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By Dave
Harmon, MSW, MBA
Note:
Some of the dollar amounts may have been updated since this article was
published.
Parents of children with disabilities know that finances can sometimes be
stretched to pay for all that is needed for their child’s care. For those
families and individuals who qualify, government benefits are an important
source of help. Many people are unaware of what government benefits can
provide and whether or not they qualify to receive them. Eligibility for a
child with disabilities who is under 18 is based on the parents’ income, but
thereafter, it is based on the child’s own assets and income. The most
important programs for people with life-long disabilities are Medicaid and
Supplemental Security Income (SSI). Let’s take a look at how they work.
Medicaid is a state-administered, federally reimbursed program that pays for
needed medical care for eligible people. An applicant’s medical diagnosis,
finances, and age are used in determining eligibility. SSI is a federal
program that provides income from the federal government to those who are
“aged”, “blind”, or “disabled.” Cash benefits are paid each month, up to the
federal benefit rate. Though this amount is the same nationwide, many states
add money to the basic rate. (For children under age 18 who live for at
least one month in certain institutions paid for by private insurance, there
is a different limit to the monthly SSI payment. This is a change to the
previous regulation in which the payment limit applied only when Medicaid
paid more than half of the cost of the child’s care.)
SSI benefits can enable an individual with a disability, or family, in need
to pay for living expenses as well as for things that insurance may not
cover, such as co-payments and certain equipment. In addition to providing
monthly benefit payment, SSI eligibility also entitles an individual to
other benefits and services depending on the state in which he or she lives,
such as: Medicaid; food stamps, payment of Medicare premiums.
DEFINING “DISABLED” UNDER SSI
For children to be defined as having a disability, the Social Security
Administration (the federal agency in charge of SSI) reviews how his or her
disability affects everyday life. The child must meet the following
criteria: have a proven physical or mental condition which results in
“marked and severe functional limitations”’ the condition must last at least
12 months or be expected to result in death; the child must not be working
at a job that the SSA considers to be substantial work. The child’s
condition must be reviewed periodically by SSA to determine if it is still
disabling, and evidence must be provided that the child is being treated for
his or her condition. At age 18, the child must be requalified using the
rules that apply to adults with disabilities.
Eligibility for both SSI and Medicaid is based on need. A person is not
qualified to receive SSI if he or she has “countable resources” in excess of
$2,000 or “countable income” in excess of the Federal Benefit Rate. The SSI
payments are reduced by the amount of any “countable income” received by the
individual. Generally, government benefits are paid to a child with a
disability who is a dependent, based on family income. But once a child
turns 18, these benefits are awarded based on the child’s own assets and
income (even if the child is still living at home with his or her parents).
Once a child become eligible due to disability, SSA will look at the
parents’ income level.
According to the Social Security Administration some assets are considered
exempt - not countable – such as:
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The house an
individual lives in and the land it is on;
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Personal and
household goods (depending on their value);
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Life insurance
with a face value of $1,500 or less;
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Burial plots
or spaces for the individual and immediate family; burial funds for the
individual;
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A car with a
current fair market value up to $4,500.
The car may be
of any value, however, if it has been modified to accommodate a person’s
disability or if it is needed for necessary activities.
Some of an individual’s income is also not counted toward SSI eligibility
such as:
The first $20 of most income received in a month (from any source); the
first $65 a month earned from working and half the amount over $65; food
stamps; most food clothing and shelter from non-profit organizations; most
home energy assistance. If the individual with a disability works, any wages
used to pay for items needed for work related to the disability are not
counted as income. (Source: Social Security Administration.)
Since eligibility for government benefits is dependent on these financial
restrictions, a person with a disability would be in jeopardy of loosing
those benefits if he or she amasses any resources above the limit. This can
cause a dilemma for parents-or other relatives-who want to provide the child
who has a disability with an inheritance when they die. The inheritance can
be used to fund those things that make life enjoyable and bring additional
comfort to the person with a disability beyond the basic necessities of life
like a CD player, video games, tickets to the movies or for a trip.
Fortunately, families can leave an inheritance to a member who has a
disability through a Supplemental Needs Trust or Special Needs Trust. A
trust is a legal arrangement in which property is held by one party for the
benefit of another. A Special Needs Trust is one which is set up for the
benefit of a person with special needs. Since the government strictly
regulates Special Needs Trusts, certain rules must be carefully observed.
Differences exist from state to state as to when Medicaid liens or payback
provisions are required on trust assets. You should work with knowledgeable
professionals who fully understand these Medicaid requirements in your
state. These issues will be examined more closely in future installments.
KNOWLEDGE IS KEY
For many people with disabilities, benefits provided by the government are
crucial. That is why a good understanding of what these benefit programs
entail and what criteria determine eligibility is essential in applying for
and getting coverage. However, new regulations have tightened eligibility
criteria considerably and have affected many aspects of setting up Special
Needs Trusts. They are complex and require a strong knowledge of the current
legislation and how it impacts people planning for their child with special
needs. In order to preserve eligibility for the benefits that they depend
upon when planning for the future of their child with a disability, parents
should think about consulting a qualified professional. One way to begin
this process is to call MetDESK, MetLife’s Division of Estate Planning for
Special Kids. MetDESK is committed to helping families through the maze of
legal and financial planning for the future of a child or dependent with
special needs. To contact a MetDESK Specialist in you local community call
1-877MetDESK (1-877-638-3375) or visit the MetDESK web site located at
www.metlife.com/desk to request a meeting by filling out the on-line
appointment maker. As a division of MetLife Financial Services, MetDESK was
established to extend MetLife’s traditional commitment to public service to
families of children with special needs.
Dave Harmon, MBA, MSW, is the Manager of the MetDESK, Division on Estate
Planning for Special Kids, Metropolitan Life. Mr. Harmon is also a parent of
a child with special needs.
Reprinted with permission from Exceptional Parent magazine.
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A special needs
trust is the only estate planning option that protects assets, enables the
beneficiary to receive goods and services from the estate, and still
preserves eligibility for government benefits. |
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