The Big Move: My son has special needs, and I worry what will happen to him when I die. Should I add him to the deed for my house?

Dear MarketWatch,

I have a 31-year-old adult son with special needs. I am 73 years old and plan on moving back to New York and buying a home after I sell my current home in California.

I want my son to always have a home. I want to put his and my name on the deed. He has a special-needs trust, which I am thinking of dissolving unless the home can transfer to him.

He is not conserved. Would appointing a power of attorney be in his best interest to make sure his name stays on the deed, or should I just put his name on the deed so the house turns over to him upon my death? Not sure which way to go with this.


Uncertain Mother

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Dear Uncertain,

You’re working through one of the hardest challenges a parent of a special-needs child faces. I can imagine how much stress you feel when you imagine your son left alone without you there to support him — and literally keep a roof over his head.

Housing is just one of your son’s many needs, and so before I provide a guide map for how to tackle that issue in your estate planning, I want to provide you with some general advice. I don’t know what your son’s particular special needs are, but it might be worthwhile revisiting the conservatorship issue. These may have gotten a bad rap amid the scandal involving Britney Spears and her family, but they can serve a vital role in ensuring that someone with special needs is properly aided.

It sounds as though your son may not be capable of making his own financial decisions, so conservatorship and guardianship may be worthwhile to consider. That said, the legal fees to seek such an arrangement can be costly. At the very least, you should decide who you might want to act as your son’s representative in your absence. If it’s a friend or family member, it’s important to discuss this with them as soon as possible to be certain they are up to the task at hand.

You also should consider writing a letter of intent. According to Texas-based lawyer Rania Combs, instead of being a legally-binding document, a letter of intent “provides valuable information about your child’s life to help guardians, trustees and courts understand your hopes and desires for him or her.” What if, for some reason, your son could no longer live in a home you left for him — what should his guardian ensure he has in terms of shelter?

As for how to guarantee him housing in the future, an important issue to consider is whether your son will need to rely on public assistance after you’re gone. Programs such as Medicaid are means-tested, so you will need to ensure that whatever assets you leave behind to him do not end up complicating his care by disqualifying him from that assistance or reducing the amount of help he’s eligible for.

“Medicaid will view the inheritance either as income and / or assets, depending on when the inheritance was received and how long it has been since receipt,” the American Council on Aging notes in a blog post. “This, unfortunately, means that receiving an inheritance could cause you to lose your Medicaid benefits.”

Putting him on the deed may seem like a decent workaround, but it’s complicated. If the home were your son’s primary residence the value of its equity would not make him ineligible for Medicaid inherently so long as he lives in it, according to information from the New York-based law firm Lamson & Cutner.

The problem arises if he were to leave the home for some reason — for instance, if his health worsens to the point where it is determined that he would be better served by moving to an assisted-living facility or a nursing home. If the home is then sold, the proceeds could be garnished by Medicaid to recoup the state’s expenses related to your son’s aid. That would eat away at any home equity that could be used to further fund his care.

Your best route may be to preserve the existing special-needs trust or to create a new, separate one. Upon your passing, the trust could inherit the home. A trust like this can protect any assets your son inherits from being garnished immediately by the government or preventing him from receiving help through government programs.

Keep in mind, though, that you’ll also want to ensure that your son’s trust also is funded with enough money to cover expensive including maintenance and taxes. Working with an experienced attorney is vital: You want to ensure that his own assets don’t end up comingled with what he inherits from you in that trust, because that could raise red flags with Social Security and Medicaid.

You’ll also want to select someone to manage the trust on his behalf, and again you can direct this person to do so in accordance with your wishes.

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