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How to Maximize Resources During Divorce When You're Disabled

Updated on March 14, 2017
Amanda J Rose profile image

I was divorced after almost 20 years of marriage and became unable to work a few years ago. Writing lets me share my research with others.

Divorce Changes Your Financial Situation

Everything was fine financially, but now the divorce is changing everything. You may feel overwhelmed and wonder how you'll be able to provide financially for yourself and your children. One way to maximize benefits to a disabled child or adult is called a special needs trust, also known as a supplemental needs trust.

Do provisions need to be made for a special needs child, adult child or disabled parent for whom you've been caring? Maybe you're the one unable to work because of a mental or physical disability. These are all situations that may benefit from setting up and funding a special needs trust before your divorce is finalized.

A special needs trust might stretch the money for a  special needs child or spouse.
A special needs trust might stretch the money for a special needs child or spouse. | Source

The appropriate use of a Special Needs Trust in a divorce proceeding can greatly enhance the standard of living for the disabled spouse or child and, by doing so, help promote a greater measure of self-sufficiency.

— Gene L. Osofsky

What is a Special Needs Trust?

A special needs trust is a specific type of trust which can only be set up to benefit a person with a physical or mental disability as recognized by the Social Security Administration. The Social Security Administration explains that trusts are "regulated by State law in which one party holds property for the benefit of another." A special needs trust, also sometimes called a supplemental needs trust, is different than the more commonly used living or revocable trust.

This trust enjoys special protection and important benefits when set up and utilized properly. It protects Social Security Income (SSI) or Medicaid benefits because the Social Security Administration does not count assets held within a special needs trust as resources. As of 2017, an SSI beneficiary can have no more than $2000 in assets.

Without a special needs trust, the recipient of funds in a marital settlement agreement couldn't obtain most public assistance and would quickly spend through their money. Although they would eventually qualify for SSI and Medicaid when their assets were adequately reduced, they would have no resources available for other necessary living expenses.

A special needs trust can allow you to continue qualifying for certain types of assistance.
A special needs trust can allow you to continue qualifying for certain types of assistance. | Source

Do You Qualify for Social Security Income?

If you've been unable to work but supported by your spouse, you may be able to qualify for Social Security Income (SSI). You don't need a work history to qualify for this, but you do need to have limited assets and income. You can download this brochure called "You May Be Able to Get SSI" from the Social Security Administration that will help you see if you may qualify for SSI. Using a special needs trust may enable you to qualify for SSI and still have access to some assets or income to cover needs beyond food and shelter.

If you were disabled recently and have a work history, you may qualify for Social Security Disability(SSD) payments. The application and approval process for SSD can be over a year, so these aren't funds you'll be able to rely upon immediately. The application process begins online at the Social Security Administration website. Links are provide below in the "Recommended Web Resources" section.

How They Compare

SS Disability
Special Needs Trust
no work history needed
must have work history
no work history needed
assets up to $2000
no asset limits
protects assets
also based on income
income limit
reduces countable income

What Can Be Put in a Trust?

The same assets can be put in a special needs trust as can be placed in a Revocable Living Trust. A special needs trust can even be set up within a Revocable Trust. It can hold life insurance benefits, 529 plans, IRA distributions, land, stocks, bonds, cash and other assets that may be part of a marital settlement agreement. The supplemental needs/special needs trust can also hold real estate, such as the family home.

Suze Orman Talks About Special Needs Trusts

Know Your Options

Divorce changes everything. If you are suffering from any disability, be sure to investigate your options before signing the final marital settlement agreement. According do Gene Osofsky, writing for The Living Trust Network, "The appropriate use of a Special Needs Trust in a divorce proceeding can greatly enhance the standard of living for the disabled spouse or child and, by doing so, help promote a greater measure of self-sufficiency."

These trusts require adherence to complex state and federal regulations so this is definitely not something you should do on our own. If there is any chance that a special needs/supplemental needs trust might benefit your financial security then be sure to consult with an attorney specializing in special needs or estate planning in addition to your divorce attorney.

You can find more information about special need planners and attorneys at It may also be helpful to consult with a certified financial planner who has experience with special needs situations or a special needs planner. Whatever you do, be sure to have an attorney familiar with special needs trusts/supplemental needs trusts write or review the trust before it's signed.

Divorce and Special Needs Trust Resources:

Best websites with information on Special Needs Trusts.
Best websites with information on Special Needs Trusts.

Recommended Web Resources

Read Up...

Special Needs Trusts: Protect Your Child's Financial Future
Special Needs Trusts: Protect Your Child's Financial Future

This book describes the use of Special Needs Trusts for disabled children and adults. It can give you a good introduction to the topic before you consult an attorney. Nolo is a respected publisher of legal information with well organized information.


Disclaimer: No Legal Advice Intended

This article was not written by an attorney. The contents of this article are intended to convey general information only and not to provide legal advice or opinions. The contents should not be construed as, and should not be relied upon for, legal advice in any particular circumstance or fact situation. The information presented may not reflect the most current legal developments. No action should be taken in reliance on the information contained. Please contact an attorney for advice on specific legal issues.

© 2015 Amanda Rose


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