NJ's New Child Support Statute

Of course, the issue of emancipation will remain under the purview of the family courts as supported by the statute's legislative history, which states that “nothing in the bill would affect the authority of the court to make judicial determinations regarding the legal emancipation of the child.” As such, courts should continue to utilize the standard set forth in Filippone v. Lee, 304 N.J. Super.301, 308 (App. Div. 1997), wherein the essential emancipation inquiry is whether the “child has moved 'beyond the sphere of influence and responsibility exercised by a parent and obtains an independent status of his or her own.'” The obligation of a parent to provide child support “might continue indefinitely if the child were crippled or unable to support himself.” Kruvant v. Kruvant, 100 N.J. Super. 107, 116 (App. Div. 1968).

Indeed, the new child support statute must be reconciled with the language set forth in N.J.S.A. 2A:34-23, stating that a child support obligation for an unemancipated child “shall not terminate solely on the basis of the child's age if the child suffers from a severe mental or physical incapacity that causes the child to be financially dependent on a parent.” The support obligation for such a child “shall continue until the court finds that the child is relieved of the incapacity or is no longer financially dependent on the parent.”

Options for Preserving the Right to Government Benefits

If the parties agree that their child remains unemancipated, or if the court adjudicates such, an important question arises as to how such “financial maintenance” should be paid.

So as to maximize the child's access to governmental benefits, parties should consider depositing money for that child into a trust. In fact, parties should consider such a trust as soon as applicable. N.J.S.A. 2A:34-23 even specifically provides that “the court shall consider” a disabled child's “eligibility for public benefits and services for people with disabilities and may make such orders, including an order involving the creation of a trust, as are necessary to promote the well-being of the child.”

Supplemental security income (SSI), established in 42 U.S.C.A. §§ 1381-1385, is a means-tested federal disability program administered by the Social Security Administration. The amounts received by a child “are not to be credited against the non-custodial parent's child support obligation[.]” Gifford v. Benjamin, 383 N.J. Super. 516, 518 (App. Div. 2006). SSI differs from Social Security disability (SSDI) because the latter is paid out of the Social Security trust fund and is available to those who have worked for a minimum amount of years, which is presumably not the case for a child with special needs.

In order to qualify for SSI, the applicant must be: 1) aged 65 or older; 2) blind; or 3) disabled.

An adult (over 18) is considered disabled for SSI purposes if he or she has a “medically determinable physical or mental impairment (including an emotional or learning problem)” which: 1) results in an inability to perform substantial gainful activity (SGA); and 2) can be expected to result in death or has lasted or is expected to last for a continuous period of at least 12 months. The disability determination for a child is identical, except that the impairment must result in marked and severe functional limitations rather than SGA analysis. SGA is demonstrated where an applicant earns in excess of $1,170 per month (for 2017).

In calculating the amount of SSI the applicant is to receive, the value of the items owned must be less than $2,000 for a single person, not including the value of the person's home, and typically not including the value of the person's automobile. The current federal benefit rate (FBR) is $735 per person; however, this amount will be reduced by the person's “countable income,” which is the amount left over after eliminating items that are not income and applying appropriate exclusions. A person receiving SSI can still earn a certain amount and continue to receive SSI, but the income earned serves to decrease the amount that person will receive in SSI. 42 U.S.C.A. § 1382h. The SSI recipient's income must fall below the SGA for them to continue to receive benefits.

Child support is deemed unearned income to a child for SSI purposes. SSA POMS SI 00830.420(B)(1). This is because, in New Jersey, “child support belongs to the child.” Pascale v. Pascale, 140 N.J. 583, 591 (1995). Thus, “child support paid directly to a parent is considered an asset of the child in the nature of unearned income and will disqualify the child for government benefits.” J.B. v. W.B., 215 N.J. 305, 324 (2013). “Maintenance” will likely be treated in the same manner.

In order to prevent disqualification for SSI because of child support or maintenance, parties should consider the use of a special needs trust, which is designed to maintain eligibility for such programs. J.B., 215 N.J. at 322. Such a trust is authorized pursuant to 42 U.S.C.A. § 1396p(d)(4)(A) and N.J.S.A. 3B:11-37. These statutes provide that the contents of the trust are not considered resources or assets for SSI eligibility determination. The contents may also be excluded from the disabled individual's income if certain requirements are met, the most important of which is that “the state must 'receive all amounts remaining in the trust upon the death' of the trust beneficiary 'up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.'” J.B., 215 N.J. at 323.

Additional requirements for such trusts can be found in the implementing regulations. See N.J.A.C.10:71-4.11(g)(1)(i)(xviii). For instance, the trust must state that: 1) it is to solely benefit the beneficiary; 2) it is irrevocable; and 3) that the trust assets are for supplementation, and not to supplant, impair or diminish governmental benefits or assistance.

Parties may also consider a pooled trust, which is a self-settled trust that will maintain the child's eligibility for governmental benefits and is established and managed by a nonprofit organization instead of the parents, grandparents or guardian.

Another potential consideration is a supplemental benefits trust, which is funded with the assets of a third party rather than with the assets of the disabled person. Thus, it may not be the appropriate solution for the ongoing payment of child support or maintenance. In order to ensure that this type of trust will not jeopardize the disabled child's access to governmental benefits, the child must have no control or access to the trust funds.

Conclusion

If a person qualifies for SSI, he or she can also automatically receive Medicaid, and may be eligible for additional programs. Thus, the benefits of maintaining SSI eligibility are of paramount importance for a child with special needs, and parents must keep this issue in the forefront when determining the manner in which child support is paid and how child maintenance after the age of 23 will be handled.·

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Kory Ann Ferro is an associate in the Saddle Brook, NJ, firm of Cohn Lifland Pearlman Herrmann & Knopf LLP. This article also appeared in the New Jersey Law Journal, an ALM sibling publication of this newsletter.

New Jersey's new child support statute, titled Termination of Obligation to Pay Child Support, N.J.S.A. 2A:17-56.67, became effective on Feb. 1. Under this statute, a child support obligation terminates “by operation of law” when the child turns 19, which termination can be extended until the child turns 23 under certain circumstances and using certain procedures. Unless another age for termination of support is present in a court order, or where the child is in an out-of-home placement, the burden is on the custodial parent to submit an application and supporting documentation to the court that seeks an extension of child support beyond the child's 19th birthday. Such a burden is nothing new, as a child reaching the age of majority has long been “ prima facie , but not conclusive, proof of emancipation.” Llewelyn v. Shewchuk , 440 N.J. Super. 207, 216 (App. Div. 2015). However, the statute's definitive termination of a child support obligation upon the child's 23rd birthday is new.

Children with Special Needs

An important question to be raised in conjunction with this statute is how it will impact children with special needs. Section (e) of the new statute provides that the court is not prevented “from converting, due to exceptional circumstances, including, but not limited to, a mental or physical disability, a child support obligation to another form of financial maintenance for a child who has reached the age of 23.” As such, it would seem that the legislature simply seeks to relieve the State's Probation Departments from the obligation to monitor and enforce an ongoing child support obligation of a parent to a child with special needs. Rebranding child support as “financial maintenance” means that parties will be left to their own devices with regard to setting up ongoing payment and collection of support for a child with special needs.

Of course, the issue of emancipation will remain under the purview of the family courts as supported by the statute's legislative history, which states that “nothing in the bill would affect the authority of the court to make judicial determinations regarding the legal emancipation of the child.” As such, courts should continue to utilize the standard set forth in Filippone v. Lee, 304 N.J. Super.301, 308 (App. Div. 1997), wherein the essential emancipation inquiry is whether the “child has moved 'beyond the sphere of influence and responsibility exercised by a parent and obtains an independent status of his or her own.'” The obligation of a parent to provide child support “might continue indefinitely if the child were crippled or unable to support himself.” Kruvant v. Kruvant , 100 N.J. Super. 107, 116 (App. Div. 1968).

Indeed, the new child support statute must be reconciled with the language set forth in N.J.S.A. 2A:34-23, stating that a child support obligation for an unemancipated child “shall not terminate solely on the basis of the child's age if the child suffers from a severe mental or physical incapacity that causes the child to be financially dependent on a parent.” The support obligation for such a child “shall continue until the court finds that the child is relieved of the incapacity or is no longer financially dependent on the parent.”

Options for Preserving the Right to Government Benefits

If the parties agree that their child remains unemancipated, or if the court adjudicates such, an important question arises as to how such “financial maintenance” should be paid.

So as to maximize the child's access to governmental benefits, parties should consider depositing money for that child into a trust. In fact, parties should consider such a trust as soon as applicable. N.J.S.A. 2A:34-23 even specifically provides that “the court shall consider” a disabled child's “eligibility for public benefits and services for people with disabilities and may make such orders, including an order involving the creation of a trust, as are necessary to promote the well-being of the child.”

Supplemental security income (SSI), established in 42 U.S.C.A. §§ 1381-1385, is a means-tested federal disability program administered by the Social Security Administration. The amounts received by a child “are not to be credited against the non-custodial parent's child support obligation[.]” Gifford v. Benjamin , 383 N.J. Super. 516, 518 (App. Div. 2006). SSI differs from Social Security disability (SSDI) because the latter is paid out of the Social Security trust fund and is available to those who have worked for a minimum amount of years, which is presumably not the case for a child with special needs.

In order to qualify for SSI, the applicant must be: 1) aged 65 or older; 2) blind; or 3) disabled.

An adult (over 18) is considered disabled for SSI purposes if he or she has a “medically determinable physical or mental impairment (including an emotional or learning problem)” which: 1) results in an inability to perform substantial gainful activity (SGA); and 2) can be expected to result in death or has lasted or is expected to last for a continuous period of at least 12 months. The disability determination for a child is identical, except that the impairment must result in marked and severe functional limitations rather than SGA analysis. SGA is demonstrated where an applicant earns in excess of $1,170 per month (for 2017).

In calculating the amount of SSI the applicant is to receive, the value of the items owned must be less than $2,000 for a single person, not including the value of the person's home, and typically not including the value of the person's automobile. The current federal benefit rate (FBR) is $735 per person; however, this amount will be reduced by the person's “countable income,” which is the amount left over after eliminating items that are not income and applying appropriate exclusions. A person receiving SSI can still earn a certain amount and continue to receive SSI, but the income earned serves to decrease the amount that person will receive in SSI. 42 U.S.C.A. § 1382h. The SSI recipient's income must fall below the SGA for them to continue to receive benefits.

Child support is deemed unearned income to a child for SSI purposes. SSA POMS SI 00830.420(B)(1). This is because, in New Jersey, “child support belongs to the child.” Pascale v. Pascale , 140 N.J. 583, 591 (1995). Thus, “child support paid directly to a parent is considered an asset of the child in the nature of unearned income and will disqualify the child for government benefits.” J.B. v. W.B. , 215 N.J. 305, 324 (2013). “Maintenance” will likely be treated in the same manner.

In order to prevent disqualification for SSI because of child support or maintenance, parties should consider the use of a special needs trust, which is designed to maintain eligibility for such programs. J.B., 215 N.J. at 322. Such a trust is authorized pursuant to 42 U.S.C.A. § 1396p(d)(4)(A) and N.J.S.A. 3B:11-37. These statutes provide that the contents of the trust are not considered resources or assets for SSI eligibility determination. The contents may also be excluded from the disabled individual's income if certain requirements are met, the most important of which is that “the state must 'receive all amounts remaining in the trust upon the death' of the trust beneficiary 'up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.'” J.B., 215 N.J. at 323.

Additional requirements for such trusts can be found in the implementing regulations. See N.J.A.C.10:71-4.11(g)(1)(i)(xviii). For instance, the trust must state that: 1) it is to solely benefit the beneficiary; 2) it is irrevocable; and 3) that the trust assets are for supplementation, and not to supplant, impair or diminish governmental benefits or assistance.

Parties may also consider a pooled trust, which is a self-settled trust that will maintain the child's eligibility for governmental benefits and is established and managed by a nonprofit organization instead of the parents, grandparents or guardian.

Another potential consideration is a supplemental benefits trust, which is funded with the assets of a third party rather than with the assets of the disabled person. Thus, it may not be the appropriate solution for the ongoing payment of child support or maintenance. In order to ensure that this type of trust will not jeopardize the disabled child's access to governmental benefits, the child must have no control or access to the trust funds.

Conclusion

If a person qualifies for SSI, he or she can also automatically receive Medicaid, and may be eligible for additional programs. Thus, the benefits of maintaining SSI eligibility are of paramount importance for a child with special needs, and parents must keep this issue in the forefront when determining the manner in which child support is paid and how child maintenance after the age of 23 will be handled.·

*****
Kory Ann Ferro is an associate in the Saddle Brook, NJ, firm of Cohn Lifland Pearlman Herrmann & Knopf LLP. This article also appeared in the New Jersey Law Journal, an ALM sibling publication of this newsletter.