Divorces with Disabled Spouses or Children: How a Special Needs Trust Can Help!

Guest Post Introduction: When a divorce case involves an incapacitated spouse or child, there are unique issues regarding the availability or qualification of that disabled individual for public benefits. When these issues arise it may be necessary for your divorce attorney to also consult with an expert in the area of special needs. Neal A. Winston is a partner at Moschella & Winston, LLP who has been practicing in the areas of special needs and public benefits law for over 30 years. Neal wrote the following guest post for us regarding:

How a Special Needs Trust Can Help in cases with a Disabled Spouse or Child!

Spouses and children receiving court-ordered support may also be eligible for needs-based public benefits such as MassHealth (Medicaid) and Supplemental Security Income (SSI). Both programs are income sensitive, and support that is directly received, including child support to the custodial parent, can cause these benefits to be reduced or terminated. However, if a Court orders the support to be paid directly into a Special Needs Trust (SNT) drafted with certain provisions, then the support would not be countable as it goes into the trust. Distributions from the trust can then be structured in such a way as to have minimal or no effect whatsoever on public benefits received by the beneficiaries.

In a recent case, in which Kelsey & Trask and I share a client, a severely disabled woman in her late 30s, required a Personal Care Attendant through MassHealth to remain in her home. I created a SNT for her, and Attorney Kelsey obtained a Court order for the alimony to be paid directly into the SNT. To our surprise, MassHealth then rejected the procedure.

The agency first claimed that the trust had to be a Medicaid “payback” trust, which is not required by the law or regulations. I took the matter to a Fair Hearing, and the agency then changed its position and claimed that the Court does not have authority to order the alimony to be paid into a trust in order to be exempt as income for MassHealth eligibility. The Hearing Officer rejected all of the agency’s arguments, determined that Court-ordered alimony into a properly drafted SNT would not be countable as income, and reversed the benefit termination decision.

We are increasingly hearing that the MassHealth agency is being very aggressive in attempting to force extra-regulatory restrictions on the use of trusts under these circumstances. This case had a fortunate outcome, and it is important that if others face the same trust counting challenge by the MassHealth agency, that they not necessarily accept the agency’s decision as being right or legal. However, sometimes the client would feel it more helpful and less expensive to comply rather than appeal. The pros and cons of that option should be analyzed in each individual case.

A copy of the hearing officer’s decision is available here.