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NJ Family Legal Blog Pertinent Information As It Relates To New Jersey Family Laws

Income from Special Needs Trust to be Considered for Support

Posted in Child Support

The issue of what happens when a parent who has to pay support has income from a special needs trust has been recently addressed by the Appellate Division in an unreported (non precedential) decision. In that matter, the father of a child had been involved in a motor vehicle accident several months prior to her birth. The accident resulted in permanent brain damage and the father received a substantial settlement in excess of a million dollars .  The settlement was placed in a special needs trust. A special needs trust, also known as a supplemental needs trust, is a trust that is created to allow a Medicaid recipient to shield certain funds and income from Medicaid eligibility provided that once the recipient dies, any remaining funds in the trust are paid to the State up to an amount equal to the total assistance paid on behalf of the individual.

The trial court, which was affirmed on appeal, noted that parents have a moral obligation and a legal duty to support their child. The court further pointed out that the New Jersey Child Support Guidelines, which clearly state that total family resources should be considered to be available for child support, define gross income to include social security, an interest in a trust and personal injury awards. 

Had the father kept the proceeds from his settlement and not placed them in trust, the money would have been unquestionably been available for child support. He further noted that the trust itself stated that distributions could be used for such expenses including “vacations, technology, cable television, etc.” The judge then determined that nothing prevented a conclusion that the father’s “special needs” might include support for his daughter. 

Ultimately, the court determined that the father’s trust income as well as his Social Security disability payments were to be considered income for the purposes of determining his child support obligations.  Also compelling in this matter was the fact that the father had this settlement while at the same time the mother was receiving public assistance on behalf of the child.

Despite the fact that the Trust can be considered to determine the amount of child support, it was acknowledged that the court cannot order a Trustee to make payments from the trust to satisfy any child support payments.  Whether the court had addressed actual payment of the support is not known since that issue was not part of the appeal Thus, the unanswered question in this decision is how the child support award will actually get paid.