Going through a Divorce? Have a Child with Special Needs? Watch Out!

Determining whether or not you or a loved one is entitled to Social Security Income (SSI) can be tricky. SSI is a needs-based program that looks at income and assets to determine eligibility. In fact, income reduces or eliminates SSI payments. One way to ensure our clients keep their SSI is by using an assignment to a Medicaid payback Special Needs Trust. We often do this with child and/or spousal support. However, there can be traps and pitfalls with this approach.

There are specific payments that cannot be assigned, such as Temporary Assistance for Needy Families (TANF), Railroad Retirement Board-administered pensions, Veterans pensions and assistance, Federal employee retirement payments administered by the Office of Personnel Management, Social Security title II and SSI payments and Private pensions under the Employee Retirement Income Security Act (ERISA). These will always count as income. However, this list is non-exhaustive, and child and spousal support are not on the list. To provide further guidance, Social Security regulations state that legally assignable payments to a trust or a trustee are still counted as income unless the assignment is irrevocable. Moreover, an irrevocable assignment of support is not countable for SSI. In summary, payments that are legally assignable and irrevocable are exempt from being counted towards SSI. Sounds simple, right? Not quite.

Social Security regulations also provide examples of irrevocably assigned payments. The regulations state, “Child support or alimony payments paid directly to a trust or trustee because of a court order are considered irrevocably assigned and thus not income.” So what about payments that are irrevocably assigned without a court order? While these should be valid, we have found that Social Security has been insisting upon a court order even though such an order is listed only as an example of an irrevocable assignment. Therefore, for those who are trying to be cautious or proactive with their resources by assigning payments to an irrevocable trust or trustee, you may wish to talk with a domestic relations attorney to seek a court order assignment of support payments directly to a Medicaid payback trust. Their expert advice may be the difference between SSI eligibility and ineligibility.

Posted in Blog, Children with Special Needs.