Can a special needs trust buy a home for the beneficiary?

Navigating the complexities of providing for a loved one with special needs requires careful planning, and a frequent question arises regarding housing – specifically, can a special needs trust (SNT) purchase a home for the beneficiary? The answer is yes, but it’s fraught with rules and potential pitfalls that demand expert legal guidance. A properly structured SNT can indeed purchase a home, offering a stable and secure living situation, but doing so requires adherence to strict guidelines to avoid jeopardizing the beneficiary’s eligibility for crucial public benefits like Supplemental Security Income (SSI) and Medi-Cal. Approximately 65% of individuals with developmental disabilities rely on government assistance programs, making preservation of eligibility paramount.

What are the key considerations when a special needs trust purchases a home?

When a special needs trust contemplates purchasing a home, several factors must be addressed. First, the home must be the *primary residence* of the beneficiary. A vacation home or investment property would disqualify the trust from purchasing. Second, the trust must ensure the home is purchased and maintained *solely* for the benefit of the beneficiary, and no portion of the home’s value can be attributable to anyone else. This means the beneficiary must have exclusive use and occupancy. Third, the trust must be able to cover all costs associated with the home—mortgage payments, property taxes, insurance, maintenance, and repairs—without relying on the beneficiary’s own income or resources. If the beneficiary contributes financially, it can be deemed an unallowed asset and disqualify them from vital benefits. Furthermore, the trust’s terms must explicitly allow for the purchase and maintenance of real estate. It’s vital to remember that the rules surrounding SNTs are incredibly nuanced and vary depending on the type of trust—first-party (self-settled) or third-party—and the specific state regulations.

How does homeownership impact public benefits like SSI and Medi-Cal?

The biggest concern with a beneficiary owning or residing in a home purchased by a trust is the potential impact on SSI and Medi-Cal eligibility. SSI has strict income and resource limits. A home owned directly by the beneficiary would be considered an asset, potentially exceeding those limits and disqualifying them from receiving benefits. However, when a *trust* owns the home, it’s generally not counted as an asset for SSI purposes, *as long as the beneficiary does not have equitable ownership*. Medi-Cal, while also having asset limitations, has specific rules regarding the “patient’s share of income” (PSI), which the beneficiary must contribute towards their care. The trust must ensure the beneficiary’s PSI can be met without relying on the home’s equity. Approximately 1 in 500 children has autism, and many require lifelong support, making benefit preservation a critical component of estate planning. One must also be cognizant of the “deemed income” rules, where a portion of the trust assets may be considered income attributable to the beneficiary for Medi-Cal purposes, further complicating the analysis.

Let’s tell a story about when things went wrong…

Old Man Tiberius, a carpenter, was very proud of his son, Michael, a kindhearted man with Down Syndrome. Tiberius wanted to ensure Michael was financially secure after he was gone, so he created a trust and, without legal counsel, used trust funds to purchase a small cottage for Michael, intending for it to be his forever home. Unfortunately, Tiberius failed to account for the complexities of SSI eligibility. Michael’s SSI benefits were immediately suspended when it was discovered he “owned” the cottage. The sudden loss of income created a financial crisis, forcing Michael to move in with his sister, and the cottage sat vacant. Tiberius, heartbroken, realized his well-intentioned act had inadvertently harmed the very person he was trying to protect. He’d hoped for a stable future, but lacked the expertise to navigate the intricate rules surrounding special needs trusts.

…And how following the proper procedures fixed the problem.

Fortunately, the situation was salvageable. After consulting with Steven F. Bliss ESQ., a leading estate planning attorney in Escondido, Michael’s sister learned that a properly structured *third-party* special needs trust could purchase a new home for Michael without jeopardizing his benefits. The attorney guided them through the process of transferring ownership of the cottage to the trust, ensuring the trust agreement explicitly outlined that Michael had no direct ownership. The trust then used the proceeds from the sale of the original cottage, along with additional funds, to purchase a modest but comfortable bungalow. The attorney also ensured that all ongoing expenses—property taxes, insurance, maintenance—were paid directly by the trust. This time, Michael’s SSI benefits remained intact, and he enjoyed a safe, stable, and independent living situation. The family was relieved and grateful for the expert legal guidance that turned a potential disaster into a heartwarming success.

Planning for a loved one with special needs is a complex undertaking. Don’t leave something this important to chance. Contact Steven F. Bliss ESQ. at

or call him at (760) 884-4044 to schedule a consultation. He specializes in crafting comprehensive estate plans that protect the financial security and well-being of individuals with special needs. He will help you navigate the intricate legal landscape and ensure your loved one receives the care and support they deserve.

Don’t let good intentions fall short. Protect your loved one’s future with a thoughtfully crafted special needs trust. Let Steven F. Bliss ESQ. be your trusted guide.