Monday, May 14, 2018

Considerations in the Purchase of Personal Residences for Beneficiaries Living with a Disability

By Erin Sunday, CTFA
Vice President - Senior Special Needs Trust Services Advisory Specialist 
Wells Fargo Wealth Management

Having a safe, comfortable, and appropriate living arrangement is important to an individual living with a disability and can lead to a higher quality of life.  The decision to purchase or build a residence to be owned by a trust should be the result of a collaborative discussion between the beneficiary and the Trustee.

There are many considerations in the process of purchasing a home for a beneficiary.  The first step is to determine an appropriate budget for the acquisition which includes the purchase price, transactions costs, any renovations required to accommodate the special needs of the beneficiary (i.e. the construction of an accessible bathroom, ramps, flooring, elevators, structural changes), the on-going carrying costs of the residence (e.g. real estate taxes, homeowner’s insurance, maintenance, HOA dues), ensuring the budget does not impact the ability to provide for other needs of the beneficiary over time, and any requirements of the trust document, state law, public benefits regulations, and/or court oversight.

As a best practice, it may be helpful to have an assessment completed by a care manager to help ensure any proposed home meets the needs of the beneficiary.  It is also important to discuss with the beneficiary (and anyone else living in the residence) what the expectations are surrounding the payment of utilities, general maintenance of the property (e.g. mowing and leaf and snow removal), and if there is a requirement for rent to be paid by any non-beneficiary residing in the home.  The ability of the school district the home is in to provide for the needs of the beneficiary should also be considered.

The Trustee’s role after the residence is purchased does not diminish.  The Trustee must ensure that all real estate taxes are paid, proper insurance coverage on the residence is maintained, any and all contractors are licensed and insured, and that the home continues to meet the needs of the beneficiary. 

A best practice can be use of an Occupancy Letter between the Trustee and the beneficiary and/or other family members living in the home.  The letter can clearly define the roles and responsibilities of each party (financial and maintenance), who will be living in the home including pets, how home ownership may impact an individual’s public benefits, and outlines who to call in case of an emergency.

While the purchase of real estate from a trust does require careful consideration, providing a personal residence can be an important part of helping create a better life for an individual living with a disability.

Investments in securities and insurance products are: NOT FDIC-INSURED/ NOT BANK-GUARANTEED/ MAY LOSE VALUE. Wells Fargo Wealth Management provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. Wells Fargo Bank is the banking affiliate of Wells Fargo & Company.

This article was written and provided courtesy of Erin Sunday, Vice President - Senior Special Needs Trust Services Advisory Specialist, Wells Fargo Wealth Management of Camp Hill, PA at 717-730-3383.