Written by Kevin Urbatsch, JD, and Evelyn Wynn, JD
Divorce is always complex, but when it involves a spouse or child with disabilities who receives means-tested public benefits, the stakes become even higher. Property settlements, spousal support, and child support can inadvertently disqualify beneficiaries from critical programs such as Supplemental Security Income (SSI) and Medicaid.
This article examines strategies for preserving benefits during divorce proceedings, focusing on using special needs trusts (SNTs), carefully structuring support obligations, and considering divorce as a potential planning tool. While such issues arise most often in family law, they demand the attention of special needs planners, who are usually best positioned to identify risks and coordinate with family law counsel. Even those not practicing family law are frequently the first professionals to recognize these risks. Understanding the intersection between divorce and benefits planning is critical to protecting clients and avoiding malpractice pitfalls.
UNDERSTANDING THE BENEFITS LANDSCAPE
The federal disability benefit system operates through multiple programs with distinct eligibility rules. Knowing the difference is essential for divorcing families.
- Social Security Disability Insurance (SSDI): SSDI is based on an individual’s work history and is not means tested. A spouse’s income or assets do not affect eligibility. SSDI recipients also qualify for Medicare after a two-year waiting period.
- Medicare: Medicare is a federal health insurance program that covers hospital and physician services but has limited coverage for long-term care or in-home care support. Divorce and property division do not affect Medicare eligibility. However, because Medicare leaves significant gaps in long-term services, many SSDI recipients eventually need Medicaid. Specific Medicaid programs supplement Medicare coverage by helping to pay for Part B premiums and the 20 percent of medical expenses not covered by Medicare, including prescription costs.
- Supplemental Security Income (SSI): A needs-based program, SSI has strict limits: $2,000 in countable assets for individuals and $3,000 for couples, plus income rules that reduce benefits dollar-for-dollar. Effective January 2026, the federal benefit rate is $994 per month for an individual and $1,491 for a couple. Receiving SSI automatically qualifies a recipient for Medicaid in most states.
- Medicaid: Medicaid provides vital long-term care, in-home caregiving, and medical services not covered by Medicare. Like SSI, it has stringent income and asset restrictions, usually aligned with SSI’s limits. Therefore, divorce settlements, spousal support, or child support that provide direct cash or support payments threaten Medicaid eligibility.
In divorce planning, an SSDI or Medicare recipient can accept substantial property or spousal support without losing their benefits. However, if the same individual later needs Medicaid, the property or support could disqualify them. An SSI or Medicaid recipient is immediately at risk, since income and assets are counted at the time of receipt.
Hypothetical: Maria, age 42, receives SSDI based on her work history and Medicare after an injury. Currently, she does not rely on Medicaid, but she expects to need it in the future to cover in-home caregiving services that Medicare does not provide. In her divorce, the proposed settlement offers Maria $150,000 in cash plus monthly spousal support. If she accepts the settlement outright, those resources will prevent her from qualifying for Medicaid when the time comes, since the individual limit is $2,000. By irrevocably assigning the support and cash settlement into a properly drafted first- party SNT, Maria preserves her future Medicaid eligibility while receiving SSDI and Medicare without interruption.
THE MARRIAGE PENALTY IN SSI
The marriage penalty embedded in SSI compounds these challenges. When two SSI recipients marry, their combined benefit equals only 1.5 times the individual rate. This reduction, combined with spousal deeming rules that count one spouse’s income and resources against the other’s eligibility, creates powerful disincentives to marriage for individuals with disabilities.
Hypothetical: Anna and Sam each receive $994 per month in SSI. While they remain unmarried, their combined household SSI is $1,988. After marriage, their combined benefit drops to about $1,491 (1.5 times the individual rate, rounded down). This $497 monthly loss is compounded by spousal deeming rules, which count Sam’s small pension against Anna’s eligibility. For couples like Anna and Sam, marriage can reduce monthly resources enough to jeopardize their ability to cover basic needs. Some couples avoid marriage altogether; others may consider divorce to restore eligibility. . .
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