Deeming Parental Income and Disability for a Child with Special Needs

If you have a minor child with special needs, SSI benefits and Medicaid coverage may be available to your child. It may be worth crunching numbers and reviewing SSA’s charts and formulas to see if your child may qualify. If your child is already receiving SSI benefits, it is important to understand the basics of deeming parental income and disability. Inadvertently breaking the rules could jeopardize those benefits.

Supplemental Security Income (SSI) is a federal program that helps people with disabilities and very low incomes pay for food, clothing and shelter. But even more valuable than the SSI benefit itself is that, in most states, a beneficiary who receives even $1 from the program also qualifies for Medicaid health coverage.

Deeming Parental Income And Disability Benefits

To qualify for SSI benefits, the beneficiary’s income and assets cannot exceed certain limits. The Social Security Administration (SSA) doesn’t look at just the child’s income and assets. SSA also may consider a portion of the parent’s income and assets to be available to the child. This is called “deeming.”

The logic behind the deeming rule is that parents have a legal duty to support their child. Since parents’ income and assets are legally available to support that child, they may be factored in the determination of the child’s eligibility.

Unmarried children seeking SSI benefits are deemed with the income and assets of the parent the child lives with. A stepparent’s income also counts if the stepparent lives in the same home as the child. If the parents are divorced and the child lives with only one parent, the child is not deemed with the income or assets of the parent living in another household.

If a parent receives her own SSI benefits, or if the child does not live with either parent — for example, a child lives with a stepparent or grandparents and no parent lives in the home — there is no parental deeming. The amount of deeming to the child is reduced if the child is living in a household with other children under the age of 21. Once a child reaches the age of 18, even if she is living with a parent, deeming parental income and disability CEASES. After 18, only the child’s own income and assets are counted in determining SSI eligibility.

What does the SSA include in deemed income?

The SSA defines “income” as both “earned” income, like wages, and “unearned” income, like retirement and investment income, unemployment benefits, and gifts. Importantly, Social Security benefits count as unearned income. For example, in 2017 a child with special needs living with one parent earning less than $3,065 a month in earned income would qualify for SSI. If all the parent’s income is unearned, the monthly income limit would be $1,510. “Income” also includes non-cash items such as the value of food and housing one receives from others. This is called “in-kind” income, and SSI treats it the same as unearned cash income.

Assets, or what SSA refers to as “resources,” include things like bank accounts, cash on hand, and investments. However, they don’t count all assets. For example, a parent’s home, automobile, and most retirement accounts are excluded from counting. While you do not have to count a retirement account as a resource, retirement withdrawals ARE counted as income.

Calculating Deemed Income

The calculation of the deeming parental income and disability is complex. The living arrangement of the child makes all the difference and it is not one-size-fits-all. SSA provides an annually updated Deeming Chart to help families make this calculation. However, there are many exceptions that would cause the chart not to apply to a particular family’s situation. One exception is if the family has a mix of earned and unearned income, which many do. A family’s best resource is the procedure, or formula, that SSA uses in the deeming calculation. The documentation that explains this formula can be found on SSA’s website here.

These rules are complicated. We can help you sort through them and determine if your child might qualify for SSI.

Revised and published with permission from the American Society of Special Needs Planners.

Deeming Parental Income and Disability

Making Distributions from a Special Needs Trust Without Disrupting SSI

When serving as the trustee of a special needs trust, it is crucial to be careful when making distributions for the benefit of the trust beneficiary. This is particularly true if the beneficiary receives Supplemental Security Income (SSI). Distributions from a special needs trust could potentially violate Social Security’s rules regarding unearned income for SSI recipients.

If a distribution runs afoul of these rules, the Social Security Administration will treat the distribution as unearned income on behalf of the beneficiary and reduce the beneficiary’s income dollar-for-dollar after the first $20 of the distribution.

When are distributions from a special needs trust deemed income?

SSI rules consider distributions from a special needs trust to be unearned income when a trustee reimburses the beneficiary for a purchase the beneficiary made. If the beneficiary has unearned income, their SSI for that month will be reduced by the amount of the reimbursement.

What distributions can a trustee make without affecting SSI?

However, there are ways to make purchases for beneficiaries that will not negatively affect the beneficiary’s SSI benefits. Here are five examples of appropriate disbursements.

1) The trustee can distribute the requested goods or services directly to the beneficiary in person.

For example: the beneficiary finds a computer that they like at a store and gives the trustee the information. The trustee could then go to the store, buy the computer using trust funds and deliver it directly to the beneficiary. This allows for the beneficiary to receive the goods quickly. It may, however, only be practical if the beneficiary and the trustee are close to one other. Plus if the trust has a professional trustee, his time spent buying and delivering goods costs money.

2) The trustee can also purchase services or goods with trust funds and have the goods or services delivered directly to the beneficiary.

One common example is purchasing furniture or appliances online and have the items shipped to the beneficiary’s residence. This can be a very efficient way to handle a beneficiary’s request for an item. It may not be practical, however, if the product is something that the beneficiary needs to try on, such as clothing.

3) The trustee can also reimburse a third party who pays for a service.

For example, a relative might pay for a beneficiary to attend a sporting event and the trustee could reimburse the relative for the cost of the beneficiary’s ticket. It is important to remember that the trustee cannot reimburse the beneficiary, only the third party who purchased the item. In such cases involving reimbursing a third party, it is important to have documentation of the cost of the service and the date on which it was provided.

4) The trustee can purchase gift cards or gift certificates for the beneficiary.

However, trustees should exercise care because gift cards and gift certificates must meet certain legal requirements. For a more in-depth analysis of the problems with purchasing gift cards for a beneficiary, click here.

5) The trustee can pay a beneficiary’s credit card bills.

For an article on this option, click here. For more on being the trustee of the special needs trust, click here.

Revised and published with permission from the American Society of Special Needs Planners.

Distributions from a special needs trust

Bill to Increase SSI Resource, Income Limits Starts Climb in Senate

On March 7, Senators Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) introduced a bill that would dramatically increase Supplemental Security Income (SSI) resource limits and income exclusions, as well as eliminate penalties for applicants who receive in-kind food and shelter.  These increased limits would add a degree of flexibility in special needs planning, along with helping recipients to potentially avoid accidental overages that can lead to loss of services.  Louisiana’s Medicaid resource limits follow the federal SSI limits. The Supplemental Security Income Restoration Act of 2014, S. 2089, calls for an $8,000 increase to SSI’s longstanding $2,000 individual resource limit, making the new resource ceiling $10,000, and it would also raise a couple’s resource limit from the current cap of $3,000 to $15,000. Under current law, the first $20 of an individual’s unearned income does not count towards his monthly SSI income limit.  The proposed legislation would increase this monthly general income exclusion to $110.  In addition, the earned income exclusion would rise from $65 per month to $357.  Both the resource limits and the income exclusions would be indexed for inflation beginning in 2016. Finally, the bill would also eliminate the penalty on beneficiaries who receive in-kind support and maintenance, commonly known as the one-third reduction rule, so beneficiaries can live rent-free in someone else’s home without seeing their SSI awards reduced.   In a press release, Sen. Brown explained that “inflation has significantly decreased the ability to qualify for SSI benefits, hurting seniors, the disabled and blind, and more than one million children.”  Sen. Brown’s office argues that the current resource and income limits prevent people from saving and leave many SSI beneficiaries below the poverty line. To read the full text of the Supplemental Security Income Restoration Act of 2014 (S. 2089), click here.]]>