By Harry S. Margolis
The $2,000 asset limit for eligibility for Supplemental Security Income (SSI) has been in place and unchanged since 1984, making it impossible for SSI recipients to accumulate assets and causing great difficulty if, for any reason, their bank accounts exceed this limit. (On that point, let me clarify that if an SSI beneficiary’s account exceeds $2,000 due to income received, it’s not a problem if the excess amount is spent down before the end of the calendar month.)
Fortunately, the ABLE Act (Achieving a Better Life Experience), enacted at the end of 2014, has greatly alleviated this limitation. In addition, payments into the trust are not considered to be income for purposes of SSI. Now, certain SSI beneficiaries can hold up to $100,000 in these specialized accounts. But there are two important (and unfortunate) restrictions:
- The beneficiary must have become disabled before age 26.
- The account may receive no more than $15,000 a year from all sources.
The first restriction, unfortunately, limits the number of SSI recipients who can benefit from ABLE accounts.
The second is less of a problem in most cases and relieves one of the biggest difficulties in parents or trustees of special needs trusts assisting SSI beneficiaries. Under the SSI rules, beneficiaries lose a dollar of their monthly SSI payment for every dollar of income they receive. So, often, family members and trustees jump through many hoops to assist beneficiaries without violating these rules. These strategies include paying expenses directly and the use of credit cards.
Now, instead, they can pay money into an ABLE account that the beneficiary can manage on his own. For instance, a trust might pay $1,000 a month into an ABLE account, and an additional $3,000 at the beginning of every year. This can be automated without the effort of paying credit card bills or dealing with invoices coming in every month. In fact, in some instances, this can result in a higher SSI benefit. If the trust pays the beneficiary’s rent directly, this is deemed to be income and the beneficiary’s monthly benefit is reduced by about a third. If, instead, the beneficiary pays her rent from her ABLE account, there’s no income and no reduction in her SSI benefit.
There are a number of resources available to answer questions about ABLE accounts and assist in their creation.
We have created a handout comparing ABLE accounts and special needs trusts which is available here.
National Resource Center
Massachusetts ABLE Accounts
Fidelity offers the Attainable Savings Plan, an ABLE account for Massachusetts SSI beneficiaries.