SHOULD I LEAVE MY HOME TO MY CHILD WITH DISABILITIES?

by Thomas D. Begley, Jr., Esquire, CELA and Emily M. Schurr, Esquire

            A home is a very special place.  Usually parents of a child with disabilities feel that their child is comfortable in that home, and they would like to leave it to that child so he or she can continue to live there.  There are a number of factors that should be considered prior to making this decision.  The first is whether the home would be left outright to the child or to a Third Party Special Needs Trust (TPSNT) for the benefit of the child.

Home to Child Outright

• Public Benefits. Typically, a child with disabilities receives public benefits.  These benefits might include the following:
• Supplemental Security Income (SSI). This is a monthly income from Social Security.  In New Jersey the total combined federal and state benefit for 2024 is $974.25.  There is a $2,000 asset limit for SSI, but a home is a non-countable asset.
• Medicaid. Medicaid is a medical insurance program.  There are a number of pathways to Medicaid.  One pathway is that if an individual receives SSI, he or she is automatically entitled to Medicaid.  Other paths include New Jersey FamilyCare.  For many Medicaid programs there is a $2,000 asset limit, but a home is not a countable asset.
• Federally Assisted Housing. An individual owning his or her own home would not be eligible for Federally Assisted Housing unless the home was sold, and then there would be a $100,000 asset limit for Federally Assisted Housing, such as Section 8 Housing.
• Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps). Households with a family member over age 60 or disabled have an asset limit of $4,250.
• Social Security Disability Insurance (SSDI). Again, this is a monthly income from the Social Security Administration, and it is dependent on the work record of the individual with disabilities or the parent of the individual with disabilities.  There is no asset limit for SSDI.
• Medicare. Individuals over age 65 are entitled to Medicare.  Individuals receiving SSDI are also entitled to Medicare after two years of qualification for SSDI.  There is no asset limit for Medicare.
• Management Skills. Does the child with disabilities have sufficient skills to manage a home by themselves?  Will they be able to ensure that the home is property maintained over a long period of time?
• Estate Recovery on Death. If the child with disabilities is receiving Medicaid and owns the home outright, Medicaid will impose a lien on the home on the death of the child with disabilities for all medical benefits received after age 55.

Home to Third Party Special Needs Trust

            If the home is left to a TPSNT for the benefit of the child with disabilities, eligibility for SSI, Medicaid, Federally Assisted Housing, and SNAP would not be affected so long as the trust is properly administered.  Because the trust is a TPSNT as opposed to a Self-Settled Special Needs Trust (SSSNT), there would be no Medicaid estate recovery on death.  If the trust provides free shelter to the child with disabilities, the SSI payment of that child would be reduced by one-third, approximately $313 per month, because this would be considered in-kind support and maintenance (ISM).  However, this reduction can be avoided by having the trust beneficiary pay rent of $400 to $500 per month from the SSI payment, paid to the trust that owns the home.

Considerations

            There are a number of factors to be considered before leaving a home either outright or in trust for a child with disabilities.  These include the following:

1. Management Skills. Does the child with disabilities have sufficient management skills to live in a home and maintain it?  If not, a TPSNT with a responsible trustee may be a better option.
2. Living Arrangements. Will the child with disabilities live alone or with others?
3. Shelter Expenses. Does the child or the TPSNT for the child’s benefit have sufficient funds to pay taxes, insurance, utilities, repairs, and maintenance together with any condominium or co-op fees associated with the home?
4. Non-Shelter Expenses. Does the child or the TPSNT have sufficient funds to pay the child’s non-shelter expenses such as transportation (including purchase of a car, automobile insurance, gasoline, vehicle maintenance, etc.), household supplies, clothing and shoes, hair care, vacations, entertainment, non-prescription items purchased at a pharmacy, unreimbursed medical, unreimbursed psychiatric or psychological counseling, unreimbursed dental, unreimbursed medical insurance, and the cost of a caregiver?
5. Sources of Income. What sources of income does the child have?  In addition to the Social Security income of the child with disabilities, funds from the trust can be considered, but care must be given to determine how long the parents want the trust to last and how much can be spent from the trust each year, if the parents want the trust to last the lifetime of the beneficiary.  Typically, this is 3% or 4%.

Additional Options

1. Sibling. Is it reasonable to assume that the child could live with a sibling in the sibling’s home and pay rent to the sibling either from Social Security income or from the trust?  Parents often assume that this option is workable, but often when the time comes the sibling feels that he or she is no longer able to perform this task.  Frequently, it is the spouse or children of the sibling who are the roadblocks.
2. Federal Housing. Federal housing is available for elderly and disabled individuals.  Typically, the rent is approximately 30% of the disabled individual’s income.
3. Group Homes. Group homes are available for individuals with disabilities.  There is a wide range in quality.  Some are very good.  Some are not so good.  The New Jersey Division of Developmental Disabilities (DDD) can be very helpful in the search.  Some providers, such as ARC, can also be helpful.  There is typically a long waiting list, so consideration should be given to applying early.
4. Private Home. Frequently a child with disabilities is capable of living by themselves in a private home but does not need as much space as the original family home.  Where a trust is involved, the trust could sell the family home, and purchase a smaller home in which the child with disabilities could reside.  A smaller home might be more affordable and may be a more practical solution than maintaining the larger, more expensive family home.