special needs trusts

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. Continue Reading Income from Special Needs Trust to be Considered for Support