A Case Study Involving Social Security and SSI Benefits, An Overpayment, Divorce, A Special Needs Trust And A Successful Effort To Increase The SSI Monthly Benefit Amount

I don’t usually blog about the Social Security cases my law firm handles, although we represent many applicants for Social Security and SSI disability benefits each year. It’s time I remedied that oversight. My firm recently handled a very interesting and complex case for a disabled client which involved the termination of the disability benefits he had been receiving from the Social Security Administration (SSA) for years, the waiver of an overpayment, eligibility for Supplemental Security Income (SSI) benefits, divorce, the use of a Special Needs Trust (SNT) for the spousal support and equitable distribution of assets he obtained in the divorce settlement, and the use of the SNT assets to increase the amount of his monthly SSI benefits. Many SSA/SSI cases contain one or more of the issues present in the case I’m about to summarize, but this case was unique because of the number and complexity of the issues we worked through to resolve the client’s problems. I think that a discussion of the way the various issues and claims in the case were resolved may be helpful to readers.

When I met G.Z., he had then recently received a notice from SSA informing him that he had been overpaid by $43,128.18 in disabled adult child (DAC) benefits. (To qualify for DAC benefits from SSA, an applicant must show that he or she was disabled prior to the age of 19, that one of the applicant’s parents is deceased or receiving Social Security benefits, and that the applicant is unmarried. If qualified, the disabled adult child receives DAC benefits on his or her parent’s social security number.) G.Z. had received DAC benefits for many years, but had gotten married, rendering him ineligible for DAC benefits. The overpayment was caused when G.Z. continued to receive SSA benefits after his marriage. G.Z. was told he could request a waiver of the overpayment or file an appeal. We did both. In addition, we also filed a new claim seeking SSI benefits for G.Z, since G.Z. had no income (because his DAC benefits had been terminated) and few resources.

Several months later, the client was notified that the $43,128.18 overpayment of DAC benefits had been waived by SSA because G.Z. met the criteria for a waiver; that is, G.Z. was found to be without fault in causing the overpayment and was financially unable to repay. G.Z. also received notice that his claim for SSI disability benefits had been approved. However, G.Z. was awarded the lowest SSI monthly benefit amount available because SSA determined that G.Z. received “in-kind support and maintenance” from his nephew, J.Z., with whom he lived. (“In-kind support and maintenance” means unearned income that an SSI recipient receives in the form of food or shelter paid for by someone else. The receipt of in-kind support and maintenance by an SSI recipient results in the reduction of the recipient’s monthly SSI benefit amount.)

Because G.Z. had signed a Loan Agreement with his nephew J.Z. several months before he applied for SSI benefits agreeing to repay J.Z. for any support provided to G.Z., G.Z. did not believe he received in-kind support and maintenance from J.Z. As a result, G.Z. filed an appeal, asking SSA to reconsider its decision to pay G.Z. the lowest SSI monthly benefit amount available. However, on reconsideration, SSA affirmed its prior decision, concluding that the Loan Agreement was not bona fide because there was no possibility that the loan could ever be repaid given G.Z.’s low income and resources. Believing that his Loan Agreement was, in fact, bona fide, G.Z. filed a Request for Hearing before an Administrative Law Judge (ALJ).

While the SSA/SSI claims and appeals were proceeding, G.Z. had filed for divorce.  At the time of the divorce, G.Z. had been married for almost eight (8) years to L.Z. In order to resolve the issues in the divorce, the parties adopted in total the recommendations of the Middlesex County Early Matrimonial Settlement Panel, comprised of experienced family law practitioners, concerning an appropriate alimony award and the equitable distribution of marital assets. In that regard, the Panel recommended that L.Z. pay G.Z. a lump sum alimony award of $20,000 and the equitable distribution of marital assets in the amount of $75,000, for a total payment of $95,000 in satisfaction of L.Z.’s financial obligations to G.Z. resulting from the termination of their marriage. The Panel also recommended that the lump sum payment be made to a Special Needs Trust as a result of G.Z.’s disability in order to maintain eligibility for SSI benefits. The terms of the parties’ settlement were set forth in a Marital Settlement Agreement and Dual Judgment of Divorce. Thereafter, a SNT was established and the payment was made to the trustee of the SNT in accordance with the parties’ agreement. We notified SSA of the establishment and funding of the SNT, a requirment under the SSI regulations.

After the divorce was finalized, SSA scheduled a hearing on G.Z.’s appeal. After the hearing, we submitted a letter brief in support of the appeal. Thereafter, the ALJ issued an opinion which reversed SSA’s conclusion that G.Z. received in-kind support and maintenance from J.Z. The ALJ ruled that, as G.Z. claimed, the Loan Agreement was bona fide because the loan would soon be repaid by the trustee of the SNT using the trust assets obtained in G.Z.’s divorce. As a result, the ALJ ordered SSA to increase G.Z.’s SSI benefit to the highest monthly benefit amount available.

Get all that? I hope so. The result: A wholly successful outcome for the client and, hopefully, an interesting post for readers of this blog.