Under Illinois law, children may have a right to receive child support from one or both parents after they reach adulthood if they are disabled. However, they also may be eligible to receive Medicaid and Supplemental Security Income (SSI), which have strict income and asset limits. Ideally, these adults should be able to receive child support payments and maintain their eligibility for Medicaid and SSI.
If an adult child receives child support, parents will want to ensure that the child doesn’t become financially ineligible for Medicaid and SSI. As a result, parents may need to take specific steps to ensure that the adult child remains financially eligible for these programs.
Establishing an ABLE Account
One way that an adult child can receive child support from a parent is to establish an ABLE account. The child can receive child support payments of up to $16,000 per year (or $1,333 per month) in their ABLE account and still be eligible for Medicaid and SSI. A court can order that child support payments be paid directly and irrevocably into the child’s ABLE account to avoid impacting the child’s eligibility for Medicaid or SSI.
As long as the individual becomes disabled before age 26 and qualifies for SSI or SSDI benefits or has a similarly severe disability, they can establish an ABLE account. This account is a tax-free savings account similar to a 529 college savings plan. Although Illinois residents can establish an ABLE account through Illinois’s ABLE account program, they also can establish ABLE accounts through programs in other states.
An adult can have an ABLE account without losing eligibility for Medicaid and SSI. If an individual receives SSI, they can save up to a total of $100,000 in their ABLE account without losing eligibility for SSI. All earnings and withdrawals on ABLE accounts are tax-free as long as they use the funds for disability-related expenses (which are defined quite broadly by the IRS to include social and recreational opportunities including vacations).
Supplemental Needs Trusts
Adult children can also have any child support they receive paid directly to a first-party special needs trust.. Under Illinois law, families can set up two types of supplemental needs trusts for persons who have disabilities: third-party special needs trusts and first-party special needs or “payback” trusts. In most cases, the parents set up these trusts.
The funds in either type of special needs trust do not count against financial eligibility for public benefits programs such as Medicaid and SSI. If a parent pays child support directly into a first party special needs trust, it will not affect the adult child’s eligibility for those programs.
The difference between the two types of trusts is that a first party special needs trust contains property or funds that belong to the adult child (such as child support payments). As a result, if there is money left in the account at the time of their death, the state of Illinois can use those funds as reimbursement for medicaid benefits and services that the adult child received during their lifetime.
However, in the case of third-party special needs trust, there is no “payback” provision. Parents or other third parties must fund these trusts with their assets and never with assets that belong to the adult child. When the child passes the parents or others relatives that established the special needs trust will be able to decide where they want the remaining assets to go when the trust is drafted.
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