Virginia Commonwealth University?s Benefits Assistance Resource Center Briefing Paper SSI AND RESOURCES SSI is a means-tested program intended for people with disabilities who have little income and few resources. Because of this, income and resources affect whether individuals are eligible, and how much in SSI payment they are due. Income is what people receive in a month and resources are cash and items a person owns that can be converted to cash. Income an eligible individual receives, is counted for SSI purposes in the month it is received. If it is relevant, it counts as a resource as of the following month. For example, someone winning the lottery would have income the month payoff is received. If the individual hadn?t spent the money by the next month, the lottery money would then be considered a resource. What are the Limits? To be eligible for SSI, an individual?s countable resources must not exceed $2,000 as of the first moment of a given month. If an eligible couple (two SSI recipients married to each other or presenting themselves to the community as married and living together) receives the SSI, eligible couple?s countable resources must not exceed $3,000. If countable resources are above the limit as of the first of the month, the individual is not due an SSI payment for that month. If an individual has excess resources for more than twelve consecutive months, he or she would have to file a new SSI claim in order to receive SSI and provide evidence that resources have dropped below the limit. In some cases, the resources that a family member has might make an individual ineligible for SSI. If a person who is eligible for SSI is married to someone who is not, the ineligible spouse?s resources are assumed to belong to the eligible spouse. If a child under age 18 lives with his/her parent(s), part of the parents? resources may be counted when determining the child?s eligibility. This is called ?deeming? of resources. The VCU BARC website (www.vcu-barc.org) contains reference documents on Deeming that cover this in depth. Resources are items that people own and can use to meet the costs of food, housing, and clothing. However, not all resources count against the SSI resource limit. The trick is to understand what resources count and what resources do not count. For example, the following resources are excluded by law from counting against the limit: * a home that is the eligible individual?s principal place of residence, one automobile used for certain purposes or up to $4,500 of current market value, * a life insurance policy with a face value of $1,500 or less, * burial plots or spaces for the individual, spouse or immediate family, * a burial fund of up to $1,500 each for the individual and spouse, * property essential for self-support, and property set aside under a Plan for Achieving Self-Support (PASS). This list is not all-inclusive. Resource Decisions SSA conducts periodic SSI Redeterminations for all SSI recipients. The SSI Claims Representative looks at the person?s income and resources to see if the payments have been correct. At that time, they examine resources available to the SSI recipient at the beginning of each month. If the resources are too high, then no SSI payment is due. Eligibility with respect to resources is a determination made at the beginning of each month for the entire month. Thus, changes in resources during a month don?t count until the beginning of the next month. Remember, the decision about what is a resource is solely up to the Social Security Administration (SSA). The following discussion of excluded resources is not all-inclusive. When in doubt, check with SSA before telling people that something will not count against the resource limit. Household Goods and Personal Effects The SSA excludes the value of clothing, basic furniture, and other personal property that are household possessions not of high value. If an item is of a high value (valued over $500) it may or may not be excluded as a resource. If the total value of these items is less than $2,000, the items will be excluded from resources. If the total of such items is higher than $2,000, the part over $2,000 will be considered a resource, and count against the $2,000 resource limit. Medical Devices and Adaptive Equipment Medical devices, like wheelchairs and scooters, for individuals with disabilities, are completely excluded as a resource for SSI, regardless of their value. The value of adaptive equipment is also completely excluded, regardless of how much the adaptive equipment cost or is currently worth. (Note: Only equipment required because of a person?s disability is excluded under this rule.) Life Insurance Policies There are several types of life insurance. Term life insurance generally has no value, except upon death. People pay premiums and the insured person is covered by the insurance for the term of the policy. If the premium is not paid, the individual is no longer insured. Term policies generally have no cash surrender value (CSV) while the person is alive, and therefore they are not resources. However, some term policies do have a CSV which may be a resource. Whole life, or Universal Variable Life are two types of life insurance that build a cash surrender value. The more that is paid in, the more these policies are worth. People who own these policies may use them not only to pay a death benefit, but also for an investment while these individuals are alive. These policies have a cash value if they are sold back to the insurance company and policy owners may borrow against the value of the policy. Policies with a cash value may count as a resource which may have an effect on SSI eligibility. Even when a life insurance policy has a cash value, it may be excluded as resources in some situations. The policies are only completely excluded if the face value of all policies on an individual does not exceed $1,500. The face value is the amount the policy pays if the person dies. If the total of all the policy face values exceeds $1,500, then the cash surrender value of the policies is a resource. The cash surrender value is the amount of money the insurance company will pay out if the policy is turned back to them. Homes The primary residence of an SSI recipient is completely excluded from consideration as a resource no matter what it is worth. However, if someone gives an SSI recipient a home the value of the home is income in the month the deed is transferred. After that, the home is completely excluded as a resource. An example of this might be parents buying a condo for a disabled child. In the month the parents sign the condo over to the SSI recipient, the value of the home is income. After that, the home is a completely excluded resource. The parcel of land on which a home is located is also excluded, regardless of its size or value. Yet, if someone uses part of that land to generate income, the income may be countable in the month it is received. Retained proceeds would be counted as a resource in the month after the month they are received. Automobiles For the purposes of the automobile exclusion, SSA considers any form of conveyance to be an automobile including a boat, a car, a motorcycle, a snowmobile, or a horse and buggy. If the automobile is modified for the use by or transportation of someone with a disability, (for example, with hand controls or a ramp) it is completely excluded regardless of its value. If the conveyance is what a person uses to get treatment for a specific or regular medical problem or get to work it is also completely excluded. Automobiles are also excluded as resources needed because of climate, terrain or distance to perform essential activities of daily life, regardless of the automobile?s value. If the automobile can?t be excluded under the preceding rules, then up to $4,500 of the current market value is excluded. Current market value is what the car, van, or horse would normally bring at sale, not the equity value. Equity value is what the car would bring at sale, less whatever is owed on the automobile. Second cars or other conveyances are not excluded. If there is more than one automobile, SSA will exclude the automobile of higher value. The equity value of the less expensive one would count against the resource limit. Burial Funds, Burial Spaces, and Life Insurance Assigned to Funeral Provider A burial fund is a specifically designated fund of up to $1,500 in value set aside to pay for funeral expenses. Each eligible individual and spouse may have their own burial fund. The SSA must know this fund exists before it is excluded so Benefits Specialists must be sure that recipients let the SSA know as soon as they plan to set money aside. Burial funds must be kept separate from all non-burial related resources. If they are co-mingled, the burial exclusion will not apply. For example, burial funds cannot be kept in the same bank account into which the individual?s SSI check is deposited. Interest or other appreciation of burial funds is not counted as income or resources even if the total of the burial fund thus excluded exceeds $1,500. However, once money is designated as a burial fund, the eligible individual cannot use the fund for non-burial purposes. Improper use of the fund will result in a financial penalty that is withheld from SSI benefits. Burial spaces: The burial space exclusion applies to burial spaces for use by the eligible individual, spouse, and members of his/her immediate family. Burial plots, crypts, caskets, urns etc., may be purchased in advance and are completely excluded up to an unlimited value. The only exception to this is if there is more than one of a particular item for one individual. For example, if a person owns a collection of urns or caskets, only one item is excludable. This provision is in addition to the burial fund exclusion. Prepaid costs for opening and closing of a grave are also excluded. Life insurance or resources assigned to a funeral provider: People may have life insurance policies or other resources that are signed over to a funeral director to purchase a burial plot or pay for funeral services. The money or insurance policy may be assigned irrevocably, meaning that the person surrenders the right to pull the money back. The person may also create a revocable arrangement where the individual assigns the proceeds and later could revoke the arrangement. Whether the arrangement is revocable or irrevocable affects how the asset is treated. A life insurance policy that is irrevocably assigned to fund a burial contract is not a resource for SSI purposes. However, if the assignment of the life insurance policy is revocable, the policy continues to count against the resource limit. Generally, a burial contract includes burial space items (casket, cemetery plot, etc.) and ?non-space? items (funeral home, limousine, etc.). There is no dollar limit on exclusion of burial space items in the burial contract, but it must be paid in full. Items other than burial spaces covered by an irrevocable burial contract offset the $1,500 burial fund exclusion. For example, if an individual has an irrevocable burial contract for $2,000 in funeral services, the value of the contract offsets the $1,500 burial fund exclusion dollar-for-dollar and they cannot set aside any money for burial under that exclusion. The face value of excluded life insurance also offsets the burial fund exclusion dollar-for-dollar so if you have excluded life insurance with a face value of $1,000 we will only exclude up to $500 as a burial fund. Instead of using insurance to fund a burial contract, the individual may designate a life insurance policy as an excluded burial fund which has a $1,500 limit. If the person designates the policy as the excluded burial fund, only the first $1,500 of the cash surrender value is excluded. When designating the policy as a burial fund, the cash surrender value is used, not the face value. Remember that term life insurance policies that don?t have a cash surrender value are not counted as a resource. An individual may also purchase with cash a prepaid burial contract in which burial expenses are paid for in advance. If the contract cannot be revoked it is not a resource, regardless of value. If the contract can be revoked, it is a resource. However, the portion of the revocable contract that is specifically for burial space items can be excluded regardless of value. The ?non-space? items covered by the revocable contract may be excluded under the $1,500 burial fund exclusion. Retroactive Social Security Benefits: If an individual receives past-due Social Security benefits, the payment is considered income in the month it is received. If the recipient still has part of the retroactive payment by the beginning of the next month, the remaining amount of the back payment is excluded as resources for up to six-months. After that, it counts as a resource. Retroactive SSI payments are similarly excluded as a resource for 6 months. Plans for Achieving Self-Support (PASS) One of the most powerful work incentives SSI recipients may access is a Plan for Achieving Self-Support (PASS). A PASS is a formal plan to achieve a vocational goal. In order to write a PASS, the person must have a feasible vocational goal, money other than SSI to set aside in the PASS, and expenses necessary to meet the goal. Individuals writing PASS plans may contribute some or all of their countable income. Individuals may also contribute cash resources to the PASS. Funds set aside in a PASS are completely excluded for the duration of the PASS. One example of setting resources aside might be someone who receives an inheritance. The SSI recipient sets the inheritance aside in the PASS to pay for an adapted van to allow the individual to meet the vocational goal of becoming a paralegal. Because the inheritance is small, the person also puts some countable work income into the PASS. For the duration of the PASS, the person must follow the plan. The recipient must set the agreed upon resources and income aside in a designated account. The recipient must also keep receipts, and bank statements to demonstrate that the money is being used for the appropriate purposes. On the VCU-BARC website (www.vcu-barc.org) is a briefing document on PASS plans that provides additional information on this valuable work incentive. Property Essential to Self-Support (PESS) The SSA excludes certain resources or property that an individual or eligible couple needs for self-support. Property Essential to Self-Support (PESS) can include property used in a trade or business, non-business income-producing property and property used to produce goods or services essential to an individual?s daily activities. There are different rules for considering property essential to self-support depending on whether it is income producing or not. Resources excluded under this provision generally fall into three categories as described below: Category #1: Business Property, or Property of an Employee Effective May 1, 1990, all property used in the operation of a trade or business is excluded as property essential to self-support. For self-employed individuals, this includes inventory, the building where the business is housed, and cash used in operating the business, regardless of their value. The property must be in current use as defined by SSA. Personal property used by an employee for work such as tools, safety equipment, or uniforms is also excluded. These items are excluded whether or not the employer requires that the employee have them, provided that the SSI recipient or applicant is currently using them. Category #2: Non-Business Property Used to Produce Goods or Services Essential to Daily Activities Up to $6,000 of the equity value of non-business property used to produce goods or services essential to daily activities is also excluded from resources. An example might be a plot of land that the family uses to produce vegetables for their own use. Another example might be livestock intended for the family?s dinner table. Category #3: Non-Business Income-Producing Property Finally, up to $6,000 of the equity value of non-business income producing property can be excluded from resources if a net annual income of at least 6% of the excluded equity is produced. If the equity is greater than $6000, SSA will count only the amount over $6000 toward the allowable resource limit. An example of this type of property is rental property. Other Resources There are many more resource exclusions than we can describe here. A couple of the more complicated exclusions follow, but this is not a complete list. Remember that Benefits Specialists are not authorized to decide when a resource counts! When in doubt, refer the recipient to SSA for a formal determination. Trusts Established by the Individual Seeking SSI Eligibility In general, if a person sets up a trust for his or her own benefit, and uses his or her own funds to create the trust, it is a resource if it was established on or after January 1, 2000. If the trust was established before January 1, 2000, it may or may not be a resource, depending on the terms of the trust. Trusts established before January 1, 2000 are resources to individuals if the individuals have the legal authority to revoke the trust and then use the funds to meet food, clothing and shelter needs. A revocable trust is one that the person can choose to end at any time. An irrevocable trust is one that is established, and can?t be changed. A trust also counts as resources if the person can direct the use of the trust principal for their support and maintenance. In the case of a ?revocable? trust, the entire principal of the trust is a resource to the individual. Also, disbursements from a revocable trust that are not made to, or for the benefit of, the SSI recipient may be considered a transfer of resources. (See discussion of Transfer of Resources on the following page.) Some other types of trusts may not be counted as resources. While these trusts are not counted under SSI rules, the SSA refers to them as Medicaid trust exceptions. Special Needs Trusts Trusts established under Section 1917(d)(4)(A) of the Social Security Act are not counted if: * the trust was established with the assets of a disabled individual under age 65; * the trust was established for the benefit of the individual by a parent, grandparent, legal guardian or a court; and * the trust arrangement provides that upon the death of the individual, the State will receive all amounts remaining in the trust up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan. If there is money in the trust after the state has been reimbursed, then that could go to the survivors. Not all special needs trusts meet this exception. Again, asking the SSA is the best way to ensure all information is accurate. Transfers of Resources As of December 14, 1999, giving away or transferring a resource for less than fair market value can result in a period of ineligibility for SSI for up to 36 months. The number of months of ineligibility depends on the value of the resource that was given away, but cannot exceed 36 months. For initial claims, SSA will ask all SSI applicants if any resources were transferred within 36 months before the date of filing for SSI. In SSI re-determinations, the SSA will ask SSI recipients if any resources were transferred since the last SSA review. In some states transfer of resources is also known as divestment. Invalid transfers occur when property or cash is given away, or is sold below market value. The effect of transfers on SSI and Medicaid eligibility has changed in the last 20 years due to changes in the law. As of 12/14/99, if an individual gives away or sells a resource for less than it is worth, the person may be ineligible for SSI for up to 36 months. SSA refers to this transfer as an ?invalid transfer? and the property is counted as a resource for SSI purposes. The length ineligibility depends on the value of the resource transferred. Valid Transfers A valid transfer is based on a legally binding agreement. When there is a valid transfer, the individual no longer owns the resource. Both selling a resource and giving away a resource are valid transfers. If an individual sells a resource for what it is worth (fair market value), the 36-month period of ineligibility does not apply. However, what the individual or eligible couple receives for the sale may be countable as a resource in the month following the transfer. For example, the individual owns a parcel of land worth $5,000 that is not an excludable resource so he or she is not eligible for SSI. If he or she sells the real estate in April and receives $5,000, this money, if retained, will count as a resource as of May. And the individual would be ineligible for SSI if he or she is over the $2,000 limit. Conditional Benefit Agreements An individual who meets all other SSI eligibility requirements but is over the resource limit because he or she owns excess nonliquid resources can receive conditional SSI benefits for up to 9 months. The individual must agree in writing to sell the excess resources and reimburse SSA for the SSI benefits paid with the proceeds of the resources when sold. Nonliquid resources are any resources which are not in the form of cash or which cannot be converted to cash within 20 workdays. Conditional benefits are payable for up to 9 months while trying to sell real property. Real property is land and/or buildings. While trying to sell personal property (cash, jewelry, household goods, automobiles), an individual can receive conditional SSI benefits for up to 3 months. Conditional benefits cannot begin until a ?conditional benefits agreement? is developed, signed, and accepted by SSA. To be eligible for a ?conditional? exclusion of excess property, the following circumstances need to be met: * The person?s liquid resources do not exceed 3 times the applicable Federal Benefit Rate. * The SSI recipient(s) agree in writing to: 1) Sell the resource at current market value within a specified period; 9 months for real property, 3 months for personal property. 2) Use the proceeds of the sale to repay the overpayment of conditional benefits. Note: SSA will permit one 3-month extension for disposal of personal property for good cause. Good cause exists when circumstances beyond an individual?s control prevent them from taking the required actions to accomplish the reasonable efforts to sell. Examples might be the person not receiving an offer to buy the property, or being incapacitated by illness. Invalid Transfers Invalid Transfers may cause ineligibility for SSI. The SSA will compute the period of ineligibility using the following rules: * First, they will determine the total difference between the actual value of any resources sold or given away with what the person received for the resource. * Next they will then divide that value by the full amount of current SSI Federal Benefit Rate plus the full amount of the State supplementary payment (if any) based on the individual?s living arrangement. The result of this calculation represents the number of months the person will be ineligible to receive an SSI payment, up to a maximum of 36 months. The calculation is more complex for eligible couples or when spouse-to-spouse deeming is involved. Retirement Funds Retirement funds are annuities or work-related plans for providing income when employment ends. They include pensions, disability or retirement plans of an employer or union, and funds held in an individual retirement account (IRA) and Keogh plans. SSA makes resource determinations for retirement funds based on the ability to receive funds from the account. A retirement fund owned by an eligible individual is a resource if the individual has the option of withdrawing a lump sum even though he/she is not yet eligible for periodic payments. However, a retirement fund is not a resource if the individual must terminate employment in order to obtain any payment. Periodic retirement benefits are payments made to an individual at a regular interval, (like monthly retirement payments), that result from entitlement under a retirement fund. If the individual is eligible to retire, or to otherwise receive periodic payments, the fund may not be a countable resource. In this case, the periodic payments would count as income for SSI purposes. The individual is required by law to apply for those benefits to be eligible for SSI. If the individual has a choice between periodic benefits and a lump sum, the person would be ineligible for SSI unless they choose to take periodic benefits. If a person is required to apply for these types of benefits, SSA will send them a notice. Different retirement accounts, regardless of their title, may have different effects. This will depend on whether or not the person may access the funds. As with trusts, it is NOT the Benefits Specialists job to make that determination. If there is any question at all, ask the SSA to render a determination. Conclusion Remember that determining resources and resource exclusions is a very complex and specific process. Although you should be aware that these exclusions exist, it is always best to remind SSI recipients that the SSI Claims Representative is the best source of information about whether a resource is countable. Benefit Specialists have an ethical responsibility to tell clients to inform the SSA about resources as soon as possible. Timely reporting is essential because of the risk of overpayment. Some resources must be set-aside in special ways, or must be designated by the SSA as excluded resources ahead of time, or they will count against the individual?s resource limit. This is especially true of burial funds, and Plans for Achieving Self-Support. In all cases, the best practice is to tell the recipient to report right away, and let the SSA decide what counts. Frequently Asked Questions When someone receives conditional benefits, what happens if they can?t sell the property? When excess resources in the form of real property cannot be sold for certain reasons (undue hardship or unsuccessful reasonable efforts to sell), the owner can receive regular SSI benefits as long as they keep trying to sell the property. When they do sell the property, they only have to pay back the conditional benefits received. Do Claims Representatives make home visits to see what people have? The SSA asks SSI recipients about their possessions during periodic reviews. They generally don?t go to people?s homes however, you should be aware that SSA has computer matches with IRS and other agencies that can tell them about things that recipients receive or own. Not telling SSA about resources could result in a monetary penalty. Is there any exclusion for jewelry? There is a general exclusion of up to $2,000 for an individual?s household goods and personal effects. In addition to that $2,000 exclusion, one engagement ring and wedding ring are excluded for each individual, regardless of value. Other jewelry would be counted against the $2,000 general exclusion. Can a person have a burial fund if they have irrevocably assigned an insurance policy to a funeral provider? The cash value of irrevocably assigned funds or policies counts against the $1,500 burial fund exclusion, since the insurance will pay for the funeral. Do all life insurance policies have potential cash value? Policies with a cash surrender value can be a resource for SSI purposes. If the individual has a term life policy with no cash surrender value, it is not a resource for SSI purposes. However, if the policy has a CSV, it is a resource for SSI unless the policy is excluded. (NOTE: Many term policies now have cash surrender values. You can not make a general statement that they are not resources.) What happens if a person receives a dividend from a life insurance policy? Dividends from life insurance, even excluded policies, count as income when received and resources if the person still has them the next month. One exception is if it is irrevocably assigned to a funeral provider for burial costs. In that case, the funeral provider owns the policy, and all income resulting from the policy. If a person has a life insurance policy that has value, but has borrowed against the policy, what part of the value does the SSA consider to be a resource? Borrowing against the equity of a life insurance policy reduces its cash surrender value. The SSA only uses as a resource what the person could get if they surrendered the policy to the life insurance company. Debt against the policy would be subtracted before the person was paid. Only what is left counts. If someone receives SSI, and the person?s spouse does not, does the spouse?s retirement account affect the SSI recipient?s eligibility for SSI? Pension funds held by an ineligible spouse, or in the case of a child, the ineligible parent or parent?s spouse are excluded from resources for deeming purposes. How much of a person?s retirement fund is counted as a resource? The value of a retirement fund is the amount an individual can currently withdraw. If a penalty for early withdrawal exists, then the fund?s value is the amount available to the individual after penalty deduction. What happens if a person doesn?t know that she/he has a potential resource? If individuals don?t know they own something, it is not considered a resource until they become aware of its existence. In the month the individual finds out, the item or money is examined under the income rules. For months after the month of discovery, the previously unknown asset is treated as a resource. What happens when a previously unavailable retirement fund becomes available to the eligible individual (for example, a person becomes vested in a previously excluded retirement fund)? Vesting occurs when a person gains ownership of the money in a retirement fund. A previously unavailable retirement fund is not income to its recipient when the funds become available. The fund is subject to be counted as a resource in the month following the month in which it becomes available. If an SSI recipient has invalidly transferred resources for less than fair market value, will it affect his or her their Medicaid? SSA is required to notify state Medicaid agencies about transfer of resources by individuals filing for or receiving SSI. For transfers less than fair market value, Medicaid may not pay for certain health care costs including nursing home or home and community based services for up to 36 months from the date of the transfer. If a person has a life insurance policy that has value, but has borrowed against the policy, what part of the value does the SSA consider to be a resource? Borrowing against the equity of a life insurance policy reduces its cash surrender value. Thus, the SSA only uses as a resource what the person could get if they surrendered the policy to the life insurance company. Debt against the policy would be subtracted before the person was paid, thus only what is left counts. Additional References SI 00110.000 Chapter Table of Contents SI 00120.000 Chapter Table of Contents SI 00130.000 Chapter Table of Contents SI 01150.000 Chapter Table of Contents SI 00601.061 Supplemental Security Income (SSI Spotlights -- 01/04/2002) SI 01140.310 Life Insurance -- 09/27/90 SI 00830.010 When to Count Unearned Income -- 11/18/96 Give us a call or e-mail us....We are the answer to your Social Security Work Incentives questions!!! Virginia Commonwealth University Benefits Assistance Resource Center P.O. Box 842011 1314 W. Main St. Richmond, VA 23284-2011 (804) 828-1851 VOICE -- (804) 828-2494 TTY -- (804) 828-2193 FAX http://www.vcu-barc.org Edited by: Lucy Miller, VCU-RRTC on Workplace Supports Contributors: Debby Murray, Imagine Enterprises, Terri Uttermohlen and Lucy Miller, VCU- RRTC on Workplace Supports Virginia Commonwealth University, School of Education and Department of Physical Medicine and Rehabilitation is an equal opportunity/affirmative action institution and does not discriminate on the basis of race, gender, age, religion, ethnic origin, or disability. If special accommodations are needed, please contact Vicki Brooke at (804) 828-1851 VOICE or (804) 828-2494 TTY. This activity is funded through a contract (#0600-00-51200) with Social Security Administration.