Generally, persons may be eligible for Supplemental Security Income (SSI) benefits if they are aged, blind, or disabled and have limited income and resources. Thus, income is a major factor in deciding eligibility for SSI benefits. Social Security Administration counts income on a monthly basis. A person with too much income is not eligible for a benefit. However, SSA does not count all income in determining eligibility and benefit amount.
SSA divides income into two broad categories: earned income and unearned income. Earned income may be in cash or in kind and includes such things as wages and self-employment income. Unearned income is all income that is not earned. It includes such things as annuities, pensions, alimony, child support, dividends, interests, and rents.
The regulations at 20 C.F.R. 416.1124 enumerate types of unearned income that SSA does not count when determining income. Item 20 includes “interest or other earnings on a dedicated account which is excluded from resources.”
This means that SSA excludes certain unearned income on a “dedicated account.” That is to say, SSA does not hold certain income against an applicant when determining whether they are eligible for benefits and how much they will receive. This is where trusts come in, because, in certain situations, a trust can be set up for an SSI recipient.
A trust is a legal arrangement regulated by State law in which one party holds property for the benefit of another. A trust can contain cash or other liquid assets, and real or personal property that can be converted to cash. The manager of the trust is called the “trustee,” and can generally be anyone over age 18. The disabled person cannot serve as trustee.
Generally, there are two types of trust: revocable or irrevocable. In the case of trusts that may be revoked, the entire trust is deemed a resource, and counted against the applicant. In the case of a trust that cannot be revoked, if there are any circumstances under which payment could be made to or for the benefit of the applicant, that portion of the trust from which payment could be made is considered a resource.
However, Social Security Act Section 1917(d) (4) (A) lists an exception for what is often referred to as a “special needs trust.” By its own terms, therefore, the law does not apply to trusts “containing the assets of an individual under age 65 who is disabled and which is established for the benefit of such individual by a parent, grandparent, or legal guardian of the individual….”
A Special Needs Trust holds title to property for the benefit of a disabled child or adult, to supplement benefits. The trust can hold cash, personal or real property, or can be the beneficiary of life insurance proceeds.
Money received form the trust may affect your SSI benefits by reducing the amount of your benefits by the amount received from the trust. The reduction would also apply to any funds distributed to another to provide the SSI applicant with food or shelter. In 2008, the maximum allowable deduction was approximately $232.00.
Money paid directly to someone to provide the applicant with items other than food and shelter (such as medical care, telephone bills, education, entertainment, etc.) does not reduce the SSI benefit.
Certain revocable trusts under Section 1917(d) (4) (A) may still count as a resource, and SSA cannot assist in setting one up. It is therefore important to consult an attorney or financial advisor to find out more about trusts.