Whether the assignment of child support payments into the Michael Supplemental Benefits
Trust (Trust) is irrevocable, such that the payments should not be considered as income
to the claimant Michael (Michael) for purposes of determining eligibility for Supplemental
Security Income (SSI).
Because the terms of the assignment cannot be changed without modifying a court-ordered
judgment of divorce and property settlement agreement, we conclude that the assignment
of child support payments is irrevocable absent a change in circumstances. However,
we note that the treatment of any additions to the Trust as income may be dependent
in part on other factors, including the status of the underlying Trust as a resource.
Michael was born in 1997. His parents, Sandra and John, divorced in October 2013,
after entering into a Property Settlement Agreement (Agreement). At the request of
the parties, this Agreement was incorporated by Court order as part of the Dual Final
Judgment of Divorce, with Property Settlement Agreement Attached (Judgment of Divorce),
on October 28, 2013. Under the terms of the Agreement, John agreed to pay permanent
child support directly into a “Special Needs Trust” to be established on Michael’s
behalf, but the Court did not expressly order the creation of a trust.  The Trust instrument was executed the following month, in November 2013. The Trust
states that it is intended to be the recipient of Michael’s child support payments
“in order to protect and continue [his] qualification for public benefits.” Trust,
Article (Art.) II(C). Michael’s mother stated that all funds deposited in the account
consist of child support payments owed in accordance with the Agreement, although
it appears that the account may have been opened with a nominal sum ($5.00) provided
separately by Michael’s parents.
The terms of the Trust provide that “[a]t no time shall [Michael] obtain a vested
interest in Trust income or principal.” Trust, Art. III(F). However, Michael’s parents
retain the right to revoke the Trust or amend any of its terms, if both parties agree.
Trust, Art. V(A)-(B). The Trust may also be revoked or amended by the action of one
parent alone, if the other is incapacitated or deceased. Id. After the death of both parents, the “Trust shall become irrevocable.” Trust, Art. V(C).
Child support payments are generally considered to be unearned income to the recipient.
42 U.S.C. § 1382a(a)(2)(E); 20 C.F.R. § 416.1121(b); see Program Operations Manual System (POMS) SI 00830.420 (providing that some payments from an absent parent may be excluded). However, if
a legally assignable payment is irrevocably assigned to be paid directly to a trust
that is not itself a resource, the payment is not considered to be income for SSI
purposes. POMS SI 01120.201(J)(1); see also POMS SI 01120.200(G)(1).  If the assignment is revocable, in contrast, the payment remains income to the individual
legally entitled to receive it. Id. Child support payments may be considered irrevocably assigned to a trust when they
are court ordered or when the terms of the assignment cannot be modified. See POMS SI 01120.201(C)(2)(b).
In this case, Michael’s parents entered into a Property Settlement Agreement, which
included a provision that child support payments would be made directly to the Trust.
See Agreement, ¶ 5.1 (providing that “Husband will pay $770.50 per month permanent child
support for Michael ” and that “Michael’s child support will go directly into the
Special Needs Trust”). The Agreement was incorporated as part of the Judgment of Divorce,
and child support payments are presumably being made to the Trust at present. You
have asked whether the court’s order renders the assignment of these funds to the
First, we note that the Judgment of Divorce expressly states that the Court “neither
approved or disapproved” the Agreement, but merely incorporated the Agreement by reference
at the request of the parties. However, even if this created doubt as to whether the
assignment was “court ordered,” as stated in your question, New Jersey law recognizes
that a property settlement agreement is a binding contract and should be enforced
according to the original intent of the parties. See, e.g., Pacifico v. Pacifico, 920 A.2d 73, 77 (N.J. 2007). We therefore conclude that the assignment in this case
was binding once signed and incorporated, whether as a result of the court order or
the underlying contract between the parties.
New Jersey law also permits child support payments to be made to a trust, especially
when that trust is designed to meet the present and future needs of a dependent, disabled
child. See J.B. v. W.B., 73 A.3d 405, 419 (N.J. 2013) (“The redirection of a child support obligation from
a parent to a trust designed to meet the present and future needs of the dependent,
disabled child should not be considered exceptional or extraordinary relief, if such
a plan is in the best interests of the unemancipated child.”). Michael’s child support
payments, therefore, are legally assignable.
Furthermore, as a general rule, “absen[t] . . . unconscionability, fraud, or overreaching
in negotiations of the settlement,” a trial court has “no legal or equitable basis
. . . to reform the parties’ property settlement agreement.” Miller v. Miller, 734 A.2d 752, 758 (N.J. 1999); see J.B. v. W.B., 73 A.3d at 417 (noting that “care must be taken not to upset the reasonable expectations
of the parties”) (internal citations omitted). Support obligations may nonetheless
be modified, provided the requesting party meets the threshold standard of changed
circumstances. Lepis v. Lepis, 416 A.2d 45, 54 (N.J. 1980). In this case, the Judgment of Divorce indicates that
both parties represented to the Court that the Agreement was entered into freely and
voluntarily, and the Agreement itself states that “the parties are satisfied that
[the] Agreement is fair and equitable.” Agreement, ¶ 6.8. We are also not aware of
any change of circumstances that would cause the Court to modify the order and Agreement
requiring that child support payments be made directly to the Trust.
Although the Trust does include an article reserving the right of Michael’s parents
to revoke the Trust if both parents agree or one parent is incapacitated or deceased,
the language of the Agreement itself is mandatory and does not provide for an alternative
to the deposit of “child support . . . directly into the Special Needs Trust.” Agreement,
¶ 5.1; see Trust, Art. V. Because the Agreement was incorporated as part of the Judgment of Divorce,
and is treated as a binding contract under New Jersey law, it seems likely that a
modification would be necessary if the parties wished to cease making payments into
the Trust or to revoke the Trust entirely. This again would require a showing of changed
circumstances. See Lepis v. Lepis, 416 A.2d at 54; see also J.B. v. W.B., 73 A.3d at 417 (noting that where parents have “agreed to undertakings advantageous
to a child beyond that minimally required, the public policy favoring stability of
arrangements usually counsels against modification”) (internal citations omitted).
In the absence of such circumstances, at this time the child support payments are
irrevocably assigned to the Trust.
Although we were asked only for an opinion as to whether the assignment of child support
payments into the Trust is irrevocable as a result of the Court’s order, your question
suggested that you are reviewing these payments for treatment as potential income.
We therefore note that, even if the Court’s order directing payment of Michael’s child
support into the trust is irrevocable at present, the treatment of any additions to
the trust as income may be dependent in part on other factors. In particular, if the
underlying Trust is itself determined to be a resource, additions to the trust principle
may be considered as income or conversion of a resource. See POMS SI 01120.201(B)(3), SI 01120.201(C)(3), SI 01120.201(J)(2)-(3); see also POMS SI 01120.200(G)(2)(b).
We conclude that the child support payments are irrevocably assigned to the Trust,
but note that this may not fully determine whether additions to the Trust are appropriately
considered as income.