Home Ownership for People With Disabilities

3/2024

People with disabilities often require housing that accommodates their unique needs. In many cases, group living facilities may be appropriate, with the group environment providing stability and support. In other cases, the person with special needs requires a specific type of housing, designed particularly for them. Or it may simply make sense for the individual to have a place of their own.

The rental market is often ill-equipped to provide the specific adaptations many individuals with disabilities require. Fortunately, there are many ways to provide private housing for a person living with a disability. Not to mention, this is often possible without compromising their means-based government benefits.

The first decision to make is whether to put the home in trust or give the home to the resident to own in their own name.

Many people in the disability community are perfectly capable of managing their own property. Public benefits programs such as Supplemental Security Income (SSI) and Medicaid permit their recipients to own their own home. The home does not count as an asset for purposes of qualifying for, or maintaining, these particular benefits. (However, there may be specific limits on the value of the home the individual owns, which vary by state.)

Home ownership also comes with benefits of their own. Owning a home can increase one’s access to credit, help bind an individual with their community, and provide a deep sense of self-worth.

Placing a Home in a Special Needs Trust

Of course, home ownership comes with many responsibilities. Frequently, families choose to place a home into a special needs trust (SNT) as opposed to giving it to the disabled person.

Putting the home in a trust protects the home from a trust beneficiary’s creditors, who may be able to go after the equity in the home if the individual owned it outright.

Placing the home in trust also allows for flexibility if the home needs to be sold quickly, since the proceeds are retained by the trust. If a homeowner with disabilities sells their own home, they would have to purchase a new one quickly for the same price. Or, they’d have to transfer the proceeds into a different kind of special needs trust (a “first-party” SNT, which has a government payback provision) to maintain access to government benefits.

For some, it simply may not be prudent to own property in their own name. Individuals with certain intellectual or developmental impairments, for instance, may have difficulty managing property or could be at higher risk for exploitation.

Purchasing the Home

The next step is determining how to purchase the home. This decision depends on the finances of those buying the home and the government benefits that the resident receives.

Consider a person with disabilities who relies on SSI benefits. A trust (or an SSI recipient’s family) could purchase a home outright and then give it to the recipient. In this case, SSI rules dictate that the purchase counts as in-kind support and maintenance only for the month of purchase. Under the complicated restrictions, this means that an SSI recipient could lose up to about $334 (in 2024) of their benefit for one month.

If their monthly SSI award drops to zero because of this reduction, they could lose their benefits entirely (and, potentially, their health care) for that month. They could then regain their ability to qualify at the conclusion of the month.

On the other hand, if the home purchase happens through some combination of a trust or family members paying a down payment and a mortgage, then the resident’s SSI award will reduce by approximately $334 during each month that someone other than the resident pays the mortgage. It does not matter whether the mortgage payment is large; the SSI recipient could still lose approximately $334 monthly.

This amount usually pales in comparison to the benefits of living in a home of one’s own. However, imagine a beneficiary who receives an SSI award that is less than $334 a month before the purchase of the home. They will lose their SSI benefit because their award goes down to zero with the in-kind mortgage payment. Because the mortgage payments will presumably be ongoing, this loss of SSI and health care benefits could be permanent (unlike the one-time loss of benefits if the home is purchased outright).

Other sources of income can also affect an SSI award. To avoid jeopardizing important benefits, families should work with a special needs planner when purchasing a home for someone.

Household Expenses

After the home purchase, maintenance becomes key. Also under SSI regulations, payment of many household expenses for the SSI recipient counts against their monthly benefit. This applies even if a trust owns the home in which the SSI recipient lives.

For example, the trust might pay for the home’s water or electric bill. The Social Security Administration could then deduct up to approximately 1/3 of the SSI recipient’s benefits. So, if a trust owns the home outright and manages to avoid paying a mortgage, the resident can still incur a penalty if the trust pays for the upkeep of the home, and the same concerns regarding benefits apply.

Keep in mind one important exception to these restrictions. Certain types of special needs trusts can in some cases pay for home improvements without penalty. This is because these may not be typical household expenses expected to be provided by the resident.

Work With Your Special Needs Planning Attorney

The rules governing home ownership for people with disabilities may seem complex. However, the rewards are many and well worth exploring. Work with your special needs planning attorney to learn more about the options for you or your loved one.