There are a lot of acronyms used to describe government programs, and some of them represent terms that are very similar. This definitely enters the picture when it comes to Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI).
In this post, we will provide an overview of each of these respective programs so you can go forward with a solid understanding of the differences.
When you work and remit your payroll or self-employment taxes, you earn Social Security retirement credits. In 2021, you get one credit for every $1470 that you earn, and the maximum accrual is four credits in a year.
Once you have 40 credits, you will qualify for a Social Security benefit when you reach the eligibility age. This is also the cutoff for Social Security Disability Insurance eligibility, and 20 of the credits must have been accumulated during the 10 years that led up to your disability.
It should be noted that there are some adjustments made for younger disabled workers, but this is the general rule of thumb.
The amount of the benefit is based on your lifetime taxable earnings. This year, the average benefit for an individual is $1128, and the maximum is $3148.
Since this is an entitlement that is not need-based, you can qualify for SSDI with no income or asset limit. There is a two-year waiting period, but after it has elapsed, SSDI recipients automatically qualify for Medicare.
Supplemental Security Income
SSI is another type of disability insurance that is not tied to your work record. In fact, people that have never been able to work qualify for Supplemental Security Income.
It is available to individuals that are blind or disabled, and seniors that are 65 years of age and older can potentially gain potentially eligibility based on their age. The average monthly benefit this year is $577, and the maximum Supplemental Security Income payout is $794 for a single recipient.
This modest income is one of two benefits that these folks receive. People that qualify for SSI also qualify for Medi-Cal as a source of health insurance.
Special Needs Planning
As estate planning attorneys, we advise clients that want to leave inheritances to people with special needs that are relying on Medi-Cal and Supplemental Security Income.
An improvement in financial status could cause loss of eligibility, so the utilization of an advanced strategy is necessary. In these situations, a supplemental needs trust can provide the ideal solution.
The way that it works is you fund the trust, and you name a trustee to act as the administrator. This can be someone that you know personally, or you could alternately use a professional fiduciary with a thorough understanding of the rules and regulations.
Assets in the trust can be used to make the beneficiary’s life more comfortable in many different ways. Benefit eligibility would remain intact if everything is done correctly.
Medicaid is required to seek reimbursement from the estates of people that were using the benefit while they were alive. This is called the “Medicaid estate recovery” phase.
When the funding is coming from a third party, assets that remain in the trust after the death of the initial beneficiary would be protected when estate recovery efforts are underway. They would be transferred to a successor beneficiary that is designated in the trust declaration.
It is possible to fund this type of trust with assets that are the property of the person that will be the beneficiary. This would be a first party trust, and under those circumstances, Medicaid would be able to attach the remainder after the death of the grantor/beneficiary.
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