What Will Happen If Social Security Says I Transferred Assets to Qualify for SSI?

Giving away or selling assets cheaply to qualify for disability can make you ineligible for SSI.

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If the Social Security Administration (SSA) says you transferred assets for less than they were worth so that you could qualify for SSI, the agency may penalize you by making you ineligible for SSI for up to 36 months. (Supplemental Security Income is a national program that pays a monthly benefit to needy elderly and disabled people). Here's how it works.

What Is the SSI Resource Limit?

To qualify for SSI, you can have only $2,000 in assets, or $3,000 for a couple. (Though SSI does not count your house, household goods, clothing, or one car toward the limit.)

If you're over the asset limit, you might be tempted to "give away" assets to friends or family members in order to lower your assets. But you can be penalized for giving away property or assets (Social Security calls them "resources") or for selling them for less than their market value in order to fall under the asset limit.

Common resources that people want to hide are money in bank accounts or more than one car.

What Is the Look-Back Period?

If you've recently sold or given away assets, Social Security will investigate these "resource transfers" when you apply for SSI. The agency uses a three-year "look-back period" when looking at whether you made a suspect resource transfer.

In other words, if Social Security is trying to decide whether you are eligible for SSI at the time you apply, it will look back at all the resource transfers you made in the 36 months before the date that you filed. (But if you are already getting SSI payments when the SSA decides to investigate, the agency can look at any transfers you made since the beginning of the look-back period, from the year 2000 on.)

When Is a Transfer of Resources Problematic?

To evaluate whether you made a problematic transfer, Social Security will calculate what the "market value" of the resource was at the time of the transfer and what compensation you got for the resource.

Market value is what the resource was worth to an outsider (not a friend or relative) at the time of transfer. Social Security will consider all compensation you got, including intangible things like relatives promising to take care of you for a period of time in exchange for giving them the resource. Social Security has some complicated formulas for figuring out the cash value of things that don't generally have a cash value.

If Social Security finds that you transferred a resource for less than market value, then the agency will make you ineligible for a certain number of months, depending on the value of the uncompensated resource.

How Does Social Security Calculate the Ineligibility Period?

Social Security calculates the penalty period by taking the total value of the resources that you gave away or weren't properly compensated for and dividing that number by the amount of the monthly SSI payment in your state. The resulting number is the number of months you can't receive SSI payments for. The ineligibility period starts with the month following the transfer and the maximum penalty period is 36 months.

If SSI already paid you for the period for which you were ineligible, Social Security will say you received an overpayment and will try to get paid back. (With SSI, Social Security will generally take 10% of each of your monthly payments until the overpayment is paid back.)

What Do You Do When the Ineligibility Period Ends?

When your period of ineligibility is about to end, you should recontact Social Security to make sure that you start to receive SSI when you become eligible. But Social Security won't automatically issue SSI to you at the end of the ineligibility period. You'll need to show them that you continue to be disabled and continue to meet the income and resource limits for SSI before the agency will start paying you.

Are There Exceptions to the Asset Transfer Rule?

Not every transfer for less than market value will cause a penalty, because Social Security has a list of exceptions to the rule. There are exceptions for:

  • transfers of houses to family members in certain situations
  • transfers of resources other than homes to your spouse or disabled child
  • transfers that were quickly returned
  • transfers of resources into certain trusts, and
  • transfers that were made for some purpose other than to qualify for SSI.

For the last exception, Social Security presumes that all transfers made for less than market value were made for the purpose of qualifying for SSI, and it's up to you to prove otherwise.

Examples of situations where Social Security will accept that a transfer wasn't made for the purpose of qualifying for SSI include:

  • transfers ordered by a court, and
  • transfers made before something unexpected happened that causes you to become disabled suddenly.

If you plan to make a big transfer and need to know more about the above exceptions, talk to a disability lawyer.

Can the Penalty Be Canceled for Undue Hardship?

Even if you did give away resources or transfer them for less than market value, you can still continue to receive SSI if you can show Social Security that not getting SSI would cause you an "undue hardship." To meet Social Security's definition of undue hardship, you have to show that you wouldn't be able to pay for food or shelter without SSI.

To show that you can't pay for shelter, you'll need to show that you can't afford your rent if you don't get an SSI check and that there's no other affordable housing available to you. If you have housing that has some special accommodations for your disability, Social Security will expect you to show that no other affordable housing is available with the accommodations you need. In addition, you must also show that your total available funds (income and liquid resources) are less than the monthly SSI amount for your state.

Learn more about general eligibility for SSI.

Updated December 28, 2022

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