SSI, SSDI, and Special Needs Planning

There is a veritable alphabet soup used in the field of estate planning when it comes to acronyms. Some of these acronyms look very similar, and they may be used to represent programs and legal devices that accomplish similar aims, so there can be a lot of confusion.

With this in mind, let’s look at the distinctions between SSDI and SSI.

SSDI

When you are working and paying taxes, one of the taxes that you pay is the FICA payroll tax. Some people scratch their heads when they see a significant chunk of their income going toward this tax. It can be frustrating to see that money go out the window.

However, you can take heart, because it is going to benefit you in the long run if you are fortunate enough to reach the typical age of retirement. When you pay FICA taxes you are earning retirement credits, and you can accumulate up to four per year.

When you have at least 40 retirement credits, you will qualify for Medicare coverage when you reach the age of 65. Medicare is a health insurance program for senior citizens.

If you earn enough retirement credits, you could also be eligible for SSDI if you were to become disabled. The acronym stands for Social Security Disability Insurance. You could obtain eligibility even before you reach full retirement age if you become disabled and you have sufficient credits.

This benefit is available to anyone who is sufficiently vested in the program, and it is not tied to financial need at all.

Supplemental Security Income

The Supplemental Security Income (SSI) program also provides income to people who are disabled. However, you do not obtain eligibility through the accrual of retirement credits. SSI is a need-based program. It is potentially available to people who can demonstrate a significant level of financial need, regardless of their work history (or lack thereof).

Estate Planning Implications

Many people with disabilities rely on the SSI program for a modest source of income. Because it is a need-based program, a person who is qualified for this benefit could become ineligibile if he or she was to receive a direct inheritance.

A direct inheritance would not impact the eligibility of someone who was receiving SSDI benefits.

It is possible to provide for someone who is enrolled in the SSI program through the creation of a special needs trust. The trustee could use assets in the trust to provide for the supplemental needs of the beneficiary without impacting government benefit eligibility.

Special Needs Planning Report

Download our special report if you would like to learn more about special needs planning. This report is being offered free of charge, and you can obtain access to your copy through this link: Hartford CT Special Needs Planning.