Nadler_Koerner
Divorce transitions are challenging no matter what the family situation may be. However, if the divorce impacts an individual with disabilities, the legal and financial considerations may be incredibly complex. Based on our professional experience, collaboration between a family law attorney and an attorney experienced in estate planning, elder law, and special needs law is essential to achieving the best-possible outcome. Moreover, educating the family law bar presents a significant practice development opportunity for elder and special needs law attorneys.
Many professionals agree that having a spouse, child, or other dependent with disabilities can place significant strain on a marriage. Although there is limited high-quality empirical research demonstrating higher divorce rates among families supporting loved ones with disabilities, a substantial number of couples nonetheless find themselves navigating the complex interplay of divorce and special needs planning. This observation is supported by our professional experience in legal practice as well as the volume of referrals to organizations like National Care Advisors.
Please note that, for purposes of this discussion, individuals with disabilities include those with developmental disabilities, mental health conditions, substance use disorders, or physical and functional challenges.
The Case for Collaboration
Family law attorneys are skilled at getting the most favorable settlement for their clients. Typically, this means obtaining the largest amount of assets possible. Even experienced and well-intentioned family law attorneys may not realize that in cases involving special needs planning, the gross settlement is not the only outcome that matters. They also must pay careful attention to the manner in which awarded assets and income are structured and received by the spouse or child. Family law attorneys could unintentionally jeopardize a client’s public benefits — such as Supplemental Security Income (SSI), Medicaid, or housing assistance — by failing to timely consult with an elder and special needs law attorney when negotiating a settlement or before taking a case to trial.
Family law is highly state-specific. In many situations, the attorneys, the court, and even the parties may fail to appreciate the complex and varied needs of families of people with disabilities. The standard task of dividing assets and the obligation of financial support after divorce can be extremely complicated when the life-long needs of a spouse or child with disabilities must be considered.
Although some of the issues that must be addressed in a divorce involving individuals with disabilities may fall outside the typical scope of family law practice, these matters are routinely handled by elder and special needs law attorneys. Collaboration between these professionals can result in the best outcomes for the parties and the family as a whole.
Many of the issues that delay settlement are driven by fear — such as how to maintain insurance coverage for the spouse with a disability or how to afford custodial care for a child with a disability for the balance of the spouse’s lifetime. A family law attorney who understands the value an elder and special needs law attorney brings to divorce planning will be able to introduce resources that provide helpful information to the family and may reduce anxiety associated with these complex planning issues. This specialized knowledge also may enhance the possibility of a smart, satisfying settlement.
Challenges and Considerations
Common challenges to address and resolve in a divorce involving individuals with disabilities can include:
- access to and value of health insurance benefits;
- consideration for the value of unpaid time and energy for support services provided by the exiting spouse in the home setting;
- the future value of third-party benefits as possible income streams to support long-term care needs; and
- quality of life considerations such as visitation, holidays, and vacations beyond childhood.
In most cases, it is essential to conduct a strong future care cost analysis, so all parties have access to objective data regarding the needs of the individual with disabilities specific to the impact of the divorce. The cost analysis, prepared by a special needs nurse case manager, can be invaluable in these circumstances and should include:
- future medical care assessment — evaluation of the diagnoses and projection of the future course of the aging process;
- analysis of third-party benefits/health insurance and how those benefits are accessed;
- caregiver analysis — current and future long-term, hands-on care needs;
- housing requirements — inclusive of modifications and maintenance; and
- quality-of-life needs — transportation, socialization, and vocational support.
A skilled special needs nurse case manager can assist the divorcing parties to define their vision for a lifetime plan that is financially sustainable and objectively defines the needs of the individual with health and functional challenges. This information further serves as a guide for other legal and financial professionals who are or will be involved in the case.
Common Planning Missteps
After reviewing the future care cost analysis and the finances of those involved in the case, an elder and special needs law attorney can identify the benefits that will be available to support the individual with disabilities and advise on how to structure the settlement to maintain the needed benefits. Much of this planning involves avoiding the three most common missteps described below — missteps the authors have frequently observed and, in some cases, been retained to remedy after an inadvertently unwise resolution.
1. Making alimony payments directly to the spouse with a disability.
While alimony is considered passive income for purposes of Social Security Disability Income (SSDI) and Medicare, alimony paid to a divorcing spouse counts as income for purposes of means-tested public benefits such as SSI and Medicaid.
A spouse with a disability may have been unable to work and out of the workforce for years, or even decades, prior to a divorce. While married, the spouse with a disability was dependent on the working spouse. Once the marriage ends, the spouse with a disability has an insufficient work record to collect SSDI benefits. Therefore, if the spouse with a disability wishes to receive an income benefit via the Social Security Administration (SSA), then it must be through the SSI program. To qualify for SSI, an individual must be below the countable income benefit limit ($967 per month for 2025). If alimony payments are made directly to the spouse with a disability, that will reduce or even eliminate the spouse’s monthly SSI payment. And because Medicaid benefits also are means-tested, state Medicaid programs may have similar income rules; thus, spousal support income could render a spouse with a disability ineligible for critical access to health care benefits.
2. Awarding countable resources outright to the spouse with a disability.
Assets the divorcing spouse with a disability receives as part of property division also can cause eligibility issues. Under the settlement agreement, the spouse with a disability may have been awarded cash, investment accounts, retirement accounts, multiple vehicles, or real estate other than a primary residence.
For SSI eligibility, the countable resource limit is $2,000. All the aforementioned resources are countable for purposes of determining eligibility for SSI. Many state Medicaid programs have similar rules and mirror this very low countable resource limit.
3. Awarding post-majority child support payments on behalf of an adult child with a disability.
Child support payments made on behalf of an adult child with a disability (even if not made directly to the child) will increase the child’s countable income for purposes of SSI eligibility. This income is considered by the SSA to be unearned and, although it would not impact eligibility for SSDI benefits, its effect on SSI eligibility could be dramatic or even catastrophic. Specifically, two-thirds of the child support payment will be counted as income to the adult child, and their SSI payment will be reduced accordingly. If the child support payment were significant enough, the adult child’s SSI benefit could be entirely eliminated.
Although these issues can be avoided altogether by involving an elder and special needs law attorney at the outset of the divorce, if the spouse or adult child with disabilities is under the age of 65, all three missteps can be resolved by using a first-party special needs trust. Assets held in a first-party special needs trust are not countable to the beneficiary of the trust. Likewise, income payments that have been ordered by the court to be made directly to the first-party special needs trust are not income to the beneficiary. Proposing an independent and objective trustee may be helpful in resolving concerns about secondary gain and promote timely resolution of the divorce.
When a spouse or child is over the age of 65, the resolution may not be as straightforward as establishing a first-party special needs trust. However, other elder law and Medicaid planning techniques can be used to facilitate benefits eligibility and encourage settlement.
Educating the family law bar about the benefits of early collaboration with experienced elder and special needs law attorneys and special needs nurse case managers can increase the likelihood of customized, favorable divorce settlements that effectively anticipate the long-term needs of individuals with disabilities.