Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, health care and food and housing assistance. Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means/resource test that restricts eligibility to individuals with less than $2,000 in liquid resources, such as checking and savings accounts and some retirement funds. To remain eligible for these public benefits, here are four things you need to know. These tips apply to disabled individuals whether they are minors or over 18 years old.
1. Putting a Child’s Government Benefits at Risk
If an SSI beneficiary receives a lump-sum through a gift, inheritance or otherwise, this may make them ineligible for continued benefits because of having too many resources (that is over $2,000). Putting their name on your bank account or deed could also be considered a gift, even if you intend it for convenience or otherwise. Many of these benefits require monthly qualification, meaning if your child receives a gift, it must be reported and potentially could disrupt their right to continue receiving benefits. If you think refusing the gift will avoid disqualification, think again. A disabled individual may lose benefits even if they simply refuse the gift or inheritance.
One option is to simply allow the child to go off the government benefits. If the gift or inheritance is worth a large amount, it may be to their advantage to simply forego the benefits to which they are otherwise entitled. When off of these benefits, there likely are not any restrictions on how the funds can be used. Therefore, the beneficiary may be able to use these funds to pay for housing, food, clothing, medical care and other basic needs.
2. Spend Down
Another option is for the beneficiary to “spend down” the gift or inheritance in the month that it is received. If the child is not over the resource limit because they spent down the gift or inheritance, they can retain the government benefits, including medical coverage. Many benefit programs allow a beneficiary to own a certain amount or types of resources that are exempt from the eligibility rules. These might include a home, one vehicle or a burial policy up to a certain amount. Properly spending down the gift or inheritance does not simply mean wasting the money. Instead, the funds should be used to improve the individual’s quality of life. For example, improvements made to the home or an accessible van may improve their quality of life. Debt may be paid off, or medical expenses prepaid. Assistive devices such as canes, electronic wheelchairs or medical devices may also help. Any portion of the inheritance that is not spent down in the same month when it is received will be treated as a countable resource in the next month.
3. Open an ABLE Account
The Pennsylvania ABLE Savings Program (PA ABLE) is a state-offered program that gives individuals with qualifying disabilities a tax-advantaged way to save or invest without impacting their government benefits. The Act limits eligibility to individuals with disabilities with an age of onset of disability before turning 26 years of age.
All federal benefits are protected, including Medicaid and, with some limitations, Supplemental Security Income (SSI) benefits, as are many Pennsylvania benefits.
An ABLE account may be set up and funded with up to $17,000 in a year (the maximum amount increases over time). As savings earn interest or returns over time, neither federal nor Pennsylvania income tax is owed; and when a withdrawal including that growth is taken, no income tax is owed as long as the withdrawal is used to pay for Qualified Disability Expenses. These expenses include:
Education (tuition, books, supplies, etc.)
Employment support (training, moving expenses, expenses related to obtaining and maintaining employment)
Health prevention and wellness
Assistive technology and personal support
Miscellaneous expenses (legal fees, financial management fees, funeral and burial expenses)
Housing – to avoid any negative impact to your SSI be sure to spend any money you withdraw for housing expenses in the same month you make the withdrawal
In addition to the spending restrictions, another drawback of ABLE accounts is that any amount over $100,000 in the ABLE Account is counted as a resource towards SSI benefit eligibility, and if you exceed the SSI non-ABLE resource limit (currently $2,000), your SSI benefits will be suspended. As a result, for large gifts or inheritances, ABLE accounts are not appropriate.
4. Establish a Special Needs Trust
Another potential option to help a disabled child retain their benefits while still giving them a gift or inheritance is to establish a special needs trust (“SNT”)(sometimes called a “supplemental” needs trust). This type of trust is specifically designed for disabled beneficiaries. A SNT should be seriously considered for a disabled child whenever that individual may receive 1) an inheritance; 2) an injury settlement; 3) a Social Security award for back benefits; 4) an education fund; and 5) a potential or actual interest in real estate.
The benefits of a SNT include:
Preservation of valuable government benefits;
Financial security for the disabled child;
Protection from creditors or financial predators; and
Management of assets and expenditures.
Here are some examples of expenses that an SNT might cover:
Medical and dental expenses not covered elsewhere
Equipment like wheelchairs or specially equipped vans
Transportation services (Uber, Lyft, bus pass, etc.)
Therapy or rehabilitation services
Travel, which can include the cost of a companion\
Recreation and entertainment (summer camp, movies, social events, sports equipment)
Electronic equipment, appliances, and computers
Contact a Special Needs Attorney for Assistance
The rules governing government benefits and children with special needs trusts are very complicated. Fiffik Law Group has experienced estate planning lawyers who are familiar with planning for SSI or Medicaid can help explain the possible options. Contact us here or call us at 412-391-1014 to schedule an appointment