Should My Child’s Special Needs Trust Own a Home?

One of the biggest concerns for parents of children with disabilities is where their child will live in the future. Adequate housing options for people with disabilities is a challenge to say the least. Some parents want their child to continue to live in the family home after they are gone. Other parents consider leaving funds for their child that would allow them to own their own home. In both cases, it must be determined if the home should be owned by a Special Needs Trust. The first step is to weigh the benefits of home ownership against renting to determine the best fit.  Here is an overview of the rules and issues that can arise when a  Special Needs Trust owns a home.

It is important to identify what type of trust would own the home. There are a few options. A First Party Special Needs Trust is funded with the child’s own assets, and after the disabled child’s death, the state would be reimbursed from the funds in the trust for Medicaid services used during their lifetime.  A Third-Party Special Needs Trust is funded with someone else’s assets, such as the parents or proceeds from a life insurance policy. This type of trust does not require reimbursement to the state.

Another consideration in deciding whether a residence is better owned by a Special Needs Trust or the individual is whether that person has the legal capacity to hold title on their own and what decision-making supports the person needs. Minors simply cannot hold title and would require a guardian/conservator to be appointed.  Many adults may also need support to manage home ownership. If an adult is under guardianship/conservatorship, the guardian/conservator would likely have legal authority to manage the property.

You should also think about who might live in the home. If the home is owned outright by a First Party Special Needs Trust, there may be complications if other family members also live there. Distributions from First Party Special Needs Trusts are supposed to be for the sole benefit of the beneficiary, and this may be interpreted differently by Social Security. Depending on the level of caregiving performed by family members, they may be required to pay rent in order to avoid affecting the beneficiary’s eligibility for government benefits.

There’s quite a bit to think about when it comes to home ownership. If this is something you are considering, please be sure to work with an experienced Special Needs Planning Attorney. Call the Law Office of Sheri R. Abrams at (571) 328-5795 and we’ll be happy to walk you through these and other complex issues so that you can make the best decision for your child.