The Purchase Of A Private Annuity By An SSI Beneficiary Is A Permissible Spend-Down Technique

As you know, the Supplemental Security Income (SSI) program, administered by the Social Security Administration (SSA), is a needs-based government benefit program which provides monthly cash assistance to aged, blind or disabled individuals who have limited income and resources. Individuals over age 65 automatically meet the “aged” requirement. Adults who assert eligibility as “blind” or “disabled” persons must meet the SSA standards for these categories. In that regard, to be found “disabled” under the SSA rules an individual must have “a medically determinable physical or mental impairment that is expected to last (or has lasted) at least 12 continuous months or to result in death [which] prevents him or her from doing any substantial gainful activity”. In addition to being aged, blind or disabled, an individual must have low monthly income and no more than $2,000 in resources ($3,000 for a couple) to qualify for SSI.

SSI recipients who receive gifts, inheritances or money judgments in court resulting from personal injury lawsuits or other litigation will often be found ineligible for SSI as a result of excess resources. As a private attorney specializing in representing aged or disabled persons who receive SSI, Medicaid and other needs-based government benefits, my job is often to help these clients maintain eligibility for the government benefits. I often develop strategies utilizing existing law and regulations to achieve this goal.

One strategy that some have utilized to convert a resource countable under the SSI program into an excluded resource is based upon an opinion issued by the Atlanta Regional Chief Counsel (RCC) in 2005. RCC opinion letters, called “Precedents” in the SSI program, constitute legal opinions that can be relied upon by SSI recipients and their attorneys. In the RCC opinion at issue, the Regional Chief Counsel held that private annuities are permissible spend-downs of excess resources. As a result, the RCC opens amazing possibilities to assist SSI recipients maintain eligibility for necessary government benefits.

In the RCC, Eleanor G., NH, and her sister entered into a private annuity contract that NH funded with $50,000 that she received from a personal injury lawsuit. The private annuity agreement was valid under state law. The terms of the agreement provided NH with monthly income of $5.00 for the first 123 months of the contract, with the remaining $60,682.70 to be paid in the final month. NH was approximately 78 years of age when she entered into the contract. Based upon the actuarial tables in Program Operations Manual System (POMS) (SI 01150.005), NH, a 78 year old female, has a life expectancy of approximately 10.25 additional years. The private annuity contract was based on a life expectancy of 10.24 years. As a result, the Regional Chief Counsel held that NH was receiving a fair market value in return for the funds she used to establish the annuity contract. Because the private annuity contract was valid under state law,  and because NH received fair market value in return for the funds under to purchase the private annuity, the Regional Chief Counsel determined that the annuity was an excluded resource for SSI purposes.

The Regional Chief Counsel’s opinion is annexed here – SSA – POMS PS 01815.011