How can I preserve my child’s SSI benefits when she receives an inheritance?

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Supplemental Security Income (SSI) is a means tested benefit that provides $735/month (for 2017) in income to the beneficiary.  The beneficiary is not allowed to have more than $2,000 in countable resources.

For current income requirements and benefits, please visit SSI Federal Payment Amounts page.

A person eligible for SSI will also be deemed eligible for Medicaid.  Medicaid is often a more important benefit, so maintaining SSI eligibility is critical.  Medicaid also has a $2,000 resource limit.

If a SSI beneficiary receives any lump sum, including inheritance, the sum can put the beneficiary above the $2,000 resource limit.  At that point the beneficiary has several options, depending on the individual’s circumstances.

First, the beneficiary could decide to go off means tested benefits.  If the inheritance is large enough, it may benefit the beneficiary to go off means tested benefits.  The inheritance can be used to pay for food, shelter, and other living expenses and give the beneficiary more autonomy.

Second, the beneficiary could shelter the sum above the resource limit in a special needs trust (SNT).  This type of SNT can be established by the individual, parent, grandparent, or the court.  The SNT must have a provision whereby any State support payments must be paid back from the trust at the beneficiary’s death up to an amount equal to the total amount of medical assistance paid on behalf of the beneficiary by a state plan for Medicaid assistance or through an approved waiver program.

The beneficiary could also transfer the funds to a ‘pooled’ SNT.  This would be a good option if the sum is not as large or if there is not a relative or family friend available to act as trustee of the SNT.

Third, the beneficiary, or a legal representative for the beneficiary, could establish and fund an ABLE account with up to $14,000 in any one year.  It doesn’t cost anything to establish an ABLE account and the account funds can be used to pay for ‘Qualified Disability Expenses’ including (a) Education, (b) Housing, (c) Transportation, (d) Employment training and support, (e) Assistive technology and personal support services, (f) Health, (g) Prevention and wellness, (h) Financial management and administrative services, (i) Legal fees, (j) Expenses for oversight and monitoring, and (k) Funeral and burial expenses. These qualified expenses are broader than the permissible distributions from a SNT for SSI recipients.

Fourth, the beneficiary could spend down the sum in the month it is received.  Spending the amount above the resource limit in the month in which it is allows the beneficiary to maintain eligibility for means tested benefits.  Any portion of the inheritance not spent down in the month it was received will be treated as a countable resource in the following month.  If there are quality of life items that would benefit the beneficiary, spending the inheritance down might be a better option than incurring the cost to establish a SNT.  The spend down might include items such as a home, a car, paying off debt, purchasing electronic goods (TV, computer, cell phone), etc.  A spend down is not merely wasting money.  The funds need to be spent on exempt resource that will improve the beneficiary’s quality of life.

An experienced Elder Law attorney can help you understand your options in dealing with an unplanned inheritance when the beneficiary is receiving means tested benefits like SSI and Medicaid. Contact the Elder Law Attorneys with the Law Offices of Nay & Friedenberg LLC in Portland, Oregon at 503-245-0894 to set an appointment.

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