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Special Needs Trust and protecting your SSI benefit?

Recently on our legal forum a user asked, “I have been receiving Supplemental Security Income (SSI) benefits for about ten years. I recently had an uncle die. I didn’t realize it until a few weeks ago but he did not have a will. Now, as his closest living relative, I am scheduled to inherit about $10,000. I thought I had read, however, something about a Special Needs Trust? What can I do to protect my SSI payments?”


What is Supplemental Security Income (SSI)?

Supplemental Security Income or SSI is paid to individuals who are aged, disabled, or blind and who are unable to work for at least 12 continuous months. To qualify for SSI benefits, however, claimants must also have very limited income and resources.

Now, you asked about how receiving an inheritance could impact your SSI benefits. For most people any news that they are receiving an inheritance is great news. For you, however, an inheritance, if not handled correctly, could jeopardize your benefits.

Unfortunately, unlike other disability benefits such as Social Security Disability Insurance which is not a “means tested program”, SSI is means tested. For this reason, any changes in your assets or the amount of income you receive from an inheritance may affect your monthly Supplemental Security Income benefits.

For example, SSI recipients are not allowed to have more than $2,000 in resources. If the inheritance is more than $2,000, you will lose your SSI benefits for all of the months in which you keep the inheritance and do not spend it.

What do I do if I receive an inheritance?

So what should you do about the inheritance? First, you need to discuss your case with the SSA. If after having discussed your situation with the SSA you decide to keep the inheritance you must report it to the them within 10 days after the end of the month in which you receive it. The SSA will consider the inheritance as income for the month in which it was received and an asset or resource for all subsequent months you keep it and do not spend it.

How can I create a Special Needs Trust  to protect my SSI benefits?

If after talking to the SSA you want to try to protect your SSI benefit payment you have one other option. You may be able to create a special needs trust. A special needs trust allows a loved one to leave you money but give control to a trustee. The trustee is then able to determine how the money is spent.

In fact, the trustee will have sole charge of spending the money on your behalf. For example, monies held in a special needs trust can be spent on medical care personnel, vacations, personal items for the home, medical and dental expenses, recreational activities, motorized vehicles, and other rehabilitative needs.

Bottom line:

Receiving an inheritance can jeopardize your SSI benefits. With a little planning and information about how to create a special needs trust, however, you can protect your SSI benefits..

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