Supplemental Security Income, or SSI, as it is commonly referred to, is a federal disability benefit. Folks who are eligible for SSI benefits include those who are over 65, blind, or disabled. But SSI is available only to people who meet the Social Security Administration's (SSA) strict income and asset limits. These limits can be a particular problem for people who are on SSI, or are applying for SSI, if they experience a financial windfall such as an inheritance or a lawsuit settlement, because their eligibility for benefits could end. However, there are ways to place these assets into a trust that can help preserve an individual's eligibility for SSI while allowing small improvements to the individual's lifestyle.
Let's first look at what the limits are for income and assets (the SSA refers to these assets as resources), and then we'll discuss SSI trusts.
The amount of money you can make and still be eligible for SSI depends on a combination of the Federal Benefit Rate (FBR) and your state's supplementary SSI payment (if your state pays an SSI supplement). The FBR is a dollar amount that is established by the federal government every year; in 2023, the FBR was set at $914 for unmarried people and $1,371 for married couples. If your income is greater than the FBR (depending on whether you are married or single) plus your state supplement, you won't be able to get SSI.
The good news is that not all income is counted towards determining eligibility for benefits. For example, the SSA will not count the first $20 of unearned income (money not earned from working) or more than half of your earned income (money you get paid from working.) For a detailed discussion on this, read our article What Counts as Income for the SSI Disability Limit?
An unmarried person can have no more than $2,000 in assets to remain eligible for SSI. A married couple is limited to $3,000. Assets include savings and checking accounts, real estate (other than the home you live in), and stocks and bonds. However, the SSA doesn't include all assets when calculating eligibility. For example, the value of the home you live in and one car (but only up to $4,500 of its value) aren't considered. To learn more, read our article How Much Can I Have in Assets and Still Be Eligible for Disability Benefits?
A trust is a legal instrument that allows for a trustee to manage money (or other property like stocks and bonds or real estate that could be sold) on behalf of someone else. The SSA will usually count the assets in a trust against a person when deciding SSI eligibility. For example, all of the assets in a revocable trust would be counted against you. In an irrevocable trust, the portion of the trust that could be used to make payments to you would be counted against you.
Fortunately, the SSA allows for the creation of specific trusts that allow for exceptions to these general rules. These are known as "special needs" trusts or "supplemental needs" trusts. There are three general types of trusts designed to protect disabled beneficiaries.
A third-party special needs trust is one that is funded by assets owned by someone other than the disabled person. These are often created in a parent's will to ensure that the disabled child's needs are met after the parent dies. State legislation sometimes contains language that may be used to establish the trust. These trusts must be established for the "sole benefit" of the disabled person.
A special needs trust that is established with the disabled person's own assets (for example the proceeds from a medical malpractice claim) is called a "self-settled," or "first-party" special needs trust. In a self-settled special needs trust, any proceeds that remain in the trust when the person dies must go to reimburse the state for costs spent on behalf of the individual. Additionally, the disabled person must be under the age of 65 and the trust must be established by the person's parent, grandparent, or by the court.
A pooled asset trust contains the resources of the disabled person but is established and managed by a not-for-profit company. Although the individual's funds can only be spent on his or her behalf, the company "pools" the funds of all the participants into one trust that it then manages and invests. Like the self-settled trusts, a pooled asset trust must be created for the sole benefit of the disabled person by a parent, grandparent, legal guardian, or the court. Also, like the self-settled trust, any amount that remains in the disabled person's account when he or she dies is used to repay the state any Medicaid costs related to the individual's care during his or her life.
A trustee is a person selected to be in charge of administering the funds in the trust. This should be someone you know who will only act in the best interest of the disabled person. Often third-party special needs trusts are part of the estate planning process, and so the trustee is named in the will that established the trust.
In order to qualify as a special needs trust, it must have been created for the sole benefit of the disabled person. This means that there cannot be any other named beneficiary in the trust instrument and the trust can not have been created to benefit the person who created it (for example, to dispose of excess assets).
Special needs trusts generally should not be used to buy basic necessities like food or shelter, nor should they be used to provide the disabled person with the assets needed to buy food or shelter. The reason for this is that the SSA may consider the money used for these purchases to be "in-kind" support and maintenance (ISM). ISM can reduce or in some cases eliminate your SSI benefits. Therefore, make sure that you check with a trusts and estates attorney before using the funds to buy food or shelter.
However, these trusts may be used to purchase clothing, and they can also be used to pay for things like physical therapy, entertainment, education, and travel.
The Achieving a Better Life Experience (ABLE) Act, a federal law passed in 2014, allowed for the creation of ABLE savings accounts, special bank accounts for individuals with disabilities. Money in the accounts doesn't count as assets or resources for the purpose of SSI disability benefits or Medicaid. Unlike with trusts, there is no trustee who manages the account; the disabled person is able to spend the money as he or she wishes. However, these bank accounts are only available to those who became disabled before age 26. For more information, see our article on ABLE accounts.
Special needs trusts, whether third-party, self-settled, or pooled, can be great vehicles for protecting a disabled person's access to means-tested benefits like SSI. The proper creation of a trust, however, is necessary. Contact an attorney who specializes in estate planning for information about how to create a special-needs trust for SSI eligibility purposes.
Updated January 4, 2023
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