Supplemental Security Income (SSI) is a means based test that offers monthly income to a recipient. To receive SSI, however, a recipient is prohibited from having more than $2,000 in countable resources. Eligibility for SSI often results in a person being judged as eligible for Medicaid. Much like SSI, medicaid also has a $2,000 resource limit. If a person who is declared eligible for SSI or Medicaid receives a lump sum, however, this amount can place the individual above the applicable resource limit. In these situations, a person often has several options.
Going off of Means Test
If an inheritance is a large enough, a person might want to consider going off of a means test. The lump that is received can then be used to pay for daily living expenses including food and shelter. For many people, including those who do not receive a large enough lump sum, however, this is not an attractive option.
The Use of a Trust
Many individuals decide to shelter large sums in special needs trusts. These trusts can be established by the individual, a guardian, or even the court. A special needs trust requires several important provisions including a clause stating that any support payments will be paid back from the trust at the beneficiary’s death to an amount equal to the total amount of medical benefits paid by the trust.
An ABLE account is a tax-advantaged savings accounts for people with disabilities as well as their families. The beneficiary of these accounts is the account’s owner and income earned by the account is not taxed. While not everyone qualifies for an ABLE account, some individuals decide to establish an ABLE account after receiving a lump sum. ABLE accounts can be used to pay for qualified expenses including things like education, employment training, funeral expenses, health, housing, and transportation. ABLE accounts have a broader range of qualified expenses than special needs trusts.
Spend Down the Inheritance
Spend down refers to the process of spending any money in excess of SSI or Medicaid maximum resource limits to make sure a person qualifies for these benefits. Some individuals decide to spend down an inheritance amount in the same month that it is received, which allows the individual to remain eligible for continued SSI and Medicaid payments. Any amount that a person fails to spend down in the month that it was received will subsequently be viewed as a countable resource in the next month. In some cases, spending down an inheritance is a better option than establishing a special needs trust. During the spend down process, the amount of an inheritance is frequently spent on exempt resources and is not just wasting money.
Obtain the Services of a Seasoned Estate Planning Attorney
A skilled estate planning attorney like Jim A Lyon can help a person understand the various available options in dealing with an unplanned inheritance. Contact our law office today for assistance with your case.