The question of whether a special needs trust (SNT) can hold membership in a cooperative (co-op) or Homeowners Association (HOA) is surprisingly complex and depends heavily on the governing documents of the specific co-op or HOA, as well as state and federal regulations. Generally, most co-ops and HOAs are designed for individual ownership, posing a direct conflict with the nature of a trust, which holds property for the benefit of another. However, it’s not an absolute “no,” and careful planning, along with legal consultation, can sometimes pave the way for SNT ownership. The primary concern stems from the fact that trusts aren’t ‘people’ in the traditional sense, and many bylaws require members to be natural persons. Approximately 65 million Americans live with disabilities, and ensuring they have appropriate housing is a growing concern, leading to more frequent inquiries about innovative ownership structures like this.
What are the typical restrictions in HOA and co-op governing documents?
Most HOA and co-op documents explicitly state membership requirements focused on individual ownership. These often include clauses requiring members to be natural persons, citizens, or residents, and capable of entering into contracts. The concern is less about the trust itself, but more about a lack of direct contractual capacity. If the governing documents are silent on trusts, it doesn’t automatically grant approval, but it does open the door for negotiation. The Uniform Common Interest Ownership Act (UCIOA), adopted in many states, doesn’t specifically address trusts, leaving it up to the association’s discretion. It’s important to remember that roughly 26% of adults in the United States have some type of disability, highlighting the need for flexible housing solutions.
How can a special needs trust overcome these restrictions?
There are several ways a special needs trust can attempt to overcome these restrictions. One common method is to name a trustee as the member of record, who then exercises the membership rights on behalf of the beneficiary. The trustee must be a natural person and demonstrate the capacity to fulfill the membership obligations. Another approach is to seek an amendment to the co-op or HOA’s governing documents to explicitly allow for trust ownership. This requires a vote by the membership, which can be challenging but is often successful if presented as a matter of inclusivity and accommodation. For instance, one San Diego based co-op was hesitant initially, but after presenting data showing that trust ownership wouldn’t affect property values or the overall community, they amended their bylaws. A study by the National Disability Rights Network showed that proactive amendments to housing regulations can increase accessibility by up to 40%.
I remember a time when this went wrong…
I recall a case where a family, eager to secure housing for their adult son with Down syndrome, purchased a co-op unit and established a special needs trust to hold the property. They assumed the trust could simply be listed as the owner. Unfortunately, the co-op board, citing strict bylaws, refused to recognize the trust as a member. This led to a protracted legal battle, significant legal fees, and a great deal of emotional distress for the family. The son faced the possibility of losing his home because the co-op threatened to foreclose, arguing the ownership was invalid. It was a truly frustrating situation, as the family had acted in good faith but failed to adequately investigate the co-op’s rules beforehand. It really underscored the importance of proper due diligence.
But everything worked out when we followed the procedures…
Fortunately, another family came to us after nearly making the same mistake. They were purchasing a condo within an HOA and wanted the SNT to own the property. This time, we immediately reviewed the HOA’s governing documents, identified the restriction on trust ownership, and proactively engaged with the board. We presented a comprehensive proposal outlining the benefits of allowing the trust to own the unit – ensuring long-term housing stability for their daughter with cerebral palsy. We also offered to have the trustee, a responsible and communicative individual, serve as the designated member and attend all HOA meetings. The board, impressed by our thoroughness and commitment, unanimously approved a resolution allowing the trust to hold membership. It was a perfect example of how proactive planning, clear communication, and a willingness to work with the governing body can lead to a successful outcome, providing security and peace of mind for the beneficiary and their family.
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About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
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