Divorcing When You Have A Disability And High Medical Costs

divorcing disability medical costs

“My spouse and I are divorcing, but I am disabled and have high medical costs. How can I make sure that I don’t lose eligibility for my disability benefits? How does alimony factor into the eligibility requirements for disability benefits?”

If you’re an individual who is facing a divorce and you also happen to have a serious disability, you might find that you know you’re going to need Medicaid, either now or in the future because you’re going to have very high medical expenses. With a divorce, there can be several concerns. If you’re trying to be eligible for Medicaid, you can only have a certain number of resources in your name. Tangible property is not a problem. Owning a car is not a problem. But certain retirement assets are going to create an issue if they’re titled in your individual name.

A special needs trust might be a very good option for you for a number of different reasons. One could be to hold assets that otherwise would be countable. Another reason is that alimony payments could be made directly to a special needs trust and if that were to occur, then those alimony payments wouldn’t be considered your income.

If you decide to create a special needs trust as part of this divorce process, it will have to be what’s known as a self-settled special needs trust. This is a trust that will hold your money and it will have a Medicaid payback provision.

There are a few questions that people generally have when they’re thinking about creating their own special needs trust. One is whether they can serve as their own trustee. You cannot. If you’re going to have a special needs trust, somebody else is going to have to be the trustee. Another question is whether you can name your own beneficiaries. Your children, as your beneficiaries. You can name children as beneficiaries but only after a state has been reimbursed for Medicaid that’s been paid on your behalf. So, these self-settled special needs trusts all have Medicaid payback provisions.

How Alimony Factors Into Eligibility For Disability Benefits

When you’re facing a divorce and you have a disability and trying to maintain eligibility or even gain eligibility for Medicaid, there are concerns over how alimony is coming to you. Because if it comes directly to you, it will count as income. But there are options.

One is for alimony to be directed to a special needs trust. Another is for your ex-spouse to pay certain bills for you. Paying a mortgage is going to be fine from a Medicaid eligibility standpoint, it’s not going to count as income. Because it is shelter, it would count as income for the Supplemental Security income or SSI program. So all of those issues need to be looked at.

Essentially, what you’re going to want to do is look at a variety of factors in terms of what your needs are, what your bills are, what possibly can come your way in terms of resources and income, and figure out the best way to structure that. And there are choices to be made that can maximize your public benefits eligibility and not put them at risk.