As a New Jersey divorce attorney, one of the most difficult situations I confront is when a case involves a child with special needs. First, I investigate the severity of the disability. If the disability is severe, I then explain how, as a New Jersey divorce lawyer, we must address child support. Moreover, it may be wise to include a Special Needs Trust into the New Jersey divorce agreement. Let’s explore.
First, it is always important to keep in mind that, under New Jersey divorce law, child support is considered to be “the child’s” money even though the payment goes directly to one of the parents. However, the parent of a child with special needs receives child support, they may no longer be eligible for essential government benefits. Therefore, it is wise for the divorcing parents to agree to have a First Party Special Needs Trust that would legally be the recipient of the child support. This way, the child is protected, as child support placed into the Special Needs Trust will be an asset to the child yet the parent will not lose their government benefits.
By way of background, the law in New Jersey did not provide specifically for creating special needs trusts. Yet, recognizing that special needs trusts are pertinent if you have a disabled child, New Jersey adopted N.J.S.A. §3B:11-37(b) in 2000. The statute is a basic, straightforward one, as it merely provides for the establishment of a special needs trust If you have a child with special needs, it is extremely important for you to understand the concept of establishing a special needs trust fund. Pursuant to regulation NJAC 10:71-4.11, the purpose of the trust is to enable a person to have assets to complement any existing governmental benefits or assistance for which the beneficiary is eligible or already receiving. Such a trust is crucial to establish for your child if he or she is disabled and it will be funded up until the child reaches the age of sixty-five.
However, not all trusts will qualify as a special needs trust. The Alliance for the Betterment of Citizens with Disabilities states the four requirements to qualify as a special needs trust as follows:
(1) The trust must be identified as an OBRA’93 trust (meaning that the trust is based on a provision in federal law from the Omnibus Reconciliation Act of 1993 allowing for these types of trusts) that cannot be changed, and that the trust is for the sole benefit of the trust beneficiary (child/adult with disability)
(2) The trust must explain that the trust’s purpose is to permit the use of assets to supplement benefits; and that if the trust provides for food, clothing or shelter, such expenditures are considered income under Social Security regulations for Supplemental Security Income and under New Jersey Medicaid regulations
(3) The trust must state the name, address and age of the beneficiary and explain that the individual is disabled; state whether the beneficiary is competent at the time of the trust’s establishment; and be established by a parent, grandparent, or legal guardian of the trust beneficiary or a court; and
(4) The trust must identify the source of the initial assets trust (money) and all assets of the trust; state that the Trustee shall fully comply with all state laws; and state that upon the death of the primary beneficiary (child/adult with a disability), the State will be notified and be paid all amounts remaining in the trust up to the total value of Medicaid paid on behalf of the beneficiary. If there is a provision for repayment of other assistance programs, the trust shall specify that Medicaid shall be repaid first.
The most recent case law on special needs trusts—J.B. v. W.B., 215 N.J. 305 (2013)
The issue: is it possible for a party to modify a property settlement agreement so that a special needs trust fund can be established for a disable child of the marriage? If so, under what circumstances can the party seek modification?
Relevant facts: In the case, the divorced parties were parents of an autistic son with special needs. Id at 313. Years after the parties were divorced and their property settlement agreement was set in stone, however, the father filed a motion to create financial responsibility for their son’s education and to establish a special needs trust. Id. Yet since the property settlement agreement had already address the support issues for the autistic son and the father had not shown any change in circumstances to warrant a modification of his support obligation, his motion was denied. Id. Furthermore, the trial court stated that “the proposed trust plan lacked sufficient detail to permit an informed decision about whether such a trust would be in the child’s best interest.” Id.
The holding: “A parent seeking to modify a negotiated agreement for the support of a disabled child through the establishment of a special needs trust must present a specific plan and demonstrate how the proposed trust will benefit the disabled child.” Therefore, the father’s motion to modify his support obligation for the parties’ disabled, adult son and to create a special needs trust was properly denied because he failed to present a specific plan and demonstrate how the proposed trust would benefit the child.
If you have a child with special needs and would like to discuss in more detail about setting up a special needs trust, please do not hesitate to contact my office today.