Government programs often have wordy names, so they are shortened to acronyms for convenience purposes. When they are very similar, things can get confusing, so we endeavor to provide clarity from time to time on our blog. With this in mind, we will look at SSI and SSDI in this post.
Social Security Disability Insurance
The acronym SSDI stands for Social Security Disability Insurance. You become eligible for SSDI coverage through the accumulation of retirement credits. When you pay FICA taxes, part of what you pay goes toward Social Security. If you accrue sufficient credits, you may be able to qualify for SSDI if you become disabled at some point in time.
If you are deemed eligible, you will receive a monthly benefit.
There is another government benefit that is available to some disabled people called Supplemental Security Income or SSI. The eligibility requirements are different for SSI. This program is available to people who can prove that they have significant financial need. Eligibility has nothing to do with the accumulation of retirement credits.
Many people who have been disabled all of their lives rely on the SSI program. If you have never been able to work, you are probably going to have very limited resources. As a result, you can meet the eligibility requirements.
Estate Planning Implications
From an estate planning perspective, you have to be very careful when you provide for a love one who has special needs. Because SSI is a need-based program, an influx of money could render a benefit recipient ineligible.
People with disabilities often rely on SSI, but they may also qualify for Medicaid. This is a need-based health insurance program. The same situation applies with regard to a possible loss of eligibility if a benefit recipient was to experience a change in financial status.
This type of situation is typically addressed through the creation of a special needs trust. These trusts are sometimes called supplemental needs trusts.
With a special needs trust, the trustee must have exclusive control of the assets. The beneficiary cannot directly handle the resources in the trust.
However, the trustee can use assets in the trust to pay for things that the government benefits are not covering. These are called supplemental needs, and this is why special needs trusts are alternately referred to as supplemental needs trusts.
As long as the trustee acts within the rules, benefit eligibility would not be impacted.
An inheritance would not impact SSDI eligibility, because this program is not based on financial need.
Special Needs Planning Consultation
If you would like to discuss special needs planning with a licensed attorney, our firm can help. We offer free consultations, and you can contact us through this link to schedule a consultation: Indianapolis IN Special Needs Planning.