“How do I ensure that my child’s needs are met?” is a question all parents of children with special needs have, whether their child is 3 or 30. “What happens to my child with special needs after I’m gone?” is a question that keeps parents of older children awake at night. Fortunately, there are several things families can do to alleviate their worries.

Special needs planning is doubly important if the person with disabilities needs means-tested benefits, such as Supplemental Security Income (SSI) and Medicaid (SoonerCare). Means-tested benefits do not include Social Security or Medicare, which are insurance programs and not subject to income or asset limits. A minor can get SSI benefits because they are disabled but cannot get Social Security disability benefits because they are disabled.

Social Security, SSI and Medicaid are all part of the Social Security Act, which is complicated, to say the least. As the U.S. Supreme Court noted, “The Social Security Act is among the most intricate ever drafted by Congress. Its Byzantine construction, as Judge Friendly has observed, makes the Act 'almost unintelligible to the uninitiated.'”[1]

This article is designed to help lawyers spot the issues. It contains the basics, with many statements having an exception or needing more explanation to fully understand their applications. It mostly addresses financial issues and not guardianship and living arrangements. Except where noted, the numbers in this article are for Jan. 1, 2024. The numbers go up a little every year, except for the $2,000 asset limit for SSI and most categories of Medicaid eligibility.

SUPPLEMENTAL SECURITY INCOME

SSI is the best entry point into planning because most people with special needs get SSI at some point, and its rules form the basis of Medicaid eligibility rules.

SSI is a payment from the Social Security Administration (SSA) that pays a maximum of $943 per month to people who are over 65 or disabled and whose countable assets are $2,000 or less.[2] It is for people who have not worked enough to get a Social Security check or whose Social Security is less than $943 per month.

SSI disability is available to individuals of any age up to their “full retirement age.” At full retirement age, benefits are switched to retirement, which has the same income and asset rules as SSI disability. For those under 18, some income and all assets of a parent living with the child are counted when determining the child’s eligibility.[3] At age 18, parents’ income and assets no longer count.[4]

SSI INCOME

For an adult (18 or older), the SSA deducts all but $20 of unearned income from the maximum payment. Unearned income includes another person supplying cash, food or shelter. Shelter includes payment of rent or mortgage, property taxes and insurance required by a lender, and natural gas, electricity, water, sewer and trash.[5] Unearned income does not include someone else paying directly to the vendor for everything else, including a car, car expenses, internet access, cable TV, entertainment, travel, cellphone or insurance that is not required by a lender or landlord.[6] For earned income, the SSA deducts $65 from the gross, divides it by two and deducts the rest from the $943 monthly payment.[7]

There is a limit on how much the SSA will deduct from an SSI check if the recipient is receiving free food or shelter. The most the SSA will reduce the SSI payment is one-third of the $943 maximum. If the SSI recipient is paying their pro rata share of household expenses, there is no reduction in payment.[8]

For minor beneficiaries, the rules are the same, except that the SSA counts the income of a parent the child lives with. However, not all income of a child’s parents is counted when calculating a child’s SSI payment.[9]

SSI ASSETS

Everything you think of as an asset[10] counts as an SSI asset, except a home; household goods, clothing and jewelry; one vehicle of unlimited value; an irrevocable prepaid funeral with no cap on cost; prepayment of burial plots, headstones and grave openings and closings; assets in a (d)(4)(A) or (d)(4)(C) trust; assets in a third-party trust; and money in an Achieving a Better Life Experience (ABLE) account.[11] Regardless of age, there is a $2,000 cap on countable assets. The assets of a parent who lives with a child are deemed to the child when determining asset eligibility.[12]

Trusts

42 U.S.C. §1396p(d)(4)(A). Assets of a trust are countable assets if the trust was established by or for a disabled person and funded with their assets.[13] There are two exceptions. The first is that the assets of a trust complying with 42 U.S.C. §1396p(d)(4)(A) are not countable for SSI or Medicaid.[14] A (d)(4)(A) trust must be established for the benefit of a person under 65 who is disabled, as determined by the SSA; be established by the disabled person, their parent, grandparent, guardian or a court; contain only assets owned by the disabled beneficiary; be irrevocable; be unamendable without the agreement of the Department of Human Services (DHS) or the Oklahoma Health Care Authority (OHCA); and the trust’s assets and income must be used for the sole benefit of the disabled beneficiary. Money left in the trust at the beneficiary’s death goes to pay back Medicaid for all expenditures made during the person’s life. Theoretically, a family or charity can receive assets of a (d)(4)(A) or (d)(4)(C) trust (see below) after Medicaid has been reimbursed, but this happens very rarely. Almost without exception, Medicaid’s reimbursement claim is more than trust assets remaining at the beneficiary’s death.[15]

A (d)(4)(A) trust can have an individual or corporate trustee. If the trustee of a (d)(4)(A) trust gives the beneficiary cash or makes payments for items that count as income, the SSI payment is reduced accordingly. Therefore, it is in the beneficiary’s best interest to pay for “income” items with their SSI payment and for the (d)(4)(A) trust to pay for items that are not treated as income.

A thing to keep in mind when drafting a (d)(4)(A) trust is that the beneficiary may outlive the trustee, or the trustee may decline to serve. Therefore, include a provision in the trust that allows the assets of the trust to be paid over to a (d)(4)(C) trust. Also, drafting should include a provision that trust assets can be deposited in an ABLE account.

42 U.S.C. §1396p(d)(4)(C). The second exception to counting a self-funded trust as an asset is found at 42 U.S.C. §1396p(d)(4)(C), known as a “pooled trust.”[16] It is created and operated by a nonprofit, which forms a master trust. The nonprofit accounts for individuals’ money separately but pools the money for investment.

Joinder agreements are executed to establish an individual account, which are supplied by the trust. An account must be established by the disabled individual, their parent, grandparent, guardian or a court.[17] The person who establishes the individual account appoints someone close to the beneficiary to advise the trustee on disbursements. When the beneficiary dies, the nonprofit may retain up to 30% of what remains in the trust, and the rest goes to repay Medicaid.[18]

Like a (d)(4)(A) trust, if the trustee of a (d)(4)(C) trust gives the beneficiary cash or makes payments for items that count as income, then the SSI payment is reduced accordingly. Therefore, it is in the beneficiary’s best interest to pay for “income” items with their SSI payment and for the (d)(4)(C) trust to pay for items not treated as income.

Third-party trusts. A third-party trust is established by someone other than the beneficiary or their spouse and funded with assets the beneficiary never had the right to have in their hands.[19] Assets of a third-party trust do not count against the SSI and Medicaid asset limits. It is income if the trustee gives the beneficiary cash or pays directly for food or shelter. As with (d)(4)(A) or (d)(4)(C) trusts, it is in the beneficiary’s best interest to pay for income items with their SSI payment and for the trustee to pay for items that are not income. An advantage of a third-party trust is that when the beneficiary dies, the remaining assets can be directed to family members or charities.

ABLE Accounts

An ABLE account can be established by or for a person who became disabled before age 26.[20] In 2026, the age goes up to 46.[21] Up to $18,000 of the disabled person’s money, or money belonging to another, can be put into the account each year. If the ABLE account accumulates money and, when added with all other countable assets, is more than $100,000, SSI will be suspended until the total is less than $100,000.[22] Medicaid has no such cap.

An ABLE account can pay for anything that is for the sole benefit of the beneficiary and – unlike a (d)(4)(A), (d)(4)(C) or third-party trust – can pay for food and shelter without it counting as income for SSI and Medicaid.[23] Therefore, it is good to put a paragraph in a (d)(4)(A) trust that allows the trust to fund an ABLE account. You will have to talk to the nonprofit operating a (d)(4)(C) trust to see if it is possible for the trust to fund an ABLE account. Like a (d)(4)(A) trust, when the beneficiary dies, any money left in an ABLE account goes to repay Medicaid.[24]

MEDICAID

Medicaid is a federally authorized and partially federally funded health insurance program that provides services to certain categories of people who are unable to afford health care.[25] Although shorter, the Medicaid Act will remind you of the Internal Revenue Code in its complexity.

Medicaid is known as SoonerCare in Oklahoma. OHCA is the designated Medicaid agency, which contracts with DHS to determine eligibility for people who are over 65 or who have been determined to be disabled by the SSA.[26] Medicaid has asset and income limits. It mostly, but not entirely, uses SSI rules to determine income and assets.

There are about 55 ways to be eligible for SoonerCare, with five broad categories. The category we are interested in is Aged, Blind and Disabled (ABD).[27] Within ABD are a couple of dozen ways to be eligible. The most common categories for people with disabilities are:

• SSI recipients: An individual who receives at least $1 of SSI per month is eligible for Medicaid.[28]
• Disabled, living in the community: A person with disabilities not living in an institution is eligible for Medicaid if their countable income is up to $1,215 per month, and countable assets are up to $9,090.[29] The income and assets of parents living in the home with a minor are counted when determining the minor’s eligibility, except when the minor is receiving services through a developmental disability waiver.[30]
• Developmental disability waivers: DHS operates two programs for people who are developmentally disabled and have intellectual disabilities and who are not members of the Homeward Bound class.[31] The asset limits are the same as for someone living in a nursing home – $2,000 in “countable” assets.[32] The “countable” income limit is $6,833 per month the same, but any income above $2,742 is not available to the SoonerCare recipient.[33] The income and assets of a parent of a minor do not count when determining eligibility.[34] These waiver programs used to have a years-long waiting list, but thanks to a large additional appropriation by the Legislature, the waiting list is being eliminated. The In-Home Supports Waiver provides services costing up to $29,914 for adults and $19,283 for minors.[35] There are many types of services available.[36] The most common is a habilitation training specialist (HTS), who helps the disabled person learn life skills. The Community Waiver, sometimes known as the “big waiver,” provides the same services without a cost cap.[37] The Community Waiver also has residential services available, with three waiver participants living in a home where the roommates receive services 24/7.[38]

OTHER STRATEGIES

Inheritance

A person with disabilities who receives SSI and/or Medicaid should never directly inherit money. If they inherit, the only way they can stay on benefits is to establish a (d)(4)(A) or (d)(4)(C) trust, which will almost never be able to be passed on to family or charity when the beneficiary dies.

If relatives want to leave money to a family member with disabilities, it should be done through a third-party trust, whether living or testamentary. If the grantor does not have a suitable trustee available, most nonprofits that operate (d)(4)(C) trusts also act as trustees of third-party trusts.

True Link Card

A True Link card is a prepaid debit card. A trust or SSA payee can put money on the card and determine how the card can be used. It is an excellent way to give a person with disabilities some control over their life without interfering with SSI or Medicaid. It is also an excellent way to keep the parent/guardian/trustee/payee from having to be involved with every purchase or payment.

Limits on use are set by the parent/guardian/trustee/payee, not the person with disabilities. The limits include how much can be used a week or month; what the card can be used for, such as car-related expenses or clothing; what the card cannot be used for, such as gaming, food and utilities; when the card can be used, such as only between 8 a.m. and 5 p.m.; and where the card can and cannot be used. The website is www.truelinkfinancial.com.

42 U.S.C. §1396p(c)(2)(B)(iv) trust. When an individual needs to enter a nursing home, they often have to “spend down” assets, without giving them away, before they are eligible for Medicaid payment. The general rule is that if assets are given away within five years of Medicaid application, the applicant is disqualified for a day for every $224.60 given away.[39] The disqualification period only starts when the applicant has less than $2,000 of countable assets – thus, not having enough money to private pay while ineligible for Medicaid.[40]

One exception to the penalty for giving away assets is putting assets in a trust for the “sole benefit” of a person with disabilities, as authorized by 42 U.S.C. §1396p(c)(2)(B)(iv). The person with disabilities does not have to be a relative but must have been found disabled by the SSA. The trust will be a normal third-party trust with one difference: The trust has to contain language that ensures the trust will be depleted during the beneficiary’s expected life according to the actuarial tables for the general population.[41] The trust does not have to distribute an even amount every year and can contain language that asset expenditures are expected to be greater the older the beneficiary gets. If the beneficiary dies before the trust is exhausted, the remainder can go to family or charity with no Medicaid repayment required.

Excess Income

As emphasized above, an SSI or Medicaid recipient should avoid having so much income that it reduces or eliminates benefits. However, all is not lost if it happens occasionally. For example, an SSI recipient owns their home and can pay for food and utilities out of their monthly income but cannot afford to pay property taxes. If another individual or a trust pays the taxes, it counts as income and would probably be enough to eliminate or reduce SSI and Medicaid benefits for the month of payment.

For SSI, the individual (or payee) is required to report income that reduces or eliminates payment in the first 10 days of the next month.[42] Eventually, the beneficiary (or payee) receives a letter from the SSA saying the beneficiary was overpaid in the month of excess income and to please pay it back. If not paid back, the SSA will reduce the beneficiary’s SSI check by 10% per month until repaid.[43] To avoid payment reduction, an individual, a third-party trust or a (d)(4)(A) trust can pay the SSA directly because payment of the overpayment is not for food or shelter. A (d)(4)(C) trust might or might not be able to repay the overpayment depending on the terms of the master trust and joinder agreement.

For Medicaid, the beneficiary is supposed to report anything to DHS that results in a loss of benefits within 10 days of the event.[44] When the report is made, the person/trustee who made the excess income expenditure should submit a letter saying the expenditure was a one-time event and will not be repeated in the following months. Eventually, the beneficiary will get a letter saying they were overpaid in the excess income month and to please pay back all Medicaid expenditures for that month. An individual or a trust can repay Medicaid, but nothing happens if no payment is made. The beneficiary won’t be sued, Medicaid benefits will not be reduced, and the beneficiary will not lose waiver or nursing home services.[45]

Trust Homeownership

The income problem with the SSI recipient owning a home could be avoided if a (d)(4)(A) trust owns the home. The SSI recipient is considered the “beneficial owner” of the home by the SSA and DHS and does not receive income by living there for free.[46] The trust, as the actual owner, can pay property taxes and insurance without it counting as income to the beneficiary. However, it still counts as income if the trust pays for basic utilities.

Disabled Adult Child

Although not a planning technique, it is worth knowing about because it comes up quite often. If a person becomes disabled before their 22nd birthday, they can draw Social Security disability benefits from their parent’s earnings record if the parent is deceased, entitled to Social Security disability benefits or entitled to Social Security retirement benefits.[47] This person is known as a “disabled adult child.” They are also eligible for Medicare after being eligible for Social Security disability benefits for two years.[48]

The amount of Social Security disability benefits the disabled adult child receives will usually be greater than the SSI $943 monthly payment. If not, then SSI pays the difference between the SSI maximum and the Social Security payment. If their Social Security payment is greater than the SSI maximum, they lose SSI but not necessarily Medicaid. If their income and assets remain below the Medicaid maximums, they keep their Medicaid benefits.

Even if the adult disabled child has income or assets greater than the limits for their Medicaid category, if they have no more than $1,215 per month and assets up to $9,090, Medicaid will pay their Medicare premiums, deductibles and co-payments. However, to retain Medicaid payment for health care services, including DDS waiver services, countable assets must remain below the maximum for their category of eligibility.

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ABOUT THE AUTHOR

Travis Smith practices elder law with Holmes, Holmes & Neisent PLLC and has handled issues relating to people with special needs since 1988. Before entering private practice, he spent 19 years at the Oklahoma Department of Human Services as an assistant general counsel, mostly handling issues relating to Medicaid, including benefits for people with intellectual disabilities. Prior to that, he was a staff attorney with Legal Aid of Western Oklahoma for 20 years, handling Social Security and public benefit issues.

 

 

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ENDNOTES

[1] Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981).

[2] 42 U.S.C. §1382a(a); 42 U.S.C. §1382c(a)(1); SSA Programs Operations Manual System (POMS) SI 1110.03(A)(2). The POMS is the SSA’s non-APA materials that are accorded Skidmore deference. The POMS is useful because it discusses each issue in light of relevant SSI statutes and rules – and gives examples. This is especially true in light of the relative paucity of Medicaid regulations for determining financial eligibility. The POMS is found at https://bit.ly/47nDMh2.

[3] 20 C.F.R. §416.1161; 20 C.F.R. §416.1202(b).

[4] 20 C.F.R. §416.1165.

[5] 20 C.F.R. §416.1133(c); POMS SI 835.465(D).

[6] POMS SI 810.005(A)(1).

[7] Id.

[8] 20 C.F.R. §416.1131; 20 C.F.R. §416.1140.

[9] 20 C.F.R. §416.1165.

[10] The SSA uses the term “resource” to describe what the rest of the world thinks of as an asset. 20 C.F.R. §416.1201(a).

[11] 20 C.F.R. §416.1203 – 1204, 1210-1216 and 1245.

[12] 20 C.F.R. §416.1202(b); POMS SI 1330.200(A).

[13] 42 U.S.C. §1382b(e).

[14] 42 U.S.C. §1382b(e)(5).

[15] 42 U.S.C. §1396p(d)(4)(A); Oklahoma Administrative Code (OAC) 317:35-5-41.6(6)(A).

[16] 42 U.S.C. §1382b(e)(5).

[17] 42 U.S.C. §1396p(d)(4)(C).

[18] OAC 317:35-5-41.6(6)(C)(viii).

[19] 42 U.S.C. §1382b(e); 42 U.S.C. §1396p(d)(3).

[20] 26 U.S.C. §529a(e)(1)(A).

[21] P.L. 117-328, §124.

[22] POMS SI 1130.740(C)(3).

[23] POMS SI 1130.740(B)(8) and (9).

[24] 26 U.S.C. §529A(f).

[25] Oklahoma State Medical Association v. Corbett, 2021 OK 30, ¶3. To complicate things, each state is given a number of options to choose from so that no two states have Medicaid programs that are the same. See 42 U.S.C. §1396a(a). To further complicate things, the secretary of Health and Human Services has the authority to waive provisions of the Medicaid statutes. 42 U.S.C. §1396n(c). The result is that a state may have a Medicaid Program component that has rules that are in seeming conflict with federal statutes.

[26] 63 O.S. §5009.

[27] OAC 317:35-5-2.

[28] OAC 317:35-7-38(a)(2).

[29] DHS Appendix C-1, Schedule VI.

[30] OAC 317:35-5-42(a)(3); OAC 317:35-9-68(c).

[31] OAC 317:40-1-1.

[32] OAC 317:35-9-68.

[33] Id.; DHS Appendix C-1, Appendix VIII.

[34] OAC 317:35-9-68(c).

[35] OAC 317:40-1-1(c)(2).

[36] OAC 340:100-40-5.15, et seq.

[37] OAC 317:40-1-1(c)(3).

[38] OAC 317:40-1-2.

[39] 42 U.S.C. §1396p(c)(1); DHS Appendix C-1, Schedule VIII(B).

[40] 42 U.S.C. §1396p(c)(1).

[41] State Medicaid Manual (SMM) §3258.1(6). The SMM is non-APA guidance promulgated by the Centers for Medicare and Medicaid Services (CMS) and which is entitled to Skidmore deference.

[42] POMS SI 2301.100(B)(6).

[43] POMS SI 2220.016(A)(1).

[44] OAC 340:65-5-1(a).

[45] The authority for this statement is the lack of law or rules that give DHS the power to take any of these actions.

[46] POMS SI 1120.200(F).

[47] POMS RS 203.001(A)(1)(e).

[48] POMS HI 801.100(A).