Non-Custodial Parent’s Establishment Of A Special Needs Trust For Child Would Not Justify Elimination Of That Parent’s Child Support Obligation

In Bond v. Bond, the Appellate Division considered whether a non-custodial parent’s creation of a special needs trust (“SNT”) can justify the elimination of that parent’s obligation to pay child support. Although it concluded that the non-custodial parent “may utilize a special needs trust to take advantage of government programs to lessen the burden on the parent to provide support and medical assistance,” it went on to reason that the creation of such a trust would not justify the non-custodial parent’s concurrent application seeking to eliminate his obligation to pay child support.

Plaintiff Jonathan Bond and defendant Wendy Bond are the divorced parents of two sons, ages 23 and 20. The elder child, referred to as “A.B.” in the opinion, is autistic. The parties’ property settlement agreement (“PSA”) obligated the father to pay $50,000 per year in child support for each child, regardless of the mother’s income. The PSA noted that A.B. would likely never become emancipated, and that the father would pay his special education and similar expenses. It also set forth the parties’ agreement that each child should “attend and accomplish the highest level of schooling/education possible for that child.” After the divorce, A.B. was declared incapacitated, and Jonathan and Wendy Bond were appointed co-guardians of his person and property.

When A.B. turned 21, he enrolled in a residential facility for special needs young adults. Following A.B.’s enrollment, Jonathan Bond filed a motion seeking, inter alia, to establish an SNT for A.B. and eliminate the child support obligation; and to apportion A.B.’s expenses based upon the parties’ income and assets. Wendy Bond cross-moved to determine the parties’ financial contributions toward each of the sons’ expenses, and for an award of counsel fees. Although Wendy Bond did not oppose her ex-husband establishing an SNT for their son, she objected to the termination of child support.

By Order of December 15, 2009, Mr. Bond’s request to eliminate child support and establish the SNT was denied. He was also ordered to pay 99% of post-secondary educational costs of the parties’ non-disabled son, with the mother being responsible for 1% of those costs.

The trial court also concluded that the father had acted in bad faith, and awarded $27,397 in counsel fees to the mother.

By Order of March 17, 2010, a motion judge (who had not made the earlier rulings) directed Mr. Bond to pay $5,335 in counsel fees for failing to comply with the December 15, 2009 Order.

On appeal, the Appellate Division found it appropriate to review the parties’ finances. It found that, although Mr. Bond was claiming that his financial circumstances had declined in recent years, his 2008 gross earned income was $4,924,469.  It found that he owns a $6 million home in New York City and a $3 million beach house in Bridgehampton. His net worth is reportedly over $8 million. Wendy Bond’s earned income in 2008 was $9,218, although her unearned income was $253,539 (apparently reflecting income earned from equitable distribution). She has a $1.9 million home in Short Hills. Her claimed expenses include contribution for A.B.’s extracurricular activities, medication, clothing and toiletries, and her frequent travels to and from his residential school, including hotels, meals, and activities with A.B. during her visits. She maintains a home for A.B.’s visits, and she pays for his vacations.

The Appellate Division noted that, although the application was advanced by the father as one for the establishment of an SNT, the trial court had “perceptively concluded that this was primarily an application to terminate child support,” and to require the parties to contribute toward the children’s living expenses based on their relative income and assets. It found that, although an SNT is a beneficial tool to allow funds to be invested in a manner that would not disqualify the beneficiary from governmental benefits, the parties had entered into the PSA fully recognizing A.B.’s future needs. It went on to find that Mr. Bond had failed to establish that his claimed decrease in income was permanent, or that A.B. would actually be eligible for public benefits if the SNT were established. It noted that, in the event that A.B.’s assets were depleted in the future, he would become eligible for public benefits at that point, and it denied Mr. Bond’s application:

In sum, we conclude that plaintiff failed to demonstrate any “changed circumstances” that would warrant a modification of the PSA …Ultimately, plaintiff’s motion was a self-serving effort to revise the terms of the PSA to make them more favorable to him.

With regard to the March 17, 2010 Order by the motion judge directing Mr. Bond to pay $5,335 in counsel fees for failing to comply with the prior Order, the appellate court remanded for a statement of reasons. As to the trial court’s other rulings, it affirmed.

A copy of the December 22, 2011 opinion in the Bond case is annexed here – Bond v. Bond

UPDATED ON AUGUST 23, 2013: Plaintiff Jonathan Bond filed a petition for certification to the New Jersey Supreme Court, which was granted. On review, the Supreme Court created a new legal standard for courts to apply when considering applications to establish special needs trusts for the disabled children of divorcing parents. In considering such applications, the Court held that lower courts should use the “best interest of the child.” The Court ultimately affirmed the denial of plaintiff’s application, ruling that he failed to demonstrate how the establishment of the special needs trust was in the best interest of his disabled child. I blogged about the Supreme Court opinion here.