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Utilizing the Spend Down Option to Maintain SSI & Medicaid Elegibility

An SSI recipient must retain $2,000.00 or less by the end of any calendar month. If this happens, then the benefits will be maintained for the following calendar month. So what do you do with a sudden influx of assets from an inheritance or a settlement? The money received from an inheritance or a settlement does not have to be an unwelcome burden for a Medicaid or SSI recipient. Rather, that money can be thoughtfully spent on enhancing the quality of the recipient’s life.

An option you have is to utilize what is known as the “Spend Down” option. This means that individuals receiving needs-based government benefits could make certain purchases and expenditures with the excess income that they have acquired to maintain eligibility. To preserve Medicaid and SSI there are requirements and restrictions that MUST be followed and a spending plan is a key step in the process. It is especially important to remember that: (1) the money must be spent on items and services for the benefit of the beneficiary only; (2) it cannot be given away; (3) the spend down must be reported to Social Security (and any other applicable public resource agencies) by the 10th day of the month following the month in which the spend down was done. The recipient must still report the change in circumstance but will simply explain how the money was spent to bring his/her total assets below the allowable $2,000.00; and (4) the money must be spent in the calendar month that it is received. Note that it is not a period of a month (30 days) that is allowed, but rather, the funds must be spent within the month, before the beginning of the next calendar month.

The following is a list of exempt expenditures that a beneficiary could make and still be eligible:

  • For individuals under 65, establish a special needs trust that would supplement, rather than replace, government benefits by paying for non-covered services or equipment.
  • Purchase a home;
  • Pay off a utility bills;
  • Pay off mortgage on a home;
  • Pay rent for that calendar month only;
  • Modify a home to accommodate an individual’s disabilities;
  • Purchase interest in child’s home (provided parent intends to live there);
  • Purchase home furnishings;
  • Purchase home appliances;
  • Home repair, remodeling, or deferred maintenance expenses (including landscaping);
  • Pay for medical expenses/bills not covered by Medicaid (e.g., annual check-ups);
  • Pay for dental expenses, eye glasses, physical therapy, support services not covered by any benefit program;
  • Pay for education expenses (including computer, software, books, etc.);
  • Pay for entertainment/recreation expenses (books, magazines, movie/concert tickets, sporting events, audio/video equipment);
  • Pay for vacation travel (airline tickets, train/bus passes, temporary food & shelter, etc.);
  • Pay an attorney to do estate planning and/or Medicaid planning;
  • Pay off unsecured debts (existing credit card debt, loans with supporting paperwork);
  • Pre-pay burial arrangements and associated funeral costs;
  • Spend on your personal hygiene (haircuts, manicures);
  • Purchase an automobile, pay for registration and insurance;
  • Purchase clothing;
  • Purchase fitness equipment for health benefits;
  • Up to $2,000 for a single person, or up to $3,000 for a married couple, in cash reserve, e.g., in savings, checking, etc.

Reporting Requirements

The beneficiary must report their settlement award by the 10th day of the month following physical receipt of the funds. The following guidelines should be followed in order to be properly prepared for completing the reporting:

KEEP ALL RECEIPTS!

  • The beneficiary should keep sufficient funds in their bank account, as they will most likely be required to re-pay their benefit for the month in which they received the lump sum.
  • The beneficiary should keep receipts for all items purchased, as those will be needed to complete the reporting.
  • If a home was purchased, the beneficiary must have their name on the title.
  • If remodeling was done, all receipts will be needed too.
  • If a vehicle was purchased, the beneficiary’s name must be on the ownership certificate and they must be the loss payee for the auto insurance
  • Copies of current bank statements from all accounts will be needed, as well as a printout on the last day of the month showing the balance as of that day
  • Uncleared checks or debit card purchases should be listed at the end of the month

 An additional important thing to note is that a person receiving Medicaid cannot simply refuse or disclaim his or her inheritance without being financially penalized for it. For the purposes of Medicaid, if a person has access to assets, those assets will be counted as income whether they are accepted or refused. This means you will lose your inheritance and your benefits too. Remember, this is because declining an inheritance is tantamount to giving money away and that subjects the Medicaid beneficiary to a disqualification period.

About the Author

Viktoria Beress
Viktoria Beress
administrator

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