Acronyms that sound similar can be confusing, and there are plenty of them in the elder law and estate planning realm. In this post, we will provide clarity with regard to Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
When you work and pay FICA taxes, you earn retirement credits that lead to eligibility for Social Security and Medicare. This year, you get one credit for every $1470 that you earn, and the maximum annual accrual is four credits.
After you have accumulated 40 credits, you will qualify for these programs when you reach the eligibility age. For Medicare, it is 65 for everyone, and the full eligibility age for Social Security is somewhere between your 66th and 67th birthdays depending on your birth year.
This plan is disrupted if you become disabled along the way, but there is recourse. If you have at least 40 credits, including 20 credits in the 10 years prior to the onset of your disability, you can qualify for Social Security Disability Insurance.
The exact amount of your benefit will depend on the amount of your contributions over the years. In 2021, the average benefit is $1128, and the maximum monthly SSDI benefit stands at $3148.
There is also the matter of health insurance if you are no longer able to obtain coverage from your employer. If you qualify for SSDI, you automatically qualify for Medicare 24 months after you start to receive your benefit. (Certain disabilities like ALS result in immediate Medicare coverage.)
The key point to understand is the fact that you can potentially qualify for this benefit regardless of your assets and your income because this is a disability insurance program you have paid into.
Supplemental Security Income is another disability benefit, but people who are 65 years of age and older can potentially qualify even if they are not disabled. This is a need-based program so you cannot qualify if you have more than $2000 in countable assets in your name.
These payouts are very modest. The average benefit is just $577 a month, and the maximum is $794. People who qualify for this benefit also qualify for Medicare, and there is no waiting period.
Special Needs Planning
As estate planning attorneys, we advise clients who want to provide resources for loved ones with disabilities who are relying on SSI and Medicaid. Clearly, a significant direct inheritance could impact eligibility so you have to implement a special needs planning strategy.
This will revolve around the use of a supplemental needs trust. You fund the trust and you name a trustee to act as the administrator. Many people will use a professional like a trust company or the trust department of a bank, but any adult can technically act as the trustee.
As you have seen, SSI benefits are very limited, and Medicaid does not cover every treatment that a person may want or need. The trustee would be able to use assets in the trust to satisfy the unmet needs of the beneficiary. Benefit eligibility would not be disrupted.
Medicaid Estate Recovery
Medicaid can attach property that is left in the estate of a person who was enrolled in the program.
When it comes to the remainder in a supplemental needs trust that is funded by a third party (someone other than the beneficiary), the assets would be protected. A successor beneficiary named by the grantor would receive the funds after the death of the disabled beneficiary.
Sometimes a person with a disability will receive a personal injury settlement or judgment or come into money for some other reason. The funds can be used to establish a first party supplemental needs trust, and the situation would be the same while the individual is living.
After their death, the assets would be available to Medicaid for reimbursement during the estate recovery phase.
Schedule a Consultation Today!
We are here to help if you are ready to work with an Ashland, Kentucky estate planning attorney to put a plan in place. You can schedule a consultation right now if you call us at 606-324-5516. Our number in Florence, Kentucky is 859-372-6655.
Our Charlotte, North Carolina or Huntersville, North Carolina office can be reached at 704-944-3245, or you can use our contact form if you would rather send us a message.