Question

"We just read your blog post about cash contributions into retirement accounts not being disposed assets. [HERE] We have a similar situation, but with a trust. An elderly resident created a nonrevocable trust for a son who lives in another state using cash and other assets from net family assets totalling over $345,000. This has resulted in a significant reduction in net family assets. Are these funds "disposed assets" under affordable housing rules?"  

Answer

Summary: Yes. Contributions to a nonrevocable trust for a person who is not part of the family that resides in the unit are "disposed of" under HOTMA guidance.  

According to HUD HOTMA Notice 2023-10 (F.4.a and footnote F3), "in determining the value of net family assets, PHAs/MFH Owners must include the value of any business or family assets disposed of by an applicant or tenant for less than fair market value (including a disposition in trust)." It further explains that "a disposition in trust is when the family creates a trust for the benefit of someone outside of the assisted family." [bold emphasis ours] This differentiates this scenario from the situation in the earlier question, as the retirement accounts in the original question were held by family members in the unit and put into retirement accounts held by the family members, so cash put there was not disposed of. Consistently, the footnote goes on to clarify that "it would not be considered an asset disposed of for less than fair market value if the family establishes a nonrevocable trust for the benefit of someone in the assisted family."  [bold emphasis ours]

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