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Articles

Using ABLE Accounts to Avoid a One-Third Loss in SSI

By Theresa M. Varnet on November 13, 2020
The following example shows how an ABLE Account can be useful to supplement income without risking the loss of SSI benefits.

If the Social Security Administration (SSA) determines that you are receiving “in-kind support,” it will decrease the amount of your Supplemental Security Income (SSI) by one-third. Often parents will not charge rent to their child with special needs who is living at home. Or the parent will subsidize the cost of rent or other housing expenses if the disabled adult child is living independently. SSA makes the presumption that you do not need the full SSI check if someone is assisting you with the cost of food and shelter. Regardless of the actual dollar amount of this in-kind support, SSA values the support to be equal to one-third of the SSI benefit and reduces the full SSI check by that amount.

To avoid having your SSI check reduced by one third, you must be able to show that you are either paying rent or contributing your “fair share” of the cost to maintain your household. In order to determine whether you are paying your fair share, SSA will require you to itemize the following basic household expenses--rent or mortgage, property taxes, heating, electricity, sewer, garbage collection and food--and divide these expenses by the number of people living in the home. This amount is considered your pro rata share of household expenses. If the pro rata share is greater than the total amount of your SSI and earnings, SSA will consider the difference to be in-kind support and will reduce your check by one-third.

There are two ways to avoid the one-third loss of SSI. One way is for you to begin paying rent to your parents to live in their household. This rent charged should be equal to your pro rata share for living in the home. The second way comes into play if your income is not enough to pay the pro rata share. Then contributions to an ABLE account may fill in the difference and still enable you to receive the full SSI check.

An ABLE account is a special savings account that allows a person who was disabled prior to the age of 26 to save up to $100,000 without losing SSI. ABLE accounts can be used to pay for Qualified Disability Expenses (QDE) which include the cost of housing and living expenses. If your income does not stretch to cover your pro rata share for housing expenses, a contribution can be made to your ABLE account by your special needs trust or a friend or family member. Once the ABLE account is funded, the trust manager can use the funds in the account to pay for your pro rata share of household expenses. The maximum annual contribution to an ABLE account is $15,000.

In summary, if your parent or Special Needs Trust subsidizes the cost of your living expenses, you will lose one-third of your SSI. If, instead, your parent or Special Needs Trust makes a contribution up to $15,000 per year to your ABLE account and then you withdraw the amount needed to pay your pro rata share of household expenses, you will receive the full SSI check. Distributions from an ABLE account for food and shelter will not be deemed in-kind support.

For more information on ABLE accounts, download the related articles on the Fletcher Tilton website.


©2020. This material is intended to offer general information to clients and potential clients of the firm, which information is current to the best of our knowledge on the date indicated below. The information is general and should not be treated as specific legal advice applicable to a particular situation. Fletcher Tilton PC assumes no responsibility for any individual’s reliance on the information disseminated unless, of course, that reliance is as a result of the firm’s specific recommendation made to a client as part of our representation of the client. Please note that changes in the law occur and that information contained herein may need to be reverified from time to time to ensure it is still current. This information was last updated November 2020.

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