Some government programs have similar sounding names, and this can lead to confusion and misunderstandings. With this in mind, let’s look at the differences between Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
SSDI
When you remit payroll tax payments, you eventually get something in return of your contributions. You earn retirement credits that are used to qualify for Social Security and Medicare.
In 2021, you get one credit for every $1470 in taxable earnings, but you can earn no more than four credits in a year. After you have accrued a total of 40 credits, you will be eligible for these government programs for seniors when you reach the respective eligibility ages.
For your information, the eligibility age is 65 for Medicare, and it is between 66 and 67 for a full Social Security benefit depending on the year of your birth.
If you become disabled, you can qualify for Social Security Disability Insurance based on your work record. You do not necessarily need the full 40 credits to be eligible if you are no longer capable of working while you are still relatively young.
Since this is an earned benefit, there are no need-based requirements. You can potentially qualify for this benefit if you have significant assets, and this also applies income that is not earned on the job.
The amount that you would receive will depend on your taxable earnings, but to give you an idea, the average SSDI payout in 2021 is $1277 a month.
SSI
Supplemental Security Income is a program that is very familiar to estate planning attorneys. This is a need-based benefit that is potentially available to people with disabilities that do not have the ability to work. Individuals that receive SSI also qualify for Medicaid.
We assist clients that want to provide inheritances to loved ones with disabilities, so benefit preservation is a priority. It is possible to convey assets into a supplemental needs trust to make a beneficiary more comfortable without impacting benefit eligibility.
The SSI benefit is quite modest. During the current calendar year, the maximum Supplemental Security Income benefit is just $794 a month. This is not going to go very far, so a supplemental needs trust can go a long way toward improving the beneficiary’s quality of life.
Supplemental Needs Trust Overview
If you want to set aside assets for the benefit of a loved one with a disability, you could fund a supplemental needs trust. You would name a trustee to act as the administrator, and this can be someone you know personally or a professional fiduciary.
The beneficiary would not have direct access to the assets in the trust, but the trustee could provide many different goods and services. As long as the rules are followed correctly, benefit eligibility would not be negatively impacted, but there is another consideration.
Medicaid is required to seek reimbursement from the estates of deceased beneficiaries. This is called the Medicaid estate recovery process.
If you establish a trust with your resources for the benefit of someone else, it would be a third party trust. A successor beneficiary that you name in the trust agreement would inherit the assets after the death of the first beneficiary, and Medicaid would not be able to touch the assets.
When someone with a disability comes into money for some reason, the assets can be used to fund a first party special needs trust. The guidelines would be the same during the life of the beneficiary, but after their death, Medicaid would be able to attach the remainder.
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