Supplemental Security Income And the Aged
SSI is a basic safety net program for the elderly, blind, and disabled. It provides a minimum guaranteed income. Effective January 1, 2006, the maximum SSI benefit is $603 a month for an individual.
Also, it is only $904 a month for a couple (increasing every January 1). These amounts get supplemented in most states. So the Social Security Administration (“SSA”) administers the program.
But eligibility for SSI benefits gets based on financial need alone. Also, it does not get based on how long you have worked. Furthermore, it's not about how much you have paid into the SSA Social Security system.
However, the financial eligibility rules are quite stringent. So this article gives seniors and families a basic understanding of how the SSI system works. But we also will discuss the legalities involved in applying for the same.
Table of Contents:
- Understanding SSI.
- What are Resources?
- Your Trusts Need to be Handle by Us.
- Do you think you Qualify?
- Plan Ahead for Living Arrangements.
- Children’s Life Insurance.
- Can a Child have Trusted?
Are you seeking Social Security Benefits because of being physically challenged? The program’s criteria for determining disability are in the Social Security Disability section.
- Also, about 6.6 million persons were receiving SSI payments in or about December 2000.
- Furthermore, 57% of these recipients were between the ages of 18 and 64. Also, 30% were 65 or older, and 13% were under 18 years old.
Many older persons are not eligible for Social Security retirement benefits. Mostly, this is because they have not accumulated enough work credits. However, they may still qualify for SSI.
Most noteworthy here is many receiving Social Security retirement could supplement with SSI payments. Hence, estimates show that 1.5 million elderly are potentially eligible for benefits. But they never apply for them.
Many states supplement the federal SSI payment with payments of their own. Some states do not pay for supplements.
These states are:
- West Virginia
- Georgia. In some states that do pay a supplement, you may qualify for the state payment.
So even if you don’t meet the federal SSI eligibility criteria, you can still get coverage. But even in states that supplement federal payments, SSI benefits usually fall below poverty. The idea of the SSI program is to provide a floor income level.
If you are receiving income from another source, your SSI benefit gets cut dollar for dollar. Also, the SSA deems food and shelter you receive from another source to be “in-kind” income. As a result, actual payment amounts vary.
So these depend on your income, living arrangements, and other factors.
- While benefits are few, most states' SSI recipients are automatically eligible to receive Medicaid.
Hence, this helps pay for hospital stays, doctor bills, prescription drugs, nursing home care. Also, it can pay other health costs. SSI recipients may also be eligible for food stamps in every state except California. But in some cases, individual programs are available for the developmentally delayed.
So Who Is Eligible for SSI?
- You must be either age 65 or older, blind or disabled;
- One must be a citizen of the U.S. or be a long-time resident who meets certain strict requirements;
- Your monthly income must be less than a minimum established by your state; and;
- Individuals must have less than $2,000 in assets ($3,000 for a couple). Although certain resources get excluded in the eligibility determination (see below).
What About Your Current Income Limits?
The amount of income you may earn and still qualify for SSI differs from state to state. (For the income limits in your state, call 800-772-1213 or check with your local SSA office.)
- In many states, the income limit for eligibility is the same as the maximum federal benefit — $603 a month for an individual and $904 in 2006.
What About Your Threshold Income Levels and SSI?
If your income falls below these thresholds, you are eligible for benefits. Your benefits will be the difference between your income and the SSI benefit in your state.
For example, if your income is $400 a month. Hence, if the SSI benefit for a single individual in your state is $600 a month, you will receive an SSI check of $200 a month.
At some point, it may not seem worth the trouble to apply and stay eligible for SSI. But as is mentioned above, the ancillary benefits, especially Medicaid, may make it worthwhile. So maintain SSI even if the financial payment is only a few dollars a month. If you are unsure whether your income is low enough, apply anyway.
Is it True that Some Income Does Not Get Counted?
Certain sources of revenue and support don't get counted in determining your eligibility. Thus, what may appear to you to be income may not be income. Therefore, it won't get counted as such by your local Social Security or welfare office. If you live on a small fixed income with few resources (assets), it’s worth applying for benefits.
Is Your Income Low Enough?
There is a method to determine if your income is low enough to qualify you for benefits. Consequently, the SSA counts the money you earn in wages or from self-employment.
They also may include any investment income. Furthermore, pensions, annuities, gifts (except donations of clothing), rents, and interest are income sources.
Also, Social Security and Veterans benefits get considered as income. Free housing received from friends or relatives may get counted too.
So this gets viewed as income, based on what such housing would cost in your area.
- However, in total your income, the SSA does not count:
- The first $20 per month received from most income;
- The first $65 a month you earn from wages or self-employment, and only half of the amount you earn above $65;
- Irregular earned or the unearned income of not more than $10 and $20 a month, respectively;
- Food stamps, home energy assistance, and most food, clothing, or shelter received from non-profit organizations.
As noted above, you can have no more than $2,000 in countable resources ($3,000 for a married couple living together) to be eligible for SSI. Countable resources (assets) include bank accounts, investments, real estate (other than your residence), and personal property.
Also included is any money or property held jointly with someone else. The SSA determines how much your partial ownership is worth. Thus, it counts that as a resource.
However, particular property of value does not get counted in determining eligibility for SSI, including:
- Your home and the land it is on, no matter how valuable it is;
- Your personal and household goods do not get included;
- One car of any value if it gets used for transportation for you or a member of your family;
- Wedding and engagement ring; Property for self-support, such as tools, up to $6,000 in value;
- Burial plots;
- Life insurance and burial funds up to $1,500 for each person.
If your resources are still above these limits, you may be able to “spend down” to qualify for SSI. So this is similar to the process to be eligible for the Medicaid program. After applying for benefits, you have a certain period to liquidate.
So 6 months for real estate and 3 months for personal property and liquid assets. Thus, you can sell or spend excess resources for fair market value and come under the benefit limits.
- If you give away resources or sell too low to get under the SSI resource limit, you may be ineligible for up to 36 months. The SSA looks at whether or not you have transferred a resource within the previous three years. If you have, it computes a penalty period.
So this gets done by dividing the amount of the transfer by your monthly benefit amount. So what if you give your son a $6,000 gift and apply for monthly benefits of $600 within three years of the gift?
You will not be eligible for SSI for 10-months (6,000/600=10). That 10-month period will begin on the date of the transfer. It will end 10-months later. In other words, although you can be ineligible for up to 36 months due to transfer, that is only a cap.
The actual period of ineligibility gets based on the value of what you transferred. Last, this gets divided by the monthly benefit in your state.
What About Transfer Penalties?
Beware, the transfer penalty applies to transfers occurring on or after December 14, 1999. No penalty applies to transfers that took place before that date.
You should also be aware that transfers may be “cured” by the person to whom you made a gift returning it to you. And, finally, there are certain exceptions to the transfer penalty.
These include gifts to:
- A spouse (or anyone else for the spouse’s benefit);
- A blind or disabled child;
- A trust for the interests of a blind or disabled child;
- A trust for the sole advantage of a disabled individual under age 65 (even if the trust is for the applicant's benefit, under certain circumstances).
Also, special exceptions apply to the transfer of a home. The SSI applicant may freely move his or her home to the following individuals without incurring a transfer penalty:
- The applicant’s spouse;
- A child who is under age 21 or who is blind or disabled; Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the good of the applicant, under certain circumstances);
- A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home; or
- A “caretaker child” is a child of the applicant who lived in the house for at least two years before the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing homestay.
Under the statute, effective January 1, 2000, most self-created trusts get considered available. Thus, they count in determining your eligibility for SSI. On the other hand, most trust that someone else creates and names you as a beneficiary will not.
Hence, they aren't considered to belong to you for purposes of determining SSI eligibility. If you created and funded an irrevocable trust for your benefit before January 1, 2000, it gets grandfathered. Hence, in most cases, its assets will not get considered to belong to you.
What About the Safe Harbor Provision and SSI?
When Congress created rules limiting trusts for SSI purposes, it created a “safe harbor.” In other words, this permits you to place money into two types of trusts for your benefit. In doing so, it adopted safe harbors already created for Medicaid purposes.
The safe harbors apply to “supplemental needs trusts.” These get established by a parent, grandparent, or court for the sole benefit of the disabled under age 65.
“Pooled trusts” established by non-profit associations under Section 1917(d)(4)(C) of the Social Security Act. “Miller Trusts” gets created in “income cap” states.
- Also, this gets done under Section 1917 (d)(4)(B) of the Social Security Act. The SSA has revised its online publication, “Understanding SSI — Spotlight on Trusts.”
- The document applies to trusts established on or after January 1, 2000. Also, it applies to trusts established under Section 1396p(d)(4)(A) and (C).
Given the complexity of this field, and trust should get drafted by an attorney. This lawyer must be knowledgeable about SSI matters.
How do You Apply for SSI Benefits?
If you think you may qualify for SSI benefits, you can call or visit your local SSA office and apply. (For online help in finding your local SSA office, click here.) If your state offers payments supplementing the federal SSI benefit, you may have to apply for that supplement.
So you would do that at your local county social welfare office. Some have the federal government administer their supplements. But other states administer the supplements themselves.
In these latter states, application for the supplement must be made separately with the state agency. For a listing of states with federally administered supplements, click here.
You will need to provide the SSA with proof of age and citizenship or legal residence. Also, you must provide detailed information about your financial situation.
Usually, an SSA claims representative interviews you and completes the forms using the information you supply.
What is the Effect of Delaying Application for Benefits?
You should apply as soon as possible so that you do not lose benefits. If you call SSA to make an appointment to apply, SSA will use the date of your call as your application filing date. If your application gets denied, you can appeal.
The appeal proceedings are similar to that for appealing Social Security claims denials. For that discussion, click here. Once you begin receiving benefits, the SSA reviews your SSI eligibility once every one to three years. For more on SSI, visit the SSA’s “Understanding SSI” Website.
Do You Need a Supplemental Trust and Planning for Disabled Children?
Americans live longer than they did in years past, including those with disabilities. At least 480,000 adults with mental retardation live with parents 60 or older.
This figure does not include adult children with other forms of disability. Also, it doesn't include those who live separately. But it does include those who still depend on their parents for vital support.
When parents can't help children due to disability or death, the responsibility falls on siblings. It may also fall upon other family members and the community.
In many cases, expenses will increase dramatically. Mainly this is because care and guidance provided by parents must get provided by a professional for a fee. Planning by parents can make all the difference in the life of a child with a disability.
Because not doing so could mean siblings may get left with responsibility for caretaking. (on top of their careers and caring for their families and, possibly, ailing parents).
Any plan should include the following elements:
Where is your child going to live when she can no longer live with you? Will she move in with a sibling? Or into a group home? Who will make the decision? Who will monitor the care she receives? It’s never too soon to begin answering these questions.
Because doing so makes sure that the living and support arrangements are in place. In some cases, it can ease the transition for all concerned if the child moves to the new living arrangement. This way, his or her parents can still help with the process.
In parts of the country, non-profit organizations and private consultants can set up plans. Also, they can research available options and assist in the move.
Parents and "Written Statement of Wishes" About Children?
It helps everyone if the parent creates a written statement of her wishes for their child’s care. She also knows her better than anyone else. They can explain what helps, what hurts, what scares her child. (who, of course, is an adult).
Also, they can tell those people what reassures them. When the parents are gone, their knowledge will go with them unless they pass it on. In almost all cases where a parent will leave funds at death to a disabled child, it should get done in the form of a trust.
Trusts set up for the care of a disabled child are “supplemental” or “special” needs trusts. These get described in more detail below. Money should not go outright to the child. First of all, he or she may not be able to manage it properly.
Also, receiving the funds directly may cause the child to lose public benefits. Lost benefits could include lost Supplemental Security Income (SSI) and Medicaid. Often, these programs serve as the entry point for receiving vital community support services.
What was the Effect of the 1999 Law?
In SSI, Congress enacted laws at the end of 1999, making it harder to get. Thus, it's hard to create trust for disabled individuals after receiving an inheritance.
So it is even more important now that the parents create confidence as part of their estate plan. Some parents choose to avoid the complication of trust.
Hence, they leave their estates to one or more of their healthy children. Parents will rely on them to use the funds for the benefit of their disabled siblings. Except in the case of a small estate, this is not a good idea.
It puts the healthy child in an awkward position to decide how much of her money to spend on her sibling. Such funds also will be subject to claim by creditors. Also, they could be at risk in the event of divorce or bankruptcy.
Finally, the child who receives the funds may die before the physically challenged child. Often they pass away without setting this money aside in his or her estate plan.
What About Life Insurance?
Last, a parent with a disabled child should consider buying life insurance. This is because it can fund the supplemental needs trust set up for the child’s support. What may look like a substantial sum to leave in trust today may run out after several years.
So it burns up fast paying for care that the parent had previously provided. The more resources available, the better the support that provided the child. If both parents are alive, the cost of “second-to-die” insurance is payable when the second parent dies.
Also, this can be surprisingly small. The good news is that planning for a disabled child can make a significant difference in his life. You just have to take the first step.
What About Supplemental Needs Trusts?
Next are Supplemental needs trusts (also known as “special needs” trusts.) These allow a disabled beneficiary to receive gifts. Also, they can allow lawsuit settlements or other funds into play.
Of particular interest, the beneficiary won't lose eligibility for certain government programs. Funds aren't considered to belong to the recipient in determining eligibility for public benefits.
As their name implies, supplemental needs trusts aren't to provide basic support. Instead, they pay for comforts and luxuries that public assistance funds don't pay. These trusts most often pay for things like education, recreation, counseling.
They can also include medical attention beyond the simple necessities of life. (But the trustee can use trust funds for food, clothing, and shelter. And this is because the trustee may decide to do so is in the beneficiary’s best interest. Also, this is despite possible loss or reduction in public assistance.)
What About the Effect on Wills and Trusts?
Often, supplemental needs trusts get created by parents or family members for disabled children. (even though the child may be an adult by the time the trust gets created or funded).
Such trusts also can be set up in a will. Because of this artifice, an individual may leave assets to a disabled relative. Also, the disabled individual can often create trust himself.
But this is depending on the program for which he or she seeks benefits. Individuals often establish These “self-settled” trusts. These are people who become disabled as the result of an accident or medical malpractice. But later, they may receive the proceeds of a personal injury award or settlement.
Restrictions of Public Benefits Programs?
Each public benefits program has restrictions that the supplemental needs trust must follow. Furthermore, failing to do so could jeopardize the beneficiary’s continued eligibility for public benefits.
Both Medicaid and SSI are quite restrictive. Thus, it is difficult for a recipient to create trust for his or her benefit. Because doing so means they no longer retain eligibility for Medicaid benefits. But both programs allow two “safe harbors.”
So this permits the creation of supplemental needs trusts with a beneficiary’s money. But only if the trust meets certain requirements. The first of these is a “payback” or “(d)(4)(A)” trust.
And this refers to the authorizing statute. “Payback” trusts get created with the assets of a physically challenged individual under age 65. These get established by a parent, grandparent, or legal guardian, or by court. They also must provide upon the beneficiary’s death how remaining funds will first get used. They require reimbursement of the state for Medicaid paid on the recipient's behalf.
What About Pooled Trusts?
Medicaid and SSI law also permit “(d)(4)(C)” or “pooled trusts.” Such trusts pool the resources of many disabled beneficiaries. Furthermore, a non-profit association manages those resources.
Opposite of this, individual disability trusts may qualify only for those under age 65. But pooled trusts may be for beneficiaries of any age. Also, they may be set up by the beneficiary herself.
Besides, at the recipient's death, the state does not have to be repaid for its Medicaid expenses. But this is true so long as the funds get retained in the trust. But they must get used for the benefit of other disabled beneficiaries. (At least, that’s what the federal law says. But alas, some states mandate reimbursement under all circumstances.)
- A pooled trust is an option for a disabled individual over age 65. But this is a person who is receiving Medicaid or SSI. Thus, those over 65 years old who make transfers to the trust will incur a transfer penalty. (See Medicaid: The Transfer Penalty.)
What About Lose a do Dollar Pay a Dollar?
Income paid from a supplement that needs trust to the beneficiary is another issue. Particularly relevant concerns SSI benefits. In SSI, the trust beneficiary would lose a dollar of SSI benefits for every dollar paid to him.
Also, payments by the trust to the beneficiary for food, clothing, or housing are “in-kind” income. Thus, once again, the SSI benefit gets cut by one dollar for every dollar of value of such “in-kind” income. Some attorneys draft the trusts to limit the trustee’s discretion to make such payments.
Others do not limit the trustee’s discretion. Rather instead, they counsel the trustee on how the trust funds may get spent. This system permits flexibility for unforeseen events or changes in circumstances in the future. The difference has to do with philosophy, the client's situation, and the amount of money in the trust.
What is the Importance of Picking the Right Trustee?
Picking a trustee is also an important issue in supplemental needs trusts. Most people do not have the expertise to manage trust. An alternative is retaining the services of a professional trustee.
For many, this is a problem. And this is because some may be uncomfortable with the idea of an outsider managing a loved one’s affairs. But it is also possible to appoint a trust “protector.”
Relevant here, this is a person with powers to review accounts and to hire and fire trustees. This person acts as a trust “adviser.” This person instructs the trustee on the beneficiary’s needs. However, if the trust fund is small, a professional trustee may not want to help.
So this seems to favor the idea of pooled trusts. This info just gave seniors families a better understanding of the basics of the SSI system. It also covered the legalities involved in applying for the same.
Citations: Social Security Income in California: https://www.ssa.gov/pubs/EN-05-11125.pdf