Question: “My 31 year old son is disabled and has lived with his 89 year old grandmother for about 10 years. He does not hold a job and receives Social Security Disability, Medicare and Medicaid. Now that his grandmother is ill and not expected to live much longer, I am concerned that he will have no place to live. Is there any way that his grandmother can transfer title of her house to him upon her death and not affect his existing government benefits?“
Answer: The answer to your question is not that simple. The short answer is that a person who is receiving means tested Government Benefits such as Social Security Supplemental Income (SSI) and/or Medicaid can own a home and if someone on behalf of the special needs person is paying any of the mortgage payments or any payments of money that can be considered support and maintenance such as payments for shelter and/or food then their Government Benefits can be reduced. The following is a list or countable and non-countable resources as well as a description of in-kind income support and maintenance (ISM) as well some basic rules for Special Needs Trusts.
Social Security will categorize any distribution you make to or for the beneficiary as some form of income, subject to its “income rules”. Then, if the income buys some kind of asset (or becomes an asset itself such as money in a bank account), the asset will be subject to separate “resource rules”.
SSI Rules: Assets
(1) Countable Resources
Generally, a “countable resource” is any asset considered by SSI rules to determine eligibility (therefore a resource is sometimes called a “countable asset”). It could be tangible, like a second car, or it could be intangible, like a savings account. An SSI recipient and beneficiary is allowed to have only $2,000.00 or less in “resources”. If resources exceed $2,000.00 during any whole calendar month (even by a few cents), the beneficiary’s public benefits may be terminated.
Income that is received during the month is considered “income” throughout the calendar month of receipt, even if it is deposited in a bank account. If, at the end of the month, it is still in the account, it becomes a “resource” in the next month and is then subject to “resource” rules.
(2) Excluded Resources
A person who is receiving SSI (called beneficiary) is allowed to have certain exempt assets, which are excluded from the $2,000.00 limit. These exempt assets are not counted in determining eligibility, and the beneficiary’s ownership of them will not jeopardize his or her Government benefits. A person or Trust should not give the beneficiary the money to purchase exempt assets himself or herself – payments of money are always considered countable income. The following assets are exempt:
- A home, including adjacent land, if the beneficiary lives in it or intends to return to it;
- Household goods (furniture, furnishings, household equipment, household supplies), and personal effects (toiletries, items of personal care and education, clothing and jewelry — however, giving the beneficiary food or clothing is “in-kind support”, as explained below) — all limited to a total value of $2,000.00;
- One automobile (or other vehicle) limited in value unless needed for specific or regular medical treatments, modified to handicapped use, or especially needed for essential daily activities (please consult us on the current allowable value);
- A burial plot, or other burial space, worth any amount; and
- Life insurance with a cash surrender value, if its face value is less than $1,500.00, and all term life insurance or
- An irrevocable funeral contract with a value of up to $2,000.00 or
- A burial fund, worth up to $1,500.00.
All the assets above are specifically exempted by law. You might note that a number of common and useful items are not specifically mentioned as exempt in the SSI regulations, but are not counted because they are included among “personal effects” or are considered services. These include:
- Recreational equipment, games and crafts
- Books and magazines
- Telephone, answering machine
- Television, radio and cable service
- Musical instruments and stereo
- Travel and education
- Recreation and entertainment
- Some home maintenance, such as gardening
SSI Rules: Income
(4) “In-kind support and maintenance” (ISM)
If the beneficiary receives food, clothing or shelter as a result of payments by the Trustee or by a person to the beneficiary or on behalf of the beneficiary will have income in the form of “in-kind support and maintenance” (ISM). ISM causes a reduction in the beneficiary’s SSI payments.
However, in many cases, the Trustee has authority to make decisions which are in the best interest of the beneficiary. That may require examining carefully how the rules regarding “in-kind support and maintenance” will be applied. Problems can arrive when “in-kind income” consists of food or shelter. The beneficiary’s SSI benefits will be reduced or eliminated if he or she receives ISM.
The theory behind the reduction or elimination is that Government benefits are specifically intended to pay for a person’s food, clothing, and shelter, so if that person receives those things from another source, then less SSI benefits are needed. As a result, if you pay the beneficiary’s grocery bill, rent, provide meals (for example, in a restaurant), or buy a coat for the beneficiary, you are providing ISM to the beneficiary. In theory, you are then also reducing his or her need for SSI benefits.
There are sometimes some very fine distinctions between allowable “in-kind income” and countable ISM. For example, you can pay for some travel arrangements but not others (for example, charged airline tickets, but not a hotel room, because that is shelter). You can pay for some entertainment expenses, but not others (for example, a movie ticket but not a restaurant meal, as it is food).
Note also that you can pay for certain medications and alternative health treatments if they are not covered by Medicaid or other benefit programs. If the beneficiary purchases a home, ISM can arise each month when the trust pays the beneficiary’s mortgage payment, property taxes, insurance or utilities (gas, water, electricity, garbage collection). ISM can also arise if the trust purchases a home in which the beneficiary resides.
If you do give ISM to the beneficiary, his or her Government benefits will be reduced, but not on a dollar-for-dollar basis, like with cash. There are two different formulas that Social Security uses to reduce the SSI benefits for a person who receives ISM. Which formula is used depends on the household and living arrangements of the SSI recipient. Determining which rule and how it applies can be complicated and quite detailed, like income or estate tax planning. If you have questions or concerns about the impact on your beneficiary of ISM payments, please ask us for assistance. We are available to help you on such issues.
Don L. Rosenberg, Attorney and Counselor
The Center for Elder Law