There are some misconceptions about the government disability programs that carry similar sounding acronyms. In this post, we will explain the distinctions between SSDI and SSI.
Social Security Disability Insurance (SSDI)
When you earn income, you pay self-employment or payroll taxes that go toward future eligibility for government benefits for seniors. There is a retirement credit system that is utilized for standardization purposes.
During the current calendar year, you get one credit for every $1470 in taxable income, but you can only accumulate four credits in a year. After you have 40 credits, you will qualify for Social Security and Medicare.
If you are fully vested with 40 credits, and you become disabled and unable to work, you may qualify for SSDI. However, in addition to the 40 total minimum credits, you need 20 credits during the 10 year period that led up to the date of your disability.
This is the general rule, but it is possible for someone that is younger to qualify with less than 40 total credits. There are no income or asset limits that apply to Social Security Disability Insurance eligibility, because this is an earned entitlement.
At the present time, the average payout is $1128 a month, and the maximum SSDI benefit is $3148. If you were to qualify for this benefit, the exact amount that you receive will be based on your personal work history.
Income is one piece of the puzzle, but you would lose the health insurance that you get from your employer if you are disabled. The good news is that you would automatically become eligible for Medicare, but the bad news is that there is a two-year waiting period.
Supplemental Security Income (SSI)
The other government disability program is Supplemental Security Income. This is a benefit that is only available to people with a significant level of financial need, so there is a $1600 limit on countable assets.
It should be noted that a home is not considered to be countable, and one motor vehicle is exempt along with household items and personal effects.
This benefit will help, but the monthly payments are very modest. The average benefit this year is $577, and the maximum for a single individual is $794.
People that qualify for SSI are automatically eligible for Medicaid, and there is no two-year waiting period. They can obtain Medicaid coverage as soon as they are approved for SSI.
Special Needs Planning
From an estate planning perspective, you have to consider the impact of an inheritance if you are leaving assets to someone with a disability that is relying on SSI and Medicaid. To preserve benefits, you could make the person the beneficiary of a supplemental needs trust.
You would name a trustee to administer the trust, and this can be a personal connection or a professional such as a trust company. The beneficiary would not have direct access to the assets, and this would be an irrevocable trust.
As we have stated, SSI benefits are minimal, and Medicaid does not cover every medical, dental, and therapeutic treatment. The trustee would be able to use the assets in the trust to make many different types of purchases that enhance the life of the beneficiary.
Benefit eligibility would remain intact, and the remainder that is left in the trust after the death of the beneficiary would go to a successor beneficiary that you name in the trust agreement.
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