SSI and inheritance of life insurance proceeds

[Victoria-nola]

What is the name of your state? Mississippi

My sister has been on SSI for 30ish years; she is severely psychiatrically disabled with paranoid schizophrenia, and now has severe physical disabilities (colostomy bag, heart condition, back condition, and etc.). Our mother recently passed away and it turns out there is a life insurance policy that will give each of her 3 children something over $5,000. I am anxious to get the money to pay off the cabin my husb and I mortgaged and built for my mother, but there are some problems to solve before I send in the applications.

1. Can my sister receive this money without losing SSI benefits? My previous knowledge is that people on SSI can only have $2500 in assets, but I'm hoping there may be ways around this sort of circumstance.

2. My sister is severely disabled psychiatrically and has been on SSI for 30 years. A year ago we tried to get her a representative payee, but it failed due to my sister being discharged from her last mental hospital stay and going back to living on the street instead of going into a subsidized apartment (without an address, they couldn't get the rep. payee set up). She usually sleeps in a Salvation Army homeless shelter but has to leave the shelter for daytime hours. I would like this money to be set up in something like a trust that would distribute it to her at $100 a month (the amount my mother was giving her before she died), rather than her receiving it as a lump sum that she will not be responsible with (based on previous experiences) and will run through within a couple of months. I have access to my sister's Soc. Security number and her banking information (for electronic deposits). However, I do not have Power of Attorney and she will not give it to me or anyone else voluntarily. But, some longtime friends of hers (saints, truly) are working to get her back into a Section 8 apartment. Do I have any options about trying to help her make this money last?

Thank you for any insights.

 

[adjusterjack]

Can my sister receive this money without losing SSI benefits? My previous knowledge is that people on SSI can only have $2500 in assets, but I'm hoping there may be ways around this sort of circumstance.

That's something you need to find out directly from the Social Security Administration. Check the SSA website or call or visit in the AM.

I do not have Power of Attorney and she will not give it to me or anyone else voluntarily. But, some longtime friends of hers (saints, truly) are working to get her back into a Section 8 apartment. Do I have any options about trying to help her make this money last?

No, not unless you want to go to court and seek conservatorship over her. With a court order, you'll be able to handle her money for her.

Otherwise, there's nothing you can do. She gets the money, does what she wants with it, notifies SSA or not, takes whatever the consequences are.

I'm sympathetic. My son is in a similar position. You do the best you can to help them but at the end of the day they do what they want and survive a day at a time. Nothing ever gets any better.

 

[Victoria-nola]

That's something you need to find out directly from the Social Security Administration. Check the SSA website or call or visit in the AM.



No, not unless you want to go to court and seek conservatorship over her. With a court order, you'll be able to handle her money for her.

Otherwise, there's nothing you can do. She gets the money, does what she wants with it, notifies SSA or not, takes whatever the consequences are.

I'm sympathetic. My son is in a similar position. You do the best you can to help them but at the end of the day they do what they want and survive a day at a time. Nothing ever gets any better.

Thank you, I see that you truly do know what I'm facing. For sure, it never gets any better. It absolutely would not be workable for me to be in the position of Guardian with her, it would have to be someone else. I'm printing out your thoughts as a reference. My father's advice is similar-- let her take the money and assume whatever consequences may follow. That's hard to do, but probably the only actual option.

 

[Janke]

The general rule is that receipt of an inheritance counts as income in the month received and is evaluated as a resource the first of the next month. If countable resources are over $2000, then she is not eligible until it is under $2000. Because the life insurance company will issue a 1099 on this, then SSI will find out about it, but not until sometime the next year.

SSA might be able to determine that she needs a payee from non-medical evidence. Not sure how much proof you have and how much would convince SSA.

You might be able to convince her that the best use of the money would be to prepay her own funeral and final expenses. SSI disregards burial funds of $1500 and whatever grave, crypt, urn is purchased for the final resting spot.

Other than obtaining guardianship, you may not have much control over any of this.

 

[Victoria-nola]

The general rule is that receipt of an inheritance counts as income in the month received and is evaluated as a resource the first of the next month. If countable resources are over $2000, then she is not eligible until it is under $2000. Because the life insurance company will issue a 1099 on this, then SSI will find out about it, but not until sometime the next year.

SSA might be able to determine that she needs a payee from non-medical evidence. Not sure how much proof you have and how much would convince SSA.

You might be able to convince her that the best use of the money would be to prepay her own funeral and final expenses. SSI disregards burial funds of $1500 and whatever grave, crypt, urn is purchased for the final resting spot.

Other than obtaining guardianship, you may not have much control over any of this.

The general rule is that receipt of an inheritance counts as income in the month received and is evaluated as a resource the first of the next month. If countable resources are over $2000, then she is not eligible until it is under $2000. Because the life insurance company will issue a 1099 on this, then SSI will find out about it, but not until sometime the next year.

SSA might be able to determine that she needs a payee from non-medical evidence. Not sure how much proof you have and how much would convince SSA.

You might be able to convince her that the best use of the money would be to prepay her own funeral and final expenses. SSI disregards burial funds of $1500 and whatever grave, crypt, urn is purchased for the final resting spot.

Other than obtaining guardianship, you may not have much control over any of this.

Yes, I'm coming to terms with the fact I don't have any control over what happens here. Nevertheless I'm worrying about what will happen. So, if I could ask you a question about something you said in that first paragraph: Say she gets the check and deposits it-- if SSI doesn't find out about the life insurance payout until next year, and by that time the money is spent, what happens? Do they kick her off then, or not really anything because the money is gone? Also, you said something about, if countable resources are over $2000, then she is not eligible until it is under $2000. So, does that mean they would stop sending money but resume it again once the money was back under $2K? Or would she have to reapply? I don't know when she has her next eligibility meeting, which is when I think they would next get a bead on her bank account.

 

[LdiJ]

Yes, I'm coming to terms with the fact I don't have any control over what happens here. Nevertheless I'm worrying about what will happen. So, if I could ask you a question about something you said in that first paragraph: Say she gets the check and deposits it-- if SSI doesn't find out about the life insurance payout until next year, and by that time the money is spent, what happens? Do they kick her off then, or not really anything because the money is gone? Also, you said something about, if countable resources are over $2000, then she is not eligible until it is under $2000. So, does that mean they would stop sending money but resume it again once the money was back under $2K? Or would she have to reapply? I don't know when she has her next eligibility meeting, which is when I think they would next get a bead on her bank account.

They would stop giving her benefits until her resources were back under 2000.00. She would then need to reapply.

 

[Janke]

If she is ineligible for 12 months, she has to reapply and go through the disability decision process. If it is less than 12 months, she needs to show how she spent the money and then get reinstated without a new application.

If SSI finds out a year later, she will still have to supply the evidence she should have supplied when she got the money. SSI can be stopped for her failure to cooperate if she doesn't give evidence. And, she will be overpaid and will owe possibly many months of SSI back, if she was over the resource limit for many months. Could run into more overpayment than she received in inheritance. And that is a shame, but is preventable. Don't wait for SSI to find out.

To force the issue, you could always report for her or make an anonymous report to the OIG hotline. Or you could go with her to the Social Security office and assist her in reporting. Waiting for SSI to find out will probably mean she will have no evidence to submit next year and SSI has to make a decision with no evidence, which may not be in her favor. Or her checks may stop for failure to provide necessary evidence.

Although not intervening and allowing her to make foolish decisions may give you enough ammunition for SSA to decide she needs a payee after all. Here is what SSA can use if there is no doctor's statements.

https://secure.ssa.gov/apps10/poms.nsf/lnx/0200502030

 

[Janke]

Paying out money at $100 a month generally means that SSI will go down $100. So if the mother was doing that for years, SSI should have been reduced then by the same amount of money that the mother gave her. Anyway, it is too late to establish a way to exclude this money from affecting the SSI. Too bad the mother did not establish a special needs trust and direct the inheritance to be paid to the trust.

Gifts are countable income for SSI as are inheritances. If your family gives you money, the government gives you less. Unless it is established under very specific guidelines.

$5000 is not enough money to be life changing, but it could be used to enhance her life. Enough to set up a household with a little bit of furniture and a nice bed to sleep in and a TV. You would have to convince her. Or convince her to prepay for her own funeral and do whatever she wants with the rest.

If she gives it away, that can also cause problems with SSI.

 

[HRZ]

The SSA rules provides for a spend down of excess assets if you get fair market value in return ..might entail a bit of repayment and loss of benifits for 1 month but it's not fatal to SSI

Technically the payout is not an inheritance nor is it taxable income. But that aside, if It puts her over the asset cap then she risks ineligibility until the counted assets are below the cap ..as others post , some things like prepaid funerals are not counted ...and to spend it unwisely gets one down..like it or not.

 

[HRZ]

Look up (d)(4)(a). trusts ...they are designed as a safe harbor to avoid losing SSI

 

[Whoops2u]

Look up (d)(4)(a). trusts ...they are designed as a safe harbor to avoid losing SSI

Isn't it already sister's money? I'm not sure a first party special needs trust will solve things.

 

[HRZ]

I think they permit self funding....but have not looked at them with care

 

[Victoria-nola]

I think they permit self funding....but have not looked at them with care

I actually have discovered the Special Needs Trusts and yes, there is a first-party (self-funded) option. I was hesitant because the trust limits access and what the money can be spent on, but, better to have some legal access that doesn't destroy her SSI. I'd been shying away but, after hearing these discussions I'm thinking that really could be better than other options. The idea of doing nothing to try to protect her isn't sitting well with me. I may not get her cooperation, but I think I need to at least try.

 

[Janke]

Special needs trusts established with your own money are not excluded resources for SSI. The mother could have directed the insurance be paid to the trust, and then it would be excludable, but that did not happen.

This is a start to the instructions. https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120201

There was a case I worked on. Guy was going to get a settlement over $100K due to an auto accident, but through his lawyer, he set it up to be paid into his trust. Cost him $10,000 in legal fees. Named his mother as trustee. Within weeks after the money hit the trust, he and his trustee spent it all. The trust was a waste, just a money maker for the attorney.

Again, $5000 is a nice chunk of change, but not enough to support herself very long. So trying to save or invest it for the future may not be a good idea because of SSI rules. But spending it wisely at the outset may give her a better quality of life. Perhaps a mix of treats and responsible spending might be best. Household goods are excluded from resources, so she can have stuff and not cash.

 

[Victoria-nola]

Special needs trusts established with your own money are not excluded resources for SSI. The mother could have directed the insurance be paid to the trust, and then it would be excludable, but that did not happen.

This is a start to the instructions. https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120201

There was a case I worked on. Guy was going to get a settlement over $100K due to an auto accident, but through his lawyer, he set it up to be paid into his trust. Cost him $10,000 in legal fees. Named his mother as trustee. Within weeks after the money hit the trust, he and his trustee spent it all. The trust was a waste, just a money maker for the attorney.

Again, $5000 is a nice chunk of change, but not enough to support herself very long. So trying to save or invest it for the future may not be a good idea because of SSI rules. But spending it wisely at the outset may give her a better quality of life. Perhaps a mix of treats and responsible spending might be best. Household goods are excluded from resources, so she can have stuff and not cash.

I don't know yet how much it is, the only thing I know is that it's MORE THAN $5,000 per person-- I have it on my list for Monday to see if I can find out the actual payout amount. I'm very confused because there is a bunch of info online that contradicts the ssa.gov site you've linked above. I wonder if that site is about the specific "Special Needs Trusts" that have special laws? Here is a link that says pooled trusts can be set up by the first party:
https://www.nolo.com/legal-encyclopedia/using-pooled-special-needs-trusts-when-you-have-too-many-assets-medicaid.html