The alphabet soup of acronyms that are used to describe government programs can get a bit confusing when they are very similar. With this in mind, we will look at Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) in this post.
SSDI
When you remit payroll taxes from your job or self-employment taxes, you earn retirement credits that lead to future eligibility for Medicare and Social Security. The age at which you can receive your full Social Security benefit is between 66 and 67 depending on the year of your birth. The Medicare eligibility age is 65.
Eligibility is earned through the accumulation of retirement credits. You can accrue up to four credits each year, and you become eligible for these benefits when you have a total of 40 credits.
The requirement for earning credits is very modest. This year, you get one credit for every $1470 that you earn, so everyone that works consistently during a given year will obtain the four credits.
Social Security Disability Insurance is available to people that become disabled after contributing into the program via these tax contributions. The retirement credit requirement will vary depending on the age of the applicant, so you don’t necessarily need 40 credits.
In 2021, the average SSDI payment is $1277 a month, and the maximum is $3148. The exact amount you would receive will depend on your income during the years that led up to your disability.
This benefit is not based on financial need in any way, so there is no asset limit, and there is no income limit as long as the income is not disqualifying from a disability standpoint.
SSI
As estate planning attorneys, we help people that want to leave inheritances to loved ones with disabilities, so we are very familiar with the Supplemental Security Income program. This benefit is available to individuals with disabilities that cannot work and earn income.
SSI is strictly a needs-based program. There is no work requirement at all. There are income and asset limits. You cannot qualify if you have more than $2,000 in countable assets in your name.
If you qualify for Supplemental Security Income, you will also be eligible for Medicaid as a source of health insurance. The income that is received from SSI will certainly help, but the maximum monthly benefit this year is just $794.
Special Needs Planning
What do you do if you want to leave an inheritance to someone with a disability that is relying on SSI and Medicaid? A windfall of money would cause a loss of eligibility, right?
Generally speaking, the answer is yes. However, you could establish and fund a supplemental needs trust to provide support without impacting benefit eligibility. To implement this strategy, you create the trust and you name a trustee to act as the administrator.
Any mentally competent adult that is willing to assume the role can technically act as the trustee. However, you have to consider longevity, financial acumen, and an understanding of the program guidelines.
Trust companies, the trust departments of banks, and other professional fiduciaries offer trustee services for a fee. For many, choosing a professional trustee is the right choice.
The trustee would manage the assets of the trust and use them to make the beneficiary more comfortable in many different ways. Eligibility for SSI and Medicaid would remain intact, but there is another consideration.
In some states, there is a Medicaid estate recovery mandate. In that case, the state would seek reimbursement from the estates of the deceased beneficiary in an amount equal to what Medicaid paid during the life of the SSI beneficiary.
If you create and fund a supplemental needs trust for the benefit of someone else, it would be a third-party trust. Following the death of the beneficiary receiving government program benefits, the assets would be inherited by a successor beneficiary that is named in the trust declaration.
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