediators, Certified Divorce Financial Analysts, therapists, and divorce coaches.

Teresa (Tracy) Young, ChFC®, CDFA®, ChSNC®, is a financial consultant at Sound Private Wealth in alliance with Equitable Advisors where she helps individuals and families who are feeling financially uncertain or unorganized reach their financial goals by creating and implementing a unique plan for their specific situation. Her practice focuses on divorce and special needs financial planning.

Tracy Young

Parents of children with special needs may face additional challenges during a divorce. Deciding who will care for their child, if and when they are no longer able to, is often a top concern. Funding their child’s future, protecting means-tested benefits, and getting state-provided supports in place are additional unique issues. It’s extremely important these families choose collaborative professionals willing to work as a team to create a comprehensive plan. This will typically include attorneys who are familiar with special needs planning and divorce, financial professionals, government benefit specialists, doctors, and education advocates.

The very best time to start planning for a child with special needs is at the beginning of the divorce process. Here are 4 things families should be aware of:

Dina De Giorgio, Esq., is an attorney who has been specializing in divorce and family law for over 28 years. Dina uses her expertise to help clients preserve what matters most to them, their relationship with their children and guides them through their divorce process, with skill, compassion, and honesty.

Dina De Giorgio

1. Government Benefits and Child Support: If a child with special needs is receiving means-tested government benefits such as Supplemental Security Income (SSI) and Medicaid, there is an income and resource test that the child must meet. If a divorce agreement is poorly written, the payment of child support may cause a child to lose their benefits.

2. Government Benefits and Beneficiaries: If a parent or other family member names the child with special needs as the beneficiary of any account or life insurance policy, the individual may become ineligible for means-tested benefits. During the planning process, families should take steps to ensure this won’t happen. This could mean setting up a third-party special needs trust and instructing loved ones to designate it as the beneficiary instead of the child. The extended family should consult with an attorney with expertise in special needs planning. The attorney will be able to explain the circumstances and avoid unintended consequences.

Eric Jorgensen is the founder of True North Disability Planning and host of the ABCs of Disability Planning podcast. Eric helps families whose children are moderately to severely impacted by their intellectual and/or developmental disability, and the professionals who serve them, navigate the maze of benefits, resources, and services throughout high school and adulthood.

Eric Jorgensen

3. Educational Decision-Making Authority: Special Education Attorneys and Advocates advise families of children with special needs about what public school districts are required to provide under the Individuals with Disabilities Education Act (IDEA). They can be amazing champions for children with special needs. Unfortunately, when the custody agreement grants joint custody, but the parents don’t agree on what is best for their child, their hands may be tied. This may result in the child receiving improper supports, too few or no services from their school district.

4. Trustee for the Special Needs Trust(s): Sometimes a parent does not feel comfortable allocating child support or other assets to a special needs trust, especially when the ex-spouse is the trustee. A special needs planning attorney can explain to the parent that the ex-spouse has a fiduciary duty to the child/ beneficiary which requires a higher level of responsibility than if the parent paid the funds to the ex-spouse as child support. They can also provide alternatives to the spouse serving as Trustee, like using a corporate trustee or pooled trust. This will often make the contributing parent feel better, providing an opportunity to maximize the resources available to the child.

Consider the following hypothetical example. Michael and Tina have been married for 12 years and have two children – David and Jason. Jason is 9 years old, has Down Syndrome and an intellectual disability. Both Michael and Tina agree Jason will require support for the rest of his life, although he is not currently receiving any state or federal benefits. They are getting a divorce and want to ensure steps are taken to give Jason what he needs for the rest of his life. Their state allows for child support after age 18, and Michael is open to paying it for as long as he can.

Both Michael and Tina work and have significant assets, so for the purposes of this example they will not be applying for SSI for Jason until he turns eighteen. They have applied for their state’s Medicaid waiver and are on a waiting list, with the expectation Jason will start receiving services when he is twenty-two. The child support will not impact anything for Jason until he turns eighteen. However, once he turns eighteen it will be counted as unearned income when he applies for SSI, which could reduce his benefit dollar-for-dollar. In 2022, the maximum Federal SSI benefit is $841 and the first $20 doesn’t count. This means if Michael pays $862/month, or more, in child support Jason would not receive any SSI.

Michael and Tina work with an estate planning attorney familiar with special needs planning because Jason cannot have access to the child support. Once he turns eighteen all of it will be counted as his unearned income. Sometimes this could mean using a first-party, or self-settled, special needs trust. The laws of every state are different, and the attorney will be able to advise Michael and Tina on what they should do. Including their divorce attorneys will ensure the resolution is in the divorce decree for future implementation.

Recognizing the possibility of friction between Michael and Tina over the management of Jason’s child support after he turns eighteen, their divorce attorneys recommend they use either a corporate trustee or pooled trust. The team also recommends Michael and Tina consider appointing David as a Trust Protector when he is old enough. Until then Michael and/or Tina could serve as the Trust Protector. This Trustee could also manage the third-party special needs trust Michael and Tina will use to fund Jason’s future needs. It will be up to them how they fund it; their options include using life insurance, investments, and real estate.

Their attorneys help them lay out a foundation for Jason’s continued support after he turns eighteen. This includes criteria to use when determining if they should apply for guardianship, whether he will graduate or pursue a certificate, and who will have final say on who will administer his state waiver benefits. Because so much may change between now and when these decisions will occur the focus is more on building a framework for the decision-making instead of the actual resolution.

This example only scratches the surface of decisions for families to make, every case will be different and all of them have the potential for disastrous outcomes. To avoid these pitfalls, it is important to consult with special needs advisors before the divorce process begins. They will work with the family to identify and overcome their specific challenges. To achieve the best possible results, families should engage their advisors throughout the process, to discuss proposals and review any agreements and/or other documents prior to signing.

About the authors: Teresa (Tracy) Young, ChFC®, CDFA®, ChSNC®; Dina De Giorgio, Esq.; and Eric Jorgensen, MS, MBA 

Teresa (Tracy) Young, ChFC®, CDFA®, ChSNC®, is a financial consultant at Sound Private Wealth in alliance with Equitable Advisors where she helps individuals and families who are feeling financially uncertain or unorganized reach their financial goals by creating and implementing a unique plan for their specific situation. Her practice focuses on divorce and special needs financial planning. Teresa offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC (Equitable Financial Advisors in MI & TN). Equitable Advisors is not affiliated with True North Disability Planning nor with Dina De Giorgio, Esq. This article is not intended as investment, tax or legal advice and individual cases will vary. Please consult with your own tax or legal advisors regarding your own particular circumstance.

Dina De Giorgio, Esq., is an attorney who has been specializing in divorce and family law for over 28 years. Dina uses her expertise to help clients preserve what matters most to them, their relationship with their children and guides them through their divorce process, with skill, compassion, and honesty.

Eric Jorgensen is the founder of and host of the ABCs of Disability Planning podcast. Eric helps families whose children are moderately to severely impacted by their intellectual and/or developmental disability, and the professionals who serve them, navigate the maze of benefits, resources, and services throughout high school and adulthood.

Dina and Tracy are both leadership members of the Special Needs National Chapter of the National Association of Divorce Professionals. The goal of this council is to educate and raise awareness among professionals in the divorce and special needs space about the issues that could arise when these two situations intersect.

This article does not constitute legal advice or the establishment of an attorney/client relationship.


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