Trusts and Housing

Since the 1980's, our disabled population has grown significantly, much of this is due to the improvements in medical care and longer life spans for the disabled. The Wayne State Developmental Disability Institute in 2006 reported there are 1,455 people with developmental disabilities living with relatives in Oakland County. Emerging data reports a few thousand more people that were not counted in the Wayne State Survey (Community Mental Health Authority Provider Services Quarterly Report April 1, 2009). A critical time is coming when parents will age out of the ability to provide for the daily care and needs for their adult child, transferring the responsibility for the individual's care to other family members or to the community.

An example of a trust scenario provided here, with a specific set of circumstances that needed to be addressed, so that the trust would meet the needs of the individual. There are many examples of trusts that do not meet the needs of the individual. An example from the HRC includes a mother that came to the HRC after setting up a trust for her daughter to insure her future. However, the original trust did not protect the daughter's interest. Because the trust did not set limitation for what the funds could be used for, the daughter became in jeopardy of losing her Medicaid. Without Medicaid insurance, the daughter would quickly be without medical insurance, leading to further expenses that would put her housing at risk, as well as direct care supports, food, and transportation. The money was then transferred to a Special Needs/Exempt Access, Pooled Account Trust to provide more protection. Although this is a pooled trust, each person in the trust must continue to file an individual tax return on the money they have contributed to the trust. An "Exempt Trust" can only be used for Medicaid exempt activity, for specific things Medicaid does not cover, such as housing. This allowed the individual in this highlighted case to use the monies in the trust to purchase a house, with the deed remaining in the pooled trust account. The deed on the house reads "Springhill Pooled Trust for (client's name).

Another benefit of utilizing this particular trust was that there were two other individuals with disabilities that chose to live with the above person and contribute to the shared living arrangement through paying rent. This money helps to maintain the house by contributing to taxes, insurance, maintenance, and paying off the small mortgage on the home. In essence, this arrangement has served three individuals with disabilities by providing them safe affordable permanent housing of their choice, reducing expenses for care that would have been incurred by the State if the inheritance had been lost.

When an individual named in the trust passes on, it is the Trustee's responsibility to determine how this asset will be used to benefit other persons with disabilities, with consideration being provided to the two other individuals that also consider this their home. Or the assets, such as a home can go back to the family estate, when the beneficiary is not in need of these funds any longer. However, in this above scenario, Springhill is a non profit entity with a non-profit managing member. The family members who created the trust are a limited partner, with preferred depreciation. The contract states, who gets paid in the event the property is sold and how. It also states how the returns of the investment are divided. St. James Mortgage was also involved in putting together a creative loan that does not look like a basic 30 year mortgage.

Homestead Status

Homestead status reduces the cost of insurance, mortgage interest rates and taxes. The Homestead tax rate is about half of the full tax burden. Homestead status is only available for homes were all home owners and mortgage barrowers live in the property in question. Occasionally, a special needs exempt asset trust has challenged this to get the homestead rate. This is a long, difficult and some times expensive process.

Below are eight different ways to pass on an inheritance:

• Direct Bequest: leaving a specific gift of assets to a beneficiary. This form is open to high taxes and would jeopardize a person's Medicaid insurance (not recommended).
• Disinheritance: leaving nothing to the individual with a disability. This form has been done with the belief it is better then jeopardizing state and federal benefits (not recommended).
• Morally obligated gift: leaving assets to another individual and asking him or her to use them for the benefit of the child with a disability. This option has been used many times. Its drawbacks have been well documented. Sometimes the morally obligated person (typically a close family member such as a sibling) is put into a situation that requires them to pay extra taxes or they have financial hardships that limit their ability to provide for the loved one. There is also the potential that the relative who is morally obligated to provide may get sued or go through a divorce that would change their ability in the future to continue to provide (not recommended).
• Support Trust: trust instrument drafted in a standard format for support and maintenance of beneficiary usually with instructions or schedule for distribution of funds (recommended in limited situations only).
• Third Party Funded Special Needs Trust: trustee uses own discretion regarding when and how to distribute principal and interest, limiting expenditures to supplemental needs This puts a great deal of responsibility and power on one person (recommended per personal family need).
• Special Needs/Exempt Asset Trust: this option was created under the Omnibus Budget Reconciliation Act (OBRA) of 1993. Provides an option for an individual with a disability (under the age of 65), who has assets of his or her own to create a trust and preserve Medicaid and SSI eligibility. (Recommended for Medicaid recipients). When a special needs exempt asset trust is established, it is often challenged by the state as except. For people with SSI and Medicaid, an individual's special needs exempt asset trust will be charged fee for service upon their death. The home would have to be sold for the bills owed.
• Special Needs Pooled Trust: this option was created under the Omnibus Budget Reconciliation Act (OBRA of 1993). Provides an option for an individual with a disability (regardless of age), who have assets of his or her own, to create a trust and preserve Medicaid and SSI eligibility. It is much cheaper to join a Pooled Trust Account then to create a brand new trust on one's own. (Recommended when, Medicaid recipients receive money, for small families, for gifting, and for Medicaid planning for seniors). The special needs pooled trust has been challenged by the state as being an exempt asset. When the person no longer needs the special needs pooled trust account, the asset benefits others with disabilities.
• Spend Thrift Trust: which allows small regular deposits to save for exempt purchases.

More on: Exempt Asset Special Needs Trusts

These Trusts are created very differently then other trusts, and it is best to go with an attorney that specializes in this type of trust. The following Attorneys have specialized in Special Needs/Exempt Asset trusts in this community. This list is not intended to recommend or endorse any one attorney.

• Patricia Dudek: 248-731-3099
• ARC of Oakland: (for persons with D.D) 248-816-1900
• Sanford Mall & Associates: 248-538-1800
• Lisa Lapine Esq: 586-466-3666
• Barron, Rsoenber, Mayoras & Mayoras 248-641-7070
• Beier Howlett 248-645-9400
• Bernick, Omer & Radner 517-371-5361
• Alan F. Polack 586-532-7100
• Marsha Lynn Tuck 248-585-9337

  Above list checked for accuracy 6-8-09

This article was created to review options available to families planning for the future to encourage these families to have focused conversations with other family members, social workers, and attorneys. Effective planning can provide a creative individualized home, access to necessary services, ability to afford these services, more family inclusion and involvement, creative residential settings other then the state funded group homes, families and friends prepared to assist. Failure to plan may lead to loss of personal freedom, inadequate support, forced institutionalization, inadequate financial resources, over dependence on government benefits, and overwhelmed or frustrated family members.