Q. Our daughter is going through a divorce. She has a 24 year old son (our Grandson) who has a disability and gets both SSI and Medi-Cal. She plans to seek child support from the father. We worry that the child support will reduce our Grandson’s SSI and possibly eliminate his Medi-Cal. Is there a way around this?

A. Yes, indeed! Very few attorneys or judges are familiar with the work-a-round for this concern, which involves the use of a Special Needs Trusts (“SNT”). As a result, the sad fact is that many children with a disability who receive SSI and Medi-Cal see their benefits reduced or eliminated when their parents divorce. A bit of background:

To qualify for Supplemental Security Income (“SSI”), your Grandson with a disability must meet two financial conditions:  He must (a) have less than $2,000 in non-exempt resources in his own name (e.g., savings), and (b) his monthly income must be less than the SSI benefit rate, currently $1,182.94 per month if living independently or $873.87 if living in his mother’s home (in 2024).  An award of SSI also entitles him to Medi-Cal without a co-pay (“share of cost”).

But it gets more complicated in the divorce process.

For an adult child, if he is “incapacitated from earning a living and without sufficient means”, then his parents’ duty to support him continues into adulthood under California law.  However, any court-ordered Child Support (“CS”) that he receives would—unless special arrangements are made as described below — be treated as “unearned income” to him and offset his SSI dollar-for-dollar, reducing or eliminating it entirely.

The question, then, is whether there is a way to preserve both his right to SSI and his right to Child Support.?

Answer:  YES!  Enter the Special Needs Trust (“SNT”).  With professional guidance, your daughter could create a SNT for her adult son and, through her attorney, ask the court to “irrevocably assign” the payment of CS to the SNT.  If structured properly, under SSI rules there would then be no offset to his SSI !  Your Grandson would then receive (1) Full Child Support,  (2) SSI without offset, and (3) Medi-Cal without a Share of Cost.  While this strategy has been available for some time, many judges and attorneys are unfamiliar with it and, until now, some judges are of the view that they cannot order Child Support payable to any kind of trust.

Good news! On June 26, 2024, Governor Newsom signed legislation clarifying the matter.  The new law (AB 2397), was introduced by Assembly Member Maienschein and amends Family Code § 3910.  In relevant part, it provides simply as follows:

The court may order that a support payment be paid to a special needs trust”

The law becomes effective on January 1, 2025, and will give the courts explicit authority to assign child support for children with disabilities to a SNT so that they do not risk losing their SSI benefits.

The SNT would be managed by a Trustee, which could be your daughter, who would then handle the funds in a manner compliant with the SSI and Medi-Cal rules. This typically would mean that, as Trustee, she would not disburse funds directly to your Grandson, himself, but instead would use them to pay third party providers directly for goods and services provided to him, such as a tutor, computer, clothing, etc.

The use of an SNT may also be used to shelter support for a minor child who receives SSI (although the offset calculations are a bit different), as well as to shelter Spousal Support for a spouse going through divorce.

To make this option work, it is essential that your daughter engage an Elder Law or Special Needs attorney familiar with the use of the SNT in the divorce context. The SNT attorney would then work with her divorce attorney to create the proper SNT, and might even help educate the judge and opposing counsel to the benefits of this technique. In this regard, our firm has developed a special interest in these cases, and the results have been very rewarding and usually recognized as a “win-win” by all parties before the court.