By Mary Anne Ehlert, CFP
CPA 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 advising for families with special needs at the onset of a divorce will help to 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 percent 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.
As a financial professional, you will not be able to represent both parties, so first there has to be a decision about which parent will continue to be your client. Recommend 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.
In the divorce agreement, attention must be paid to unique issues that arise in the child’s transition into adulthood, such as guardianship, eligibility for quasi-government or private agency benefits, employment, recreation and social skills, independent living or custodial care. Typically, child support and custody end at the age of majority or when they graduate from college. Divorcing parents of children with special needs who have severe impairments face the reality of life-long care-giving and, perhaps, 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, so it’s important for the parents to revisit the agreement periodically.
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 risk of forfeiting the child’s entitlements by establishing a special-needs trust and an ABLE account.
In addition, managing the care of a child with special needs is often a full-time job and the effect on the custodial parent’s income should be considered when establishing spousal maintenance.
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.
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 a clear 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. CPAs like yourself may be of assistance 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.
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Mary Anne Ehlert, CFP, specializes in financial planning for families with a disabled family member. She is the founder of Protected Tomorrows in Lincolnshire, Ill., and is a partner in Forum Financial. Contact her at 847-522-8086.
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