SSI is a federal income benefit program for disabled persons who have less income than the SSI standard, which is an amount that the federal government has determined to be the “floor” amount that a person needs in order to survive. Unlike the Social Security Disability Income program (SSDI), SSI does not look at work history, and it does not require that the individual paid into the Social Security program during a work history. SSI considers only the medical/vocational question, “Is this person disabled?” and if so, whether the person’s income from all other sources is less than the SSI standard.
SSI income and asset limits are a very significant reason to have a Disability Trusts. SSI has the same asset limit as Medicaid: $2,000 for individuals and $3,000 for married couples. If a person has, or receives, assets in excess of this limit, he or she can qualify for SSI by transferring excess assets into a qualifying Disability Trust, including either an individual SNT or a Pooled Trust.
As with the Medicaid program, most assets are countable against the SSI assets limit, such as savings, investments, vacation properties and insurance or annuity contracts with a cash value. SSI also has similar exclusions, such as a personal residence, an automobile allowance, and normal household furnishings.
With respect to income, the SSI limit is the same as the minimum benefit. That amount for a single individual in 2020 is $783/month. If a person has more than that amount from other sources, he or she cannot qualify for SSI. If he or she has less than the SSI amount, however, SSI will make up the difference.
One of the things that can be confusing about SSI and SSDI is that a person can receive both types of benefits. This happens when a person has a work history and qualifies for SSDI, but the amount that SSDI pays them is less than the SSI standard. If such a person meets the other requirements for SSI, he or she will receive both a check from the SSDI program for the amount to which their work history entitles them, and an SSI check for the difference between their SSDI payment and the minimum standard set by SSI.
SSI and Disability Trusts
If a person has assets in excess of the $2,000 limit for an individual, or $3,000 for a couple, the SSI program, like Medicaid, does not allow the person to qualify by giving assets away. In order to prevent such gifts, SSI imposes a “penalty,” or a period of disqualification, on the individual. The time of disqualification is based upon the amount given away, divided by the amount that SSI would have paid each month to that individual. There is, however, a 36-month maximum time limit for the penalty.
For example, if a person’s monthly SSI benefit would be $750, and he or she gives away $30,000, the penalty period would be $30,000 ÷ $750 = 40 months. Since this period exceeds the 36-month maximum penalty period, the gift would incur the maximum, 36-month penalty. After 36 months, the person would begin receiving SSI benefits.
There are a handful of exceptions to gifting penalties, such as transfers to a disabled child or grandchild. But many disabled persons need the support that their excess assets could provide. For these individuals, SSI rules allow excess assets to be set aside in a Disability Trust, instead of spending them.
Assets in a qualifying Disability Trust are disregarded, or “exempt,” under the rules for countable assets. This treatment applies to savings, inheritances, personal injury settlements, gifts, or virtually any kind of asset that the individual might have. There is a special rule for a personal residence: as long as it is not in trust, it is an exempt personal residence. If put into trust, it paradoxically becomes a countable asset. This is so, because the SSI program requires that the state be able to place a lien against the property for estate recovery purposes after the individual’s death, and the state cannot do so if the asset is in trust.
The Disability Trust exemption from countable assets comes at a price. In order to qualify as exempt, the trust must meet the following criteria:
(1) The individual must be disabled.
(2) The trust can benefit only the disabled individual.
(3) Upon the death of the beneficiary, the trust must use assets that remain in the trust to pay back the state’s Medicaid agency for medical benefits paid during lifetime. The SSI program itself does not receive any reimbursement.
Distributions From a Disability Trust
Most people are aware that a Disability Trust cannot distribute cash—either as income or as principal—to them directly. Virtually all public benefits treat any cash distributions from a trust as income, which reduces their benefits for that month, and sometimes for longer. If the purpose of the trust is to preserve public benefits, it therefore cannot distribute cash.
Instead of giving money, a Disability Trust pays for goods and services that allow the beneficiary to live more independently and with higher quality of life. Part of the value that we bring to our role as trustee is to understand and play by these rules.
Below is a representative list of the kinds of support that a trust can pay for:
- Recreational and social activities
- Bedside telephone and cable TV
- Chair car and other transportation
- Companionship visits and support
- Fiduciary, social work and legal expenses
- Denture replacement and non-medical dental care
For a more comprehensive list of the kinds of support that a trust can provide, please go to Uses of Disability Trusts.
One of the unique concerns for those who receive SSI is the treatment of certain goods and services as “in-kind support or maintenance,” or “ISM,” under SSI rules. ISM is considered to be income, although not on a dollar-for-dollar basis. Most of the things that a trust can provide is not ISM. But distributions for food or shelter are treated as ISM.
ISM causes a reduction in monthly SSI benefits. The rules for how much is deducted can be very complicated. In general, the deduction is limited to one-third of the federal benefit. Because of this limit, the decision about whether to provide food or shelter can be tricky. For example, if the value of shelter benefits that the trust can provide is much greater than one third of the federal SSI benefit, and if the trust has enough funds to make such distributions indefinitely, it can be worth the loss of one third of the SSI benefit in order to have the trust pay for shelter. Weighing these kinds of considerations is part of the trustee’s job for beneficiaries who have SSI benefits.