Special Needs Spotlight Webinar Series: SSI, SSDI, and SS for DACs
The law firm Norris McLaughlin, P.A., is pleased to present the Special Needs Spotlight Webinar Series. In this session, “SSI, SSDI, and SS for DACs,” Shana Siegel, a Member of the firm and Chair of its Elder Care & Special Needs Law Practice Group, addressed the legal and financial assistance available for a Disabled Adult Child (DAC), such as Supplemental Security Income (SSI), Supplemental Security Disability Insurance (SSDI), and Social Security (SS).
Watch the recording here or read the transcript below:
I’m going to go ahead and get started. Again, my name is Shana Siegel. I’m the chair of the Elder Law and Special Needs Section at Norris McLaughlin and today we are going to be talking about understanding public benefits, and we’re really going to be focusing on SSI, SSDI, and Social Security work, which is commonly called DACs. I find that so many individuals who have a family member with special needs, they were told they should start a special needs trust, they draft a trust, and maybe they’ll fund it, and then that’s kind of where they stop and where their legal guidance stops. And when it comes to dealing with issues with Social Security, they’re really very confused—don't have a basic understanding of the differences between the programs and that can cause a lot of problems as we’re going to see.
So, I wanted to make sure to kind of take you through that and address some of the common issues and questions that come up in my practice. So, the basic distinction that people need to understand is the difference between needs-based benefits and what we refer to as categorical benefits. And what that means is that needs-based benefits like Medicaid and SSI have financial eligibility. Therefore, in order to qualify for them, you need to make sure that your assets and income meet the criteria, and that means often the use of a special needs trust and some planning in order to get your assets where they need to be.
However, Medicare, SSD, and the Social Security Child Disabled Beneficiary Program or DAC, as we commonly call it, do not have these limitations, and so there is no requirement to put assets into a special needs trust when you're looking at eligibility for those programs. Now you may want to do that for other reasons, there may be other benefits that you’re looking at, but just in terms of looking at eligibility for Social Security Disability or the children's benefit known as DAC, you could have substantial income and substantial assets and still be eligible for those.
Supplemental Security Income (SSI)
I’m going to spend a lot of time talking about SSI today because that is the program that many people find that they are eligible for—the loved one is eligible for—for most of their adult life. So, we look at SSI, which is short for Supplemental Security Income, this is a Social Security program that is meant for individuals with limited income and resources. In order to receive it, you need to be aged, blind or disabled, and typically you do not have a work record when you are applying for this, at least in the beginning. And you may have a work record, but there is no work record requirement for Social Security credits like we see with the other programs under Social Security. So,, that’s really what distinguishes this program, and that is one of the reasons that so many individuals when they turn 18 if they have a disability, can be eligible for this program.
Now, SSI is a cash benefit. But really for many clients, it is about the Medicaid. When you get your SSI and you get that somewhere between 600 and 800 plus a month—and we’ll talk about why there’s a difference—when you get that cash benefit it brings with it Medicaid, and Medicaid eligibility is very important for DDD eligibility. So, when you think of all the programs that you want your child to receive through DDD, you need to apply for SSI, or Medicaid by itself in order to get those programs. Automatically, when you apply for SSI, you get Medicaid. So, it’s a great way to loop into a wide range of options and services. So, our SSI eligibility categories: Here we have aged, blind, and disability. Disability is obviously where we’re focused on here today and we’re talking about an inability to perform substantial gainful activity due to medically determinable physical or mental impairments, or some combination thereof. And it has to be expected to last one year or longer—typically, we’re dealing with permanent disability here—and/or result in death. Age, education, and prior work experience are considered when they're determining whether it's going to cause an inability to perform substantial gainful activity. So, the financial eligibility for SSI is you cannot have resources of more than $2,000 if you're a single individual. Now, that doesn't mean that an individual who has more money cannot be eligible because we can create this eligibility by putting some assets into a special needs trust, which we’ll talk about a little bit, just briefly today.
There are resources that are specifically excluded. In addition, any resource that the beneficiary does not have the right or power to convert to cash is excluded. So, for instance, if property is held jointly with another individual, then it has to be excluded for eligibility purposes because I can’t force my spouse to sell the house, and we own it together, and therefore it is an excluded resource. The house was probably a bad example because that’s going to be excluded anyway. But anything that we might have—if we had a joint account. So, the specifically excluded resources are your home, a vehicle, special item or devices needed for your medical condition, clothing, household items, and personal effects, a burial plot and burial contract, and up to $1500 in life insurance. Now, when we talk about clothing and household items and personal effects, there is a—in the regulations—a limit on this. But, typically, we do not see a worker with Social Security asking about the actual value of these items. So, this typically is not a problem.
So, the income rules related to SSI a lot of times are confusing for people. Income is any item that an individual receives in cash or on his or her behalf that could be used to meet their needs for food or shelter. So clearly, if you are paid a salary that's income. But there are other things that can be income as well. Income, after the set-asides we’ll talk about, reduces the monthly benefit dollar for dollar unless it is specifically excluded—and there are certain types of income that are excluded. So, when we think of a resource, money in the bank that we have versus our income, well, where is the distinction? It is really the time that it’s received. So, if I get money into my bank account, it’s income in the month that I received it, but it becomes a resource if I don’t spend it in next month. So, you want to take that money in, you need to spend it, and then it won't count against you in terms of your resource limit. A lot of clients will say, “Well, you know, I get money in and I’m over $2,000.” That’s OK in the particular month, but then by the next month, you need to have that money out of the account.
Earned versus unearned income:
So, earned income is compensation for work. So, that may be wages, that may be other types of compensation that you have through work.
It is basically anything else. So, you have government benefits, child support or alimony, someone gives you gifts, or housing and food—and we’re going to talk about that in detail. The first $65 plus one-half of the remainder of your earned income each month is not counted in order to reduce your benefit. With regard to unearned income, only the first $20 is disregarded. So, I'm sure that if you have a family member who receives SSI, you've seen the calculations where they will send you a notice showing the disregard of $65 and then one-half, and then any unearned income, and then show what the income amount that is counted and how that reduces your SSI benefit. For many clients, they're not that concerned about a reduction in the SSI benefit. After all, the individual is working, there's obviously a lot of value in that and independence, and the real concern just comes in making sure that you don't work so many hours so that your income gets to the point where it's going to completely eliminate the SSI. That becomes a problem because of then the loss of Medicaid. So, even if you're getting one dollar of SSI, you can still get your Medicaid. And I see a lot of clients who do take advantage of that situation.
OK, I think the thing that really is the most confusing for people is in-kind income, and we think of it as in-kind support and maintenance or ISM. This is where you are not receiving cash but your receiving food or shelter or some item that’s provided to you that can be used for food and shelter. So, it could be some kind of gift card or a voucher that you’re receiving that could pay for your food or shelter, and that is going to be countable up to a maximum limit $281. So, what I mean by that, is if I am getting this type of support from another individual, that is going to reduce my benefit just as if they were giving me cash. But there’s a cap on the reduction. So, it doesn't matter if I'm receiving $3000 a month in a benefit of ISM, my only penalty, let's say, my only repercussion is a reduction in my SSI of $281. So, $281 every single month over years really can add up.
So, let’s talk about how we can work with this. So, the first thing that you need to understand are what categories that count as ISM? What are the things I shouldn’t be paying for if I can avoid it in order to avoid that reduction? So, these are the categories here: It’s food, rent, mortgage, property tax, heating fuel or gas, electric, water and sewer, and garbage removal. So, you can see there are a lot of things that aren’t on this list that we can provide for our loved ones without having any kind of reduction.
So, that's a really important thing in terms of planning our strategy and our budgeting for our loved ones. However, food and our housing costs really can be a major problem because here in New Jersey it’s very, very difficult to find a place to live that is going to fit within our SSI payment—our loved one’s SSI payment. So, is very, very common to run into difficulties with the ISM issue, whether we have our families living with us or we have our families living somewhere else and we’re helping them to pay for it because their SSI is just not sufficient to pay for their housing costs.
So, how does this work? So, it may be that the trust that you’ve established or yourself individually is paying for the rent or helping to pay for the rent for your child. It may be that the child lives with you and they're not paying for food or shelter. Often times, clients say, “Oh…Well, I was told that I have to have my child pay, so I'm going to have them pay.” But they can’t pay enough because of the cost of housing here in New Jersey, that their pro-rata share is not sufficient. So, let’s break that down a little bit. So, if there are four people living in my house and I have a mortgage payment, I’ve got utilities, I’ve got all of these costs that are going to add up, and let's say that that adds up to $4,000. Well, even if I wanted to charge my loved one their pro-rata share (one quarter) that would be $1,000, which is exceeding what their benefit is. So, we have a problem, and so in that situation, we’re going to have an ISM problem if I don't find another way for them to pay that full amount. We also have a situation where our recipient may be paying rent, but it's not fair market. Now, I’m distinguishing that from the situation where they're contributing to the household.
So, let's say that I am going to have my child pay me rent as opposed to contributing a pro-rata share of the costs. I need to make sure that that rent is fair market and then need to make sure that there’s formal agreement and that that individual is being treated as a separate household so that they are paying for their rent expenses and their food expenses separately. So, how can we address these issues? Well, one of the problems that we've come across is, well, maybe I can meet the ISM once my child gets their benefits—well, what happens during the six months, a year, however long it takes for their benefits to be approved, and during that period when I get my retroactive benefits they're going to end up being reduced because clearly my child didn’t have the money to be able to pay their fair share during that interim period. So, what they need to consider is the loan agreement, a written document where your child has a responsibility to pay for whatever the arrangement that you are going to make, whether you're able to do pro-rata share, whether you're able to do a fair market rent, and your child is going to be paying that amount. You can then not charge them, and once they get their benefits, then they will pay you back and reimburse you under the loan agreement—and that’s one way to avoid the imposition of the reduction.
Another approach is charging the pro-rata share as we’ve talked about, which may or may not be feasible depending on what your particular costs are. Now, what happens if I want to charge the pro-rata share—and as I said before, I may have $1,000 as their pro-rata share—if my child's benefit is less than that? Well, one way to address that is to put assets into an ABLE account. An ABLE account is a specialized account—we talked about those in another seminar, so if you’re not familiar with it you can take a look at our past webinar, we go through it in detail and we address this particular issue, which is that ABLE accounts can pay for food and shelter without any reduction in ISN. So, if you wanted to put assets into an ABLE account, and then that could be used to bring the payment up to that full $1,000 or whatever the pro-rata share is, and therefore avoiding the imposition of the one-third reduction. Another interesting rule is that ISM is not applied for food or shelter provided from a nonprofit. So, I know that many people are facing difficulties right now, they may be receiving some food from a food bank, for instance, and that would not be subject to the reduction. OK. So, I want to transfer on to talking about deemed income just briefly. Income and resources of a parent to an eligible child under age 18 are deemed, their income is deemed. So, that is one reason that it individual under age 18 often is not eligible for SSI. Of course, there are exclusions, they’re not all-encompassing, and there is a limit; however, very often for many of my clients, this doesn't prevent their child from being eligible for SSI until they turn age 18. At age 18, no matter whether the child remains living with you, your income and resources are now no longer relevant, and that's why we see so many individuals going onto SSI at age 18.
If the potential beneficiary has a spouse, that spouse's income and resources are also deemed to them. So, that would be relevant. That'd also be income and financials that you would have to look at to determine whether they remain eligible for SSI in that situation.
OK, so when we’re dealing with trusts, SSI—often clients do have some funds, so they're not going to be eligible for SSI immediately. They’re not going to just—to have less than $2,000 in their name in some instances. And you can create a first-party trust, place assets into that trust, and then it is not countable, as long as the trust conforms to the first party regulations that we have in New Jersey, the federal and supplemented by New Jersey regulations. If your child has a third-party trust, whether that was funded by yourself, funded by grandparents or some other source—perhaps an injury law or lawsuit—that third-party money should not be counted for SSI purposes. And I have many clients who have very large special needs trusts and they are eligible for SSI because the beneficiary is not in control of those assets. However, we do have situations where a grandparent or other family member was well-meaning and wanted to leave money aside for a child, but they didn’t realize that if they had a specific amount of money going to that child every month, or if they allowed or that the language that was in that trust stated that the trust was going to provide for the maintenance, support, health, education, that type of language for the child, instead of being discretionary or instead of being traditional third-party supplemental needs trust, that those funds then could be available. And that’s why it’s really important when you're looking at creating a trust, or have a family member who is considering doing estate planning and wants to have your child as the beneficiary, that you really need to include, make sure that they are consulting with an attorney who understands these rules and is not going to make the assets inadvertently available to the beneficiary.
Social Security (SS)
So, what happens to be trouble with Social Security? So, often I find that clients were not aware that they needed to report income; they weren’t aware that when their income changed that they didn't right away report it to Social Security; that they weren't sure how to address the in-kind support maintenance rules. Often times clients are not careful about keeping their account below the resource level, and so we see an account creep up the above $2,000. Sometimes that can happen for a long period of time before Social Security realizes it, and then you can have a real problem because you will have an overpayment for all of those months that you were not eligible because you weren’t keeping that account—you weren’t keeping the assets below $2,000. So, that’s a really important thing to be aware of.
And I have some clients who earn too much money. So, in addition to the SSI reduction of dollar to dollar, we also have another concept which you have to be aware of here, and this is more of an issue we get into SSD, but also, here with SSI. If you have a client—I’m sorry—If you are an individual who is working and you have—you’re working more than about $400 a week, that is a threshold where the Social Security Administration could say: Well, you’re no longer disabled because you are able to work enough to, what they consider support yourself. You are engaging in substantial gainful activity, and so, if you are able to work, and you are working, you want to make sure that you stay below that threshold and you're working a limited amount to show you’re your disability continues.
Also, I have individuals who have problems with SSI because they’ve received gifts—I’m sorry—because they make gifts, or they make transfers, so they may gift out to their church or they may give out to a family member, and if it's more than a nominal amount of money that can cause problems for their SSI. So, you want to be really careful about that piece as well. Even a nominal amount of money given up on a regular basis could be something that could jeopardize their SSI.
So, a lot of people don't know that Social Security Administration does not recognize powers of attorney. They also don't directly recognize guardianship. In order to be able to manage an individual's Social Security or SSI benefits, you need to be appointed as the representative payee, and that’s a process that happens through the Social Security Administration. If you have been appointed guardian of your family member, then you can present those guardianship papers, and that will expedite their appointing you as representative payee—that will happen almost automatically. However, if you’re not guardian for your family member, you will need to set up an appointment to explain to them why the individual is unable to manage their own funds, and that you would like to be appointed as representative payee.
Social Security Disability Insurance (SSDI)
Alright. So, let’s move now to Social Security Disability Insurance. This is insurance—this is a benefit that is on your own work record. So, if I have a disability and that I have been able to work over a period of time, then I could at some point become eligible for Social Security disability if, in fact, I am later more limited in my ability to work. So, I often find this with someone who becomes disabled later in life rather than having a disability. In order to be eligible, you normally have to have 40 work credits, 20 of which must have been earned in the last ten years. So, often I will have families come to me and their child was never diagnosed but always had difficulty in the workforce. So, whether this is an individual with mental health issues; maybe on the spectrum; they're an adult and they would like to get benefits at this point, but they haven't really worked, and so they may have difficulty even though they have work credits early on, because they haven't worked recently or they worked very sporadically, they can have difficulty earning this benefit. And that’s really problematic because unfortunately, this benefit can be substantially more than what they would have received on SSI depending on what their work record would have shown. The number of credits can be less than 40 depending on the age that they become disabled. So, that's something to really investigate and speak with Social Security and/or your attorney in figuring that out.
The nice thing about Social Security Disability is that after two years you qualify for Medicare, and so that can be a huge game-changer for families to be able to have Medicare coverage in addition to Medicaid. Since in some situations this can cause a loss of Medicaid, we’ll will talk about that a little bit more when we talk about the DAC benefit.
OK. Social Security for childhood disability beneficiary. It used to be referred to as disabled adult child or DAC, but they now call it CDB. Everyone I know refers to it as DAC. This is based on parents' work record. So, a lot of times clients will come in and they will tell me that their family member receives Social Security, and they don't have any idea whether this is on the parents' work record, the child's work record, are they just receiving SSI. So, the best way to be able to tell is to look and see what Social Security number is tied to the benefit, and that’s going to tell you whether or not it's on the parents' work record or on the child's work record.
When we have an individual where a parent is claiming their Social Security benefits—whether that’s based on disability or they’ve hit retirement age, or when the parent dies—in all of those situations, a child with a disability may be eligible for CDB benefits. So, this eligibility, we have a couple of factors here. The biggest factor that can be a real stumbling block is you have to prove the disability began before the age of 22. And so, if you have an individual who is maybe a bit older now, didn't have special education, never went for early intervention, never really had disability addressed and is now looking to do so, this can be a real problem. But for individuals who have gone through the school system with special education, have had physicians involved in their lives, and have had a disability that has been diagnosed prior to age 22, then this is not a factor. This is a benefit specifically for children. So, it's on the parents' work record. However, there are a couple of situations that it can include grandchildren or other individuals. For one, it can involve an adopted child. So, if there is a family member, let's say a niece, a nephew, or a grandchild who you are caring for who has special needs, you might want to consider whether adoption would be beneficial in order to have them qualify for this benefit. Without adopting your grandchild, you can also receive this benefit in certain situations.
So, if the parent has passed away then you can have a grandchild. That's important to really understand this eligibility if it's important to you. So, you would want to talk to Social Security, or better yet, to an attorney who is knowledgeable in this area. In order to receive these benefits, the individual must be unmarried. So, that's something to consider if we're looking at a substantial benefit here that this could be problematic if your child is going to marry. Now when we look at this benefit and we think why it's so important, why we might want to hold off on marriage or address these other issues in order to qualify for this benefit, well you see that this benefit may be quite robust. When a parent is going to retire the child is generally eligible for 50% of the parent—parental benefit, and that goes up to 75%. So, you can see that this benefit is often going to be much more substantial than the SSI benefit. There is a family cap, so if there are a number of individuals who are receiving benefits under the one worker, this can come into play and reduce those benefits just a bit. So, whether we’re talking about Social Security disability or we’re talking about the CDB benefit, you can receive Medicare after two years.
Now, as I mentioned before, that can be a problem for Medicaid purposes. In fact, even before we receive Medicare, we’re going to have a problem with our Medicaid benefits, because typically, these benefits are going to be higher than the income threshold for Medicaid. So, first of all, you’re going to be losing your SSI, and so you're losing your automatic Medicaid; and secondly, you may have too much income to qualify under the ABD Medicaid program.
So, what do we do? Well, there are other Medicaid programs. First of all, there is a specific rule with regard to individuals who would lose their SSI, and therefore their Medicaid as a result of getting DAC. And that is a special—here they still call it DAC—so that’s a little confusing but it's a special DAC Medicaid eligibility group in New Jersey, and what that means is that if you have received SSI—you have to have received SSI first. You can’t go directly to the CDB benefits. If you have received SSI first, and then you lose your SSI because you are now eligible due to your parents retiring or passing away, for their benefit—for the CDB benefit, and that’s going to push you over that income threshold, then you will still get your Medicaid. That income will not be considered for your Medicaid purpose. So, this helps many, many individuals—and many people don't know about it, and many Medicaid caseworkers don't know about it. So, a lot of times you will automatically get kicked off of Medicaid. That’s not supposed to happen, because they're supposed to check, but it does happen. So, you want to be aware of this if you’re coming up to this point where you may be ready to apply for your retirement benefits, to reach out to Medicaid and just kind of let them know that this is going to happen so that you don't end up with a period of ineligibility there.
Many other individuals are eligible under the workability program. So, if you weren’t on SSI, your loved one wasn’t on SSI before, and they are all of a sudden are now receiving SSDI or CDB, you may want to look at the workability program as a possibility to have Medicaid maintained for them.
OK. So, that’s what I have for today. I can certainly take questions if anyone has them. And if you want to raise questions now you can through the chatbox or if you want to send me an email, you should certainly feel free to do so. I don't seem to be seeing any questions. Oh…wait, I do have one.
The law regarding keeping Medicaid under DAC a state or a federal law. That is a federal program, yes. Yes. So, what I spoke about in terms of having a DAC Medicaid eligibility, that is federal law, but here in New Jersey they actually sort of created like a separate program, a separate category for it. So, that’s why I referred to it as a New Jersey program.
OK, I don't see any more…Well, I do. One of the individuals is asking for the name of the law. So, what I'm going to do, is I can go ahead, and I will send a link to you. If you give me your information, Wendy, I will send a link to you with that.
Anybody else have any other questions? If not, I really appreciate your time. I hope this is helpful for you, and if there was anything that you were little unclear of, certainly feel free to give me a call, or this will be available for review back and we'll send you the link out to you.
Thank you everybody. Have a great afternoon.
If you have any questions about this post or any other related matters, feel free to email Shana at email@example.com. Please join us for the next session in our Special Needs Spotlight Series. To save the date for future segments, please click here.