- Posted October 29, 2018
SNT’s And Divorce
SNTs, or Special Needs Trusts, can play a HUGE role in divorces involving children with disabilities – regardless of age. Unfortunately, the type of Special Needs Trust may not be part of the discussion as it appears there is a lack of awareness outside of the Disability world of the different types and the impact each has on benefits.
Yes, both a 1st Party and a 3rd Party Special Needs Trust allow an individual with disabilities to accumulate more than $2,000 in assets – thereby maintaining their eligibility for SSI. However, and this is an important distinction, where the money is coming from matters.
For example – if your father/mother die and they leave money to your child, who has a disability and qualifies for a Special Needs Trust, how they title the money left behind will determine which type of Trust it needs to go into. If they name your child as the beneficiary, and then they die, this money will need to go to a 1st Party Special Needs Trust – your child needs to place the money into the Trust because it is now in his/her name. If your parents talk to you first, you can set-up a 3rd Party Special Needs Trust and have the money go directly into it; because it never became the possession of the child with a disability.
So how does this affect alimony or child support? Alimony and child support is for the benefit of someone. If that individual has a disability, when paid directly to them it will be counted as an asset towards the allowable limits for means tested benefits. For example, you divorce when your daughter is 15, and you and your spouse agree child support will be paid for the remainder of your daughter’s life because of her disability. Until your daughter turns 18 the child support will be paid to you, for the benefit of your daughter – but after 18 it becomes HER money, even if you have Legal Guardianship.
This child support will need to be paid directly to a 1st Party Special Needs Trust. The 1st Party Trust will shelter the money so Social Security does not count it towards the allowable limit of $2,000. An ABLE account will NOT provide the same protections, it wasn’t designed to. Neither will a 3rd Party Special Needs Trust – because the money is a resource of your daughter as soon as it is paid.
So when working with a divorce attorney and/or mediator and you have a family member with a disability who may qualify for Social Security or other means tested public aid, talk about Special Needs Trusts. If the attorney doesn’t seem to well-versed or familiar, bring someone else in – it’s that important.