N.J. High Court Takes First Stab at PSA Modification for Redirection of Child Support into a Special Needs Trust

Brittney Cafero
Monday, February 10, 2014

I. The Case 

          In the case of J.B. v. W.B., the Supreme Court of New Jersey considered as a matter of first impression under what circumstances a parent of an adult, unemancipated, disabled child, can modify the terms of an property settlement agreement (PSA) in order to redirect his child support obligation into a newly created special needs trust.[1] The plaintiff, J.B., and defendant, W.B., were divorced parents of an autistic son, A.B., who had special needs; both parents  acknowledged he would likely never be emancipated.[2] At the time of the parents’ divorce, they negotiated a PSA, which dealt with issues about their son, but deferred others, such as payment of post-secondary education.[3]When their son enrolled in out-of-state post-secondary school, the father filed a motion to modify the PSA in order to establish financial responsibility for their son’s education and to create a special needs trust.[4]

          In New Jersey, child support paid to a parent is considered an asset of the child and disqualifies the child from receiving government benefits, and therefore, establishment of a special needs trust allows for disabled individuals to maintain eligibility for needs-based government benefits including Supplemental Security Income (SSI) and Medicaid.[5] In this light, per the New Jersey Administrative Code, a special needs trust is meant to supplement, not supplant, government benefits.[6]

          In determining whether the plaintiff could establish a special needs trust in place of some or all of the terms in the PSA, the Court used the threshold standard of “changed circumstances” and the guiding principle of “best interest of the child.”[7] Ultimately, the Court determined under what circumstances a parent may modify a child support obligation in an existing negotiated agreement by establishing a special needs trust.[8]

II. The Holding 

          The trial court denied the father’s motion because he did not demonstrate changed circumstances to warrant a modification of his support obligation and the proposed trust plan lacked sufficient detail to permit an informed decision about whether such a trust would be in the best interests of the child.[9] The appellate court affirmed, and the Court granted certification to resolve the issues.[10] The Court held that when a party to a comprehensive negotiated PSA seeks to modify any support obligation, that party must meet the threshold standard of “changed circumstances,” wherein “events that qualify as changed circumstances . . . include an increase in the cost of living, an increase or decrease in the income of the supporting or supported spouse, cohabitation of the dependent spouse, illness or disability arising after the entry of the judgment, and changes in federal tax law.”[11] However, the Court also determined that where resolution of certain issues is deferred in a PSA, the redirection of a child support obligation from a parent to a trust designed to meet the present and future needs of a dependent, disabled child should not be considered “exceptional or extraordinary relief,” as long as such a plan is in the “best interests” of the child.[12] Accordingly, the Court found the plaintiff's application to establish a special needs trust for the future financial needs of A.B. should have been evaluated under the “best interests of the child” standard.[13]

          Utilizing this standard, the Court held that the plaintiff “failed to present a detailed plan by which the trial court could evaluate whether a special needs trust furthers the best interests of A.B.”[14] Thus, in future cases, “[a] parent seeking to alter a negotiated agreement for the financial support of a disabled child or seeking court approval of a plan to address deferred and unresolved issues concerning the support of a dependent, disabled child must present a specific plan and demonstrate how the proposed trust will benefit the disabled child.”[15] However, the plaintiff failed to meet those requirements and did not establish with certainty that a special needs trust would render A.B. eligible for any government benefits.[16] In turn, the appellate division was affirmed.

* Brittney Cafero is a May 2015 J.D. candidate and a Staff Editor for the Rutgers Journal of Law & Public Policy.

[1] Debra McLoughlin, J.B. v. W.B., N.J. L.J., Aug. 22, 2013, available at http://www.law.com/jsp/nj/PubArticleNJ.jsp?id=1202616595729&slreturn=201....

[2] J.B. v. W.B., 73 A.3d 405, 409 (N.J. 2013).

[3] Id.

[4] Id.

[5] McLoughlin, supra note 1; see J.B., 73 A.3d at 415 (citing Medicaid Act, 42 U.S.C. § 1396p(d)(4)(A) (2012); N.J. ADMIN. CODE § 10:71-4.11(g)(1) (2013)) (“Contents of a special needs trust . . . may be excluded from the disabled person's income calculation only if the trust satisfies certain specific requirements.”).

[6] J.B., 73 A.3d at 415 (citing N.J. ADMIN. CODE § 10:71-4.11(g)(1)(iii)).

[7] McLoughlin, supra note 1.

[8] See J.B., 73 A.3d at 417-18.

[9] McLoughlin, supra note 1.

[10] J.B., 73 A.3d at 409, 412.

[11] Id. at 417.

[12] Id. at 419.

[13] Id.

[14] Id.

[15] Id.

[16] J.B., 73 A.3d at 420; see also McLoughlin, supra note 1.