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John Bair
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Using a Spend Down to Preserve Benefits, Prepare for Long-Term Security

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Millions of adults and children with special needs rely on benefits from Supplemental Security Income (SSI) and Medicaid to live their best lives. In fact, 86 percent of SSI beneficiaries in 2016 qualified due to a disability (rather than age).

Eligibility for these benefits hinges on how much income a person receives. People who have filed a personal injury lawsuit face a far more complex situation. Without careful planning, a court award or settlement can push some beneficiaries over the government’s income eligibility threshold, making them ineligible for SSI.

At their core, these programs cover the basic needs of daily life, but they are not an equation for long-term financial security. That’s why striking a balance between benefits and settlement is important. One option is to use a “spend down” to re-qualify for needs-based government benefits and establish a long-term plan for financial security.

spend down to comply with SSI and Medicaid

What is a Spend Down?

The basic concept behind a spend down is simple: accept the lump sum settlement, but instead of placing the entire amount in a bank, spend the money until the beneficiary has reached the government programs’ allowable resources limit. Determining the actual amount to spend down can be complicated, because different benefits programs have different eligibility requirements. It’s best to consult with an experienced settlement planner to get the correct number and come up with an appropriate plan.

In a spend down, spending should be limited to “exempt” resources, such as a home, a vehicle, or medical expenses that aren’t covered by government benefits. “Exempt” resources aren’t counted toward asset limits under SSI, so limiting spending to these resources should not threaten benefits eligibility. Of course, the resources purchased should be solely for the benefit of the SSI recipient.

A spend down is typically appropriate for handling smaller settlements. It can also be a good choice for SSI recipients who need to purchase high-value items immediately – as long as those items are considered exempt. For others, particular those who will receive larger injury settlements, establishing a special needs trust may be the answer.

Getting More Information

If you are an SSI, Medicaid, and/or other government program beneficiary and you are about to reach a personal injury settlement, the clock is ticking before you may lose eligibility. Contact Milestone Consulting to discuss your options. We can help you come up with a plan for your long-term financial security after settlement.

 

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