As I’ve written previously, financial professionals would do well by their clients to ascertain whether there are any children with disabilities who will need support — financial, residential, medical — long after the parents have retired or passed away. It’s a multistep process to help these parents plan for a future in which they are no longer around. Now, layer a divorce into the situation and suddenly it becomes much more complicated.
Divorces come in many forms: contested and uncontested, cordial and discordant. The parents may not only move into different houses, they may move to different cities or states. Custody may be shared, or one parent may be designated the custodial parent.
Knowing how to handle financial planning for families with special needs at the onset of a divorce will help ensure that the future of the family member with special needs is considered in all aspects of the negotiations, including child support, alimony, property divisions and custodial decisions, including guardianship.
Statistics show that 20% of the U.S. population is affected by special needs. While the divorce rate among families with special needs is often the topic of great debate, one fact remains certain: The complexity of a divorce proceeding increases exponentially when working with families with special needs. Make sure your clients are taking a broad view of the child’s needs and perhaps walk them through “a day in the life” of caring for the child.
Tough decisions
As a financial professional, you will not be able to represent both parties, so first you and your clients must decide which parent will continue to be your client. Recommend that the other parent also receive financial advice and perhaps refer them to a few of your respected colleagues. It’s likely you’ll also be working with your client’s divorce attorney.
In structuring a divorce agreement, special care must be given to parenting arrangements, estate planning and the child’s transition to adulthood. Legislation and case law are evolving in this area as more family lawyers deal with a burgeoning number of cases involving children with special needs.
Ties that bind
The divorce agreement should pay attention to unique issues that arise in the child’s transition into adulthood. This may include guardianship, eligibility for quasi-government or private agency benefits, employment, recreation and social skills, and independent living or custodial care. Typically, child support and custody end at the age of majority or when the child graduates from college. Divorcing parents of children with special needs who have severe impairments face the reality of lifelong caregiving and, perhaps, lifelong co-parenting.
Child support must address the extra expenses of a child with special needs: specialty medical care, services, equipment, treatments, nutritional needs and paid respite care. Uncertainty about the nature and cost of future care makes it difficult to estimate disability-related expenses in a divorce agreement. Therefore, it’s important for the parents to revisit the agreement periodically with you and their attorneys.
Alimony (spousal maintenance) and child support payments need to consider the child’s eligibility for public benefits as both a minor and adult. It is essential that you, the divorce attorney and a special-needs attorney work together to eliminate the risk of forfeiting the child’s entitlements by establishing a special-needs trust and an ABLE account.
Child-support considerations
Managing the care of a child with special needs is often a full-time job, so the effect on the custodial parent’s income should be considered when establishing spousal maintenance.
In addition, divorce attorneys do not always know how child support payments made directly to the custodial parent may negatively impact “means tested” government benefit programs like SSI and Medicaid. In-kind alimony and/or child support should be considered in order to preserve government benefits. It is critical to address these issues during the divorce process.
Looking ahead
Probably the biggest issues I see when parents of a special-needs child divorce are disagreements over the child’s current and future capabilities and an unclear understanding of present and future costs. The non-custodial parent is also likely to feel a loss of control when it comes to determining their child’s future.
It is critically important, even in the most contentious of divorces, that the parents keep their channels of communications open. Financial professionals assist in this area. Emphasize the need to address all of these issues early in the divorce process to ensure that a family member with special needs is not overlooked.
Mary Anne Ehlert, CFP, specializes in financial planning for families with a disabled family member. She is the founder of Protected Tomorrows in Lincolnshire, Illinois. She is looking for advisors who wish to build a practice in this area, so please get in touch. For more information, contact Mary Anne at 847-522-8086.
