New Jersey Supreme Court Rules on Special Needs Trusts and Child Support Payments

In New Jersey, child support payments are considered an asset of the child, despite the fact that such payments are typically paid directly to the custodial parent.  For a child with special needs, direct payment of child support to the parent could disqualify the child for means based government benefits.  For this reason, some parents include as part of their divorce settlement agreement that child support payments be made to a First Party Special Needs Trust instead of to the custodial parent directly.

In a recent New Jersey Supreme Court case, the Court considered for the first time the role of a First Party Special Needs Trust for the benefit of an adult child who was unemancipated and to whom there was a continuing child support obligation.  In J.B. v. W.B. (A-111-11)(069972), the father who had been paying yearly child support payments to the mother, petitioned the court to allow him to instead pay the child support to a First Party Special Needs Trust.  He argued that this was in the best interest of the child because the child would not otherwise be eligible for means based government assistance if payments continued to be made to the mother.

 Although the Court denied the father’s petition because it did not set forth a specific plan and demonstrate how the trust would benefit this particular child, the Court did affirm the importance of First Party Special Needs Trusts in the child support context and described the circumstances under which a parent may modify a support agreement to pay child support to a First Party Special Needs Trust instead of to the custodial parent. 

Specifically, the Court noted that a “special needs trust in conjunction with a thoughtful plan to gain eligibility and receipt of government benefits. . . permits a family to provide health care, income, housing and vocational services for their disabled, dependent child.  The redirection of a child support obligation from a parent to a trust designed to meet the present and future needs of the dependent, disabled child should not be considered exceptional or extraordinary relief, if such plan is in the best interests of the unemancipated child.”  At a minimum, the Court stated that the trial court judge must have a complete understanding of the needs of the disabled child, the cost of those needs, and the current resources available to fund those needs.  If part of the plan is to depend on government assistance, then the judge must be presented “with a specific plan that addresses, among other considerations, eligibility rules, the time it will take to gain eligibility, and how long it will take to access benefits once eligibility is established.”

The Court also addressed the question of whether a guardian ad litem must be appointed for the disabled child who is the beneficiary of a proposed special needs trust.  The Court ruled that this decision is in the trial court’s discretion, but stated that in certain circumstances, appointing a guardian ad litem with specialized knowledge of special needs trust would be appropriate.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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