SSI Basics

Supplemental Security Income (SSI) is a federal program that helps aged, blind and disabled people with very low income and resources pay for food, clothing and shelter. In other words, SSI is a government program based upon financial need. SSI is often confused with Social Security Disability benefits (SSD). Although both programs are administered through the Social Security Administration, the programs are quite different. In contrast to SSI, SSD is not based upon need, and there are no income or resource restrictions imposed upon SSD recipients. Rather, SSD is a benefit paid to those workers who paid into the Social Security system as a result of their employment, and are now disabled. The spouse and dependents of a disabled worker may also qualify for SSD benefits. One of the main differences between the two programs is that SSD is available to people with disabilities no matter how much other money they receive or have saved, 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 t than the SSI benefit itself.

In Order To Qualify For SSI, A Recipient Must Be Aged, Blind or “Disabled”

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 so disabled as to be unable to work at any job in the national economy. The applicant must have a physical or mental impairment that makes it impossible for him to engage in any “substantial gainful activity,” or SGA, and this impairment must be expected to last for longer than one year or to result in death. SGA is determined by reviewing an applicant’s monthly earnings. If an applicant earns more than $1,000 each month in 2010, SSA will conclude that the applicant is engaged in SGA and, as a result, that the applicant is not disabled under Social Security’s rules. If an applicant is able to engage in SGA, then he or she will typically be ineligible 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. In one recent case, it took a cancer survivor 14 years to prove that she was “disabled” and therefore entitled to benefits. A typical applicant for SSD or SSI benefits based upon disablity will wait two (2) years or more in New Jersey on appeal after an initial denial before benefits are awarded. Fortunately, a high percentage of cases initially denied are reversed on appeal; unfortunately, appeals often take years to succeed.

An SSI Beneficiary Must Have Very Limited Resources

Once an SSI applicant has shown that she is disabled, she must also prove that she owns less than $2,000 in cash or other resources. 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.

Monthly Income Of An SSI Recipient Must Be Low

SSI recipients get only a modest monthly benefit, and this sum is reduced by any income they may have. In 2010, the maximum federal SSI benefit is $674 a month, and New Jersey adds a small monthly supplement of $31.25 to the federal benefit, raising the maximum benefit available in New Jersey to SSI recipients to $705.25 per month. 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 Medicaid.

Special Needs Trusts Can Help Maintain Eligibility For SSI Benefits

Although SSI’s income and asset rules are highly restrictive, several types of trusts, called “Special Needs” or “Supplemental Needs” or “Supplemental Benefits” 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.

Source: Academy of Special Needs Planners