By Mary E. O’Byrne, Esq.
A chief concern of parents of a child with disabilities is where the child will live when the parents are gone. Here is the framework for one solution to consider.
Individuals with disabilities and their parents face a multitude of planning concerns. One of the most worrisome is where the individual will live — what place they will call home — when the parents have died. There are many housing options available for individuals with disabilities, each with their own possibilities and obstacles. One model of particular relevance to the special needs planning attorney is leaving the family home in trust for the benefit of an individual with disabilities.
Attorneys need to counsel the clients on these plans, to understand the wishes of the individual with disabilities, address financial feasibility, to reveal expectations about the roles that others will play and assumptions about the extent of services available to the person with disabilities from the State, and to draft trusts with the flexibility to respond to changing life circumstances, all in support of the individual with disabilities living in the setting of their choice, with access to the people, activities, and services they choose as they pursue an engaged and fulfilling life
What Will it Cost to Take Care of the Home?
The threshold question for clients wanting to leave the family home in trust for the benefit of their child with disabilities is: are there sufficient funds to take care of the property during the child’s residency and to achieve the clients’ other quality of life and legacy goals?
This assessment will be improved by considering not only the routine expenses, such as a mortgage, property taxes, home owners insurance, utilities, and community association or condominium fees, but also the cost of major repairs and replacement of appliances. A rigorous review of the actual and projected costs of operating and maintaining the home should be conducted to enable calculation of the funds needed over time to take care of the property. Clients might consider having a home inspection to get a more accurate picture of the remaining life of various appliances and insight into future repair or replacement needs.
Parents should also consider the value of their time presently devoted to supporting and assisting their child and taking care of the home property. When the parents are gone, these tasks will remain. While increased staffing or other services under home and community-based services waivers may fill some of these gaps (e.g., transportation may be covered), waivers will not pay the mortgage or other expenses related to maintaining the home property or replacing appliances.
The individual with disabilities will have their own income which may provide for contribution to household expenses, but individuals who are waiver eligible already have limited income, and these funds may be committed to contribute to the cost of care for waiver services as well as the individual’s personal expenses.
Drafting for Flexibility
Clients may focus on their home as the ideal place for their child with disabilities to remain, but on further questioning may acknowledge that their true goal is to provide for a safe, secure, and desirable residence for their child. While the family home may be the preferred choice at the time a trust is drafted, countless circumstances can change that preference, such as the home becoming too costly to maintain, the client or beneficiary no longer wishing to reside there, and changes in the beneficiary’s ability to live independently. The trust should be drafted to allow the trustee maximum flexibility to respond to the beneficiary’s changing needs for a safe and secure residence, which may ultimately call for another home purchase, a rental, assisted living, retirement community or residential care through a waiver program.
A revocable trust is the recommended vehicle for such long term arrangements, allowing the greatest flexibility. If an irrevocable trust is preferred for other compelling reasons, then at a minimum the trust should include the power for someone to change the trustee appointments, to modify the trust in the event of changes in law related to public benefits and, if allowed by state law, to be decanted into a new trust.
Selection of the Trustee
As with any special needs trust, the selection of the trustee is critical. Introducing management of real property to the trustee’s job makes this selection even more important, bringing with it responsibilities to maintain the property, pay property taxes and other lienable expenses, comply with local government codes, and manage the relationship with other residents. These are duties of a regular and persistent nature, requiring detailed records, prompt payments, scheduling, and an ability to respond to emergencies.
A trustee holding real property must have a long view. The beneficiary will age, and over time may need different accommodations or assistance. Neighborhoods change; the immediate area may become unsafe or property values may increase so much that it is prudent to sell and acquire another residence. The property condition may decline or be damaged suddenly.
Depending on the total value of the trust assets, a corporate trustee may be an option. Often these trustees have the resources of a property management team on board. There are non-profit trust companies that focus on serving people with disabilities; an increasing number now will hold and manage real property in trust. The clients’ circumstances may recommend having two trusts, one to hold and manage the real property and another to hold the other trust assets, to take advantage to trustees with different strengths who can work together effectively.
Planning for our children’s future is a labor of love and anxiety, especially for parents of a child with disabilities. Chief among the concerns is where the child will live when the parents are gone. Many parents want to leave the family home in trust for their child and take comfort in the thought that their child will always have a familiar and beloved residence to shelter them. Special needs planning attorneys can help their clients work through the practicalities of this plan, considering the life-long financial requirements, the need for and availability of public benefits and support services, and the need for flexibility to respond to life and environmental changes; they must also counsel their clients to involve their child with disabilities in developing this plan, to ensure that it reflects the child’s wishes.
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Mary E. O’Byrne is with O’Byrne Law, LLC, where she focuses her practice on estate planning, special needs planning, elder law, and fiduciary services.