Purchasing a Home With a Special Needs Trust Oct 5, 2020 Buying a house with a special needs trust can be a good move, but you should understand the pitfalls and complexities. For some people with disabilities, homeownership may present a uniquely empowering opportunity. But for many others, purchasing a home through a special needs trust may be in the beneficiary’s best interests. Homeownership comes with many pitfalls and responsibilities. Buying a home through a special needs trust, rather than through the beneficiary or a family member, can provide: additional protections against creditors allows for increased flexibility when selling the property since the assets are maintained with the trust. When buying a home, a key starting point is understanding the differences when the purchase is made through a first- or a third-party trust. Assets held in a first-party trust are considered those of the beneficiary, while third-party trusts, as the name implies, contain assets from a third party, such as a family member. Which of the two types of trusts is applicable can have a potential impact when the home is sold, particularly where the beneficiary is a Supplemental Security Income (SSI) or Medicaid recipient. If a first-party trust sells a home, then the Social Security Administration (SSA) considers the proceeds from the sale to belong to the SSI recipient. As SSI recipients may not own more than $2,000 in assets ($3,000 for couples), the sale will likely result in the termination of benefits, or some other immediate spend down or planning steps. In this situation, the SSA does provide some relief. Specifically, the SSA allows beneficiaries, upon request, up to nine months to reinvest the sale proceeds (typically on a new home) before the assets count against the beneficiary’s eligibility for benefits. On the other hand, sale proceeds from a home purchased by a third-party trust are not considered the beneficiary’s assets by the SSA. Another significant consideration is that of Medicaid and estate recovery. Where the home is the property of a first-party trust, federal and state Medicaid agencies may seek reimbursement upon the beneficiary’s death for Medicaid expenses incurred during the beneficiary’s lifetime. In some situations, this may result in the trust having to sell the home to reimburse Medicaid, a particularly problematic scenario if other people are living in the home. This gets more complicated when the original home is owned by a third-party (i.e. a parent) and the first-party trust assets have been used to upgrade or add-on to the home. What part of the home can Medicaid recover in these situations? Third-party trusts are not subject to Medicaid’s estate recovery laws and practices. As always, we at The Bell Law Firm are more than happy to help you with any special needs planning issues you may have. If you have questions or concerns about which tool may be best for your loved one, please give us a call at 913-345-2323. We will be happy to speak with you!