Dear Harry,
As a disabled adult living with your parents, you may be concerned about what will happen to your living situation after they pass away. Fortunately, there are options available to ensure that you can continue living in your home without affecting your government benefits.
One option is for your parents to set up a special needs trust for you. This trust would hold the house for your benefit, meaning that you can continue to qualify for any public benefits you need while still protecting the home. With this setup, your parents would still own the house until they pass away, ensuring that you have a secure place to live without fear of homelessness.
On the other hand, some may suggest letting your brother inherit the house and having you pay him rent to live there. However, this option comes with risks. If your brother were to run into financial trouble, get divorced, or pass away before you, the house could be sold and you may not receive anything from the proceeds.
Of course, the details of setting up a special needs trust can be complex. Your parents can transfer the house into the trust now or arrange for it to happen when they pass away. Either option should work so long as they execute their wills and trust now.
In summary, it is highly recommended that your parents create a special needs trust to hold the house for your benefit. This will provide ongoing security and peace of mind for all parties involved.
Protecting Your House from Medicaid Recovery
If your parents require long-term care, like nursing home care, your house could be at risk for Medicaid estate recovery. Medicaid allows you to protect the house from such a claim by putting it in a trust.
However, there are certain limitations when it comes to this type of trust, sometimes referred to as a “(d)(4)(A)” trust. The primary limitation is that upon your death, the state must be reimbursed for Medicaid payments made on your behalf.
A standard “third-party” special needs trust created without regard to your parents’ eligibility for Medicaid can be a better option. This type of trust can also be used to transfer the house into now. However, there are other considerations to keep in mind.
For example, do your parents need access to the equity in the home? Is it fair for the house to go entirely to you? Do you have enough income to maintain the house if it were placed in trust for your benefit?
Because of these complex issues, it’s important to consult with a special needs planner. There are two excellent organizations of these experts that you can turn to for guidance: the Academy of Special Needs Planners and the Special Needs Alliance.
