One of the most common requests by a client after settling an injury case (after the trip to Disney World) is purchasing a home. Many of these clients have waited a long time to improve their living conditions. Purchasing a home not only may improve the quality of life when addressing a physical disability, but the emotional and psychological uplift of home ownership for a client can be quite therapeutic.
However, purchasing a home for a person with a chronic long term disability has more serious considerations than a normal real estate transaction. Ultimately, the practitioner offering guidance to the client must not only consider the immediate purchase and titling of the property, but also the long term ramifications of how the home is titled and what types of negative consequences can occur relative to the value of the home in the future as to the client and client’s heirs.
There are several options for titling a home for a client with long term disabilities. Some clients can benefit from holding title in their individual names or in the client name with another person such as a spouse, sibling, adult child(ren) or friend. Another option involves using a Trust to hold title to the home. While there are many different types of Trusts that can support owning a home, unfortunately many practitioners default to using a Special Needs Trust to hold title to the home. This occurs because of the reliance on government benefits needed such as Medicaid to cover expensive long term medical costs and these benefits are means tested.
When drafted properly, the Special Needs Trust can hold title to significant assets which are not countable towards the means tested government benefit programs. This technique, on its face, seems to be the short cut to maintaining benefits eligibility while protecting the disabled homeowner from the liabilities of individual ownership. However, taking a closer look at this ownership structure begs the question, “What happens to the home after the disabled person dies?”
Sadly, many clients (and practitioners) never ask or answer this question during the purchase of the home by way of a Special Needs Trust. This type of trust typically has as a trade off the future repayment of all Medicaid benefits paid on behalf of the disabled beneficiary upon the client’s death or earlier termination of the Special Needs Trust. This means the home would be liquidated at some point to pay back the State Medicaid agency. This scenario might not be what the client or his family had in mind years ago when the injury case settled and the new home was placed in the Special Needs Trust.
Fortunately, there are other options that yield better long term results. This is especially important for younger clients whose condition may improve over the years and they may wish to rely less on government benefits. A settlement plan for an injured plaintiff who is a minor may change once the minor reaches majority and is capable of making her/his own decisions, even if physically disabled and requiring assistance on a daily basis. There are different types of Trusts besides Special Needs Trusts that provide the same protections but can greatly reduce or eliminate the payback of government benefits while having the client still enjoying such benefits.
In summary, every situation and every client’s goals are different. For those clients who need or desire home ownership with their settlement, it is important to examine the various planning scenarios/options to holding title to the real estate in the short and long term contexts as the client’s life changes. The last thing the plaintiff attorney wants to hear years after the settlement is “Why didn’t you tell me how to protect my home?”
* Certified as an Elder Law Attorney by the National Elder Law Foundation under authorization of the Pennsylvania Supreme Court.
