How Does Divorce Impact a Special Needs Trust in California?

If you’re going through a divorce, it’s not only an especially difficult transition in your life but is also a legally complex matter that can directly affect your estate planning. And if you have a child with special needs who is addressed in a special needs trust, the matter becomes that much more challenging.

If this is the difficult situation you find yourself in, you need the skilled legal guidance of a dedicated Orange County divorce attorney – with a significant amount of experience skillfully handling complex estate planning concerns – in your corner. Minyard Morris has formed over 48 years ago with over 350 years of combined legal experience.

Estate Planning for Families with Special Needs Children

If you have a special needs child, your estate planning needs are complex, and you likely have a special needs trust in place. A special needs trust is a specialized estate planning tool that allows your special needs child – who is identified as the beneficiary – to access the assets held in the trust, generally after you and their other parent pass, while continuing to receive essential government benefits, which are based on means.

Your Child’s Needs

People with disabilities, like your child, tend to rely on their government benefits in order to live their fullest lives. The income cap for government benefits, however, is quite low, and an inheritance could put your child over the limit. This would translate to a loss of benefits, which could, in turn, jeopardize their way of life.

Your Child’s Special Needs Trust

A special needs trust allows you to continue providing for your child after your death without interfering with the government benefits they rely upon. A special needs trust can also provide for your child if there comes a time when you’re no longer able to care for them.

When You’re Married

The way your estate plan was likely set up during your marriage is that you and your spouse share a revocable trust, which holds the assets you’ve assigned to it. A revocable trust keeps all the assets you include in it out of the probate process – which is especially complicated in the State of California – at the time of the last surviving spouse’s death.

This streamlines the process of assigning assets to your beneficiaries. When you’re both gone,  part of the assets in your revocable trust – or all of them if you have only one child – will likely flow directly to the special needs trust you’ve set up. If you divorce, however, it changes things, and you’ll need to address the issue in order to continue providing for your child with special needs.

Upon Divorce

A divorce can have a significant impact on your estate plans, including your child’s special needs trust. In your divorce, you and your divorcing spouse will need to resolve the matter of property division, which includes the assets in that revocable trust you share. You’ll also need to address the matter of your own estate planning as a single person, which is likely to include setting up your own revocable trust. From here, you have several options when it comes to your child’s special needs trust.

Coordinating Your Funding Efforts

Special needs children – even when they’re adults – are some of the most vulnerable among us, and you and your ex undoubtedly share a desire to provide for your child into their future. If you are able to set the differences that led to your divorce in the first place aside in order to continue supporting your special needs child, you can coordinate the funding of their special needs trust between yourselves.

This means that you’ll each have a revocable trust in your own name, and assets will flow from each of these into that special needs trust when the time comes. The benefits of continuing to maintain a special needs trust between the two of you include all the following:

• It’s simple and straightforward to create.
• It’s less costly and less complicated to execute.
• It can help to ensure balanced contributions from each of you.

This approach isn’t going to work, however, if you and your divorcing spouse are truly incapable of cooperating with one another, which can happen in a divorce. Every divorce is different, and your seasoned divorce attorney will help you make the right choices for you and your child.

Separate Trusts

If you and your ex aren’t on good enough terms to coordinate your efforts, you can each create your own special needs trust for your child, and each will be funded from that parent’s revocable trust when the time comes. This method eliminates the need for you to interact with your ex, which can be a big plus, and there aren’t a lot of serious drawbacks.

Child Support

Another divorce term that you’ll need to address is child support. While the child support obligation generally ends as each child ages out, this isn’t necessarily the case if your child has special needs. If you receive child support on your child’s behalf, however, it can put them over the limit for their government benefits, which means it can do considerably more harm than good.

These funds can, however, go into what is called a first-party special needs trust – rather than a third-party special needs trust like the ones we’ve been discussing. The assets in this first-party special needs trust will belong directly to your child. The court can then assign direct deposit of the child support payments into the first-party special needs trust. Generally, the custodial parent becomes the trustee of a first-party special needs trust.

Consult with an Experienced Orange County Divorce Attorney Today

If you have a special needs child, your estate planning needs are complex, and divorce adds an additional layer to this complexity. The compassionate 20 divorce attorneys at Minyard Morris – proudly serving Orange County – dedicate their imposing practice to affording clients like you the peace of mind that comes from knowing their children with special needs will be well provided for into the future. For more information, please contact or call us at 949-724-1111 today.