SSI is a federal benefit program for poor people who cannot work. The main advantage of SSI over SSD is that it isn’t dependent on your work history, so it can be a lifeline for people who don’t have the work history to qualify for a substantial SSD benefit or whose disability came into effect after taking a long break from work, such as to be a stay at home parent. Unfortunately, SSI has some strings attached.
As a federal poverty program, SSI is “means tested.” Means testing means that the government applies a test of your economic means, which is the combination of assets, income, and financial resources that you have available. Even after you’ve proven your medical eligibility for the benefit, the government will continue to monitor your financial status to be sure you still qualify.
There are two main limitations to keep in mind with SSI:
– household income: Your benefit amount will be offset by any income that is “deemed” to you. This includes any income that comes into the household either in your name or in your spouse’s name. The first $20 of earned income doesn’t count, but after that, the government will reduce your benefit amount by half of the amount of any earned income. So, if your earned income reaches double the SSI benefit amount, you will no longer receive the benefit. Income earned by your spouse can also sometimes offset your benefit eligibility. Unearned income, such as certain pensions, worker’s compensation benefits, or passive income, reduces your SSI benefit by the exact amount of the income, so that if your unearned or passive income adds up to the full SSI benefit amount you will lose the benefit.
– Personal assets: While collecting SSI, you are limited to $2000 in cash-equivalent assets, such as money in bank accounts or even retirement accounts. You can also be disqualified based on assets such as real estate, vehicles, jewelry, or even electronics – anything of value that the government finds out about can disqualify you from SSI if the value exceeds $2000.
Savings is a big pitfall with SSI benefits, and accumulating more than $2000 in bank accounts is probably the number one reason that individuals find themselves abruptly (and retroactively) cut off from SSI benefits and facing an overpayment situation. What I often see happen is that, for one reason or another, usually due to help from family, an individual on SSI benefits manages to accumulate over $2000 in savings from past benefits that weren’t fully spent. When this happens, the government will eventually notice that your accounts exceeded the limit, and will retroactively deem you ineligible for benefits in any month in which you had $2000 or more in cash-equivalent assets.
An “overpayment” is when the government decides that you weren’t qualified for money you received in the past, and makes you pay it back. This can be an awful situation and there’s very little that can be done about it until the money is repaid. One of the most frustrating calls that I ever get as an attorney is when people want help with overpayments, because there is usually nothing that I can do for them other than coaching on how to prevent the situation from happening again.
I think it’s important that I voice my opinion here, and my strongly-held opinion is that these rules are grossly unfair and unjust. I oppose means testing generally, as I feel that it is a principle that turns federal poverty programs into a trap. How can anyone ever hope to escape from poverty if you aren’t able to save up the resources that you would need to move yourself into a better situation? And on top of the general principle being wrong in my eyes, the situation has gotten worse over the years, as the dollar amounts of these limitations has not been increased with inflation. The $2000 asset limitation is more onerous today than it was decades ago when it was put in place. I have supported lobbyists and written to my congressmen demanding that this rule be changed, but so far, no progress has been made.
Nonetheless, as unfair as these rules are, they are in place right now, and they can get you in trouble. As you move through your life with the aid of these benefits, be mindful of the resource trap, and be careful not to accumulate more than $2000 in cash or assets at any one time.
There are three places that you can accumulate value that will not count against you in SSI means testing: one vehicle that you drive, one home that you live in, and a small fund designated for funeral/burial expenses. No, these aren’t very generous exemptions, but in many cases they can help a person live a better life. They come into play if you receive a financial windfall such as an inheritance or lawsuit settlement. If you receive a large sum of money like that, you will be immediately cut off from your SSI benefits, but you can get your benefits reinstated if you use the money to purchase a home or a car. There is also a special financial instrument known as a Special Needs Trust that can be constructed to allow a disabled person to preserve funds from an inheritance or retirement savings without disqualifying for SSI. I do not handle these instruments, but there are many estate planning and elder law attorneys locally who do, and I would be happy to make a referral if you have that need.
