Supplemental Security Income (SSI) is a federal program that helps people with disabilities and very low incomes pay for food, clothing and shelter. SSI is often confused with Social Security Disability Insurance (SSDI). One of the main differences between the two programs is that SSDI is available to people with disabilities no matter how much money they earn or have, while SSI places very strict limits on a recipient’s income and assets. However, in most states, an SSI beneficiary who receives even $1 from the program also qualifies for Medicaid health coverage, which can be far more valuable than SSI’s benefit itself.

How to Qualify for SSI:

This first requirement is often the hardest for SSI applicants to meet, in large part because the federal government’s definition of “disabled” is so narrow. In essence, adult SSI applicants who are seeking benefits based on a disability must show that they are almost completely unable to work at any job whatsoever. The applicant must have a physical or mental impairment that makes it impossible for him to engage in any “substantial gainful activity,” and this impairment must be expected to last for longer than one year or to result in death. If an applicant is able to engage in substantial gainful activity, then he will typically not be eligible for SSI. A child applicant must have a physical or mental impairment that results in marked and severe functional limitations and can be expected to last for longer than one year or result in death.

An SSI Beneficiary Must Have Very Limited Resources:

Once an SSI applicant has shown that she is disabled, she must also prove that she has less than $2,000 to her name. If the applicant can use or liquidate an asset to pay for food or shelter, the asset will probably count as a “resource” against this limit. A resource would include any funds held in the applicant’s bank accounts, retirement accounts, or in cash. If the applicant has set up a trust that does not meet specific requirements, the trust funds are also counted against the $2,000 limit. The applicant’s own home will not be considered an available resource, and her car is also exempt. The $2,000 resource limit does not disappear once a person qualifies for SSI. If an SSI beneficiary ends a month with more than $2,000 in her name, she will lose her benefits in the following month.

Income Is Key:

SSI recipients get only a modest monthly benefit, and this sum is reduced by any income they may have. In 2009, the maximum federal SSI benefit was $674 a month, although many states add a small supplement to this. In addition, SSI benefits are reduced by $1 for each dollar of unearned income a beneficiary receives (such as interest or dividends), and by $0.50 for each dollar of earned income (such as wages). SSI benefits are also reduced if an adult beneficiary lives in someone else’s home without paying rent, or if he receives free meals. Finally, the income of the people living with the beneficiary can count against the beneficiary. If the beneficiary’s combined income reduces his SSI benefit to zero, he loses SSI, along with any Medicaid benefits that may come with it.

Supplemental Needs Trusts Can Help:

Although SSI’s income and asset rules are highly restrictive, several types of trusts, called “Special Needs” or “Supplemental Needs” trusts, can protect an SSI beneficiary’s assets while allowing her to maintain SSI eligibility. Relatives and friends of the SSI recipient can also set up a trust for the recipient and fund it with their own money. If properly structured, these trusts also will allow an SSI recipient to continue receiving benefits. Unfortunately, a poorly drafted special needs trust can destroy any hopes an applicant has of ever qualifying for SSI.

Quality Advice Is Necessary:

SSI is a very complicated program with rules that most attorneys who do not focus on this practice area have trouble understanding. Therefore, it is essential to seek out a qualified special needs planner, such as the Attorneys at the Law Firm of Needham Mitnick & Pollack, who can guide you or your family through the complicated process of obtaining and maintaining SSI benefits.

Though the vast majority of America’s 2.6 million children with special needs will need costly care long after their parents have passed away, few parents are prepared for that day.  New research sponsored by The Hartford Financial Services Group, Inc. has found that three in five (62%) parents of children with special needs have no plan to cover the cost of caring for the child when they no longer are able to do so.  And those that do have a plan often make mistakes that may disqualify their child for government services on which they now depend.

Of parents with a plan, only 42% are confident it will cover their child’s lifetime needs. The most common strategy (65%) used to cover the anticipated cost of care was life insurance.  The vast majority of parents (85%) with a child under five have life insurance. But just 46% with a child between the ages of 13-18 have a life insurance policy, despite the fact that a child’s needs may be as great or greater as an adult. Among those with a life insurance policy, 51% do not know that during the child’s lifetime they may access the accumulated cash value in a permanent policy to cover some of the cost of their child’s special needs and 72% of those who are aware they can do this do not take advantage of it.

Even parents with a plan for their child made costly mistakes. Half of all parents of children with special needs plan to leave money directly to their child and even more (58%) name their child as a beneficiary, either of which could possibly disqualify the child for critical government benefits and services.  In addition, only a quarter of the parents have established a special needs trust to provide for supplemental needs and expenses of the child, while not disqualifying the individual from receiving government benefits.  These missteps likely occurred because only 16% of parents with a plan created it with the help of an attorney.

Parents should take these four steps to help ensure their special needs child is protected:

1. Work with a Financial Professional to develop a plan capable of funding a lifetime of support for your special needs child, over and above what the government will provide.

2. Establish a special needs trust to protect the assets and to ensure the child will qualify to receive government benefits and services.

3. Speak with the person you want to be your child’s guardian so they fully understand the commitment and are willing to take on the obligation.

4. Buy a permanent life insurance policy to cover the anticipated cost of care.

Parents often assume they have to amass a big savings account to cover expenses, which can easily amount to hundreds of thousands of dollars over the course of their child’s lifetime, when individual life insurance can provide a more affordable strategy.

Sheri R. Abrams, Attorney at Law, was among the attendees at the Annual Stetson University Law School Conference on Special Needs Trust Preparation, which took place October 16-17, 2008 in Tampa, Florida.

Special needs Trust Preparation is one of the fastest-growing areas of estate planning. Attorneys in this field focus on helping individuals with special needs and their families plan for a more secure future. The attorneys must combine compassion with skilled estate planning and a knowledge of the public benefit programs on which many individuals with special needs must rely.

These Conferences put on by the Stetson University Law School provide attorneys in this growing field of law with access to a collegial community and practice tools to assist them in fulfilling their clients’ needs.

This conference in Tampa featured presentations by nationally recognized leaders in special needs planning and related disciplines who shared insights on the latest developments and legal strategies in the field.

To learn more about Special Needs Planning Services offered by Sheri R. Abrams, please call 703-934-5450 and set up an initial consultation or see our website at www.virginiaspecialneedstrusts.com.