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Articles

Using ABLE Accounts to Avoid a One Third Loss in SSI

By Theresa M. Varnet on March 16, 2021
When an individual receives SSI, SSI deems all income he or she receives. SSI deems earned income, unearned income and in-kind support and maintenance income differently. This article addresses how SSI deems in-kind support and maintenance only.

In-Kind Support and Maintenance (ISM) is the value of the food and/or shelter that somebody else provides a SSI beneficiary. If someone else helps pay for rent, mortgage, utilities, and other basic housing expenses, SSI reduces the amount of SSI benefits paid to the recipient up to a maximum of one third of the full SSI benefit. (POMS SI 00835.001)

Often, if an adult child is living at home, the parents will not charge the adult child with special needs rent. In other cases, a parent or other family member, friend or special needs trust will contribute towards the cost of rent or other housing expenses if the individual with special needs is living independently. In both cases, SSI makes the presumption that if the individual is not paying for his or her fair share of food and shelter in the home of another or if he or she is receiving contributions toward food and shelter, he or she does not need the full SSI check. SSI reduces the monthly SSI check by one third which is referred to as “The One Third Reduction for In-Kind Support and Maintenance”.

To avoid having the SSI check reduced by one third, a recipient must be able to show that he or she is paying rent or contributing “fair share” of the cost to maintain the household. In order to determine whether one is paying fair share, SSI will require itemization of the following basic household expenses: rent or mortgage, homeowners insurance if there is a mortgage, property taxes, heating, electricity, water, sewer, garbage collection and food. SSI will then divide the number of people living in the home into the cost of basic household expenses. This amount is considered the “pro-rata share of household expenses”. If a SSI recipient is paying his or her “pro rata share of household expenses”, he or she will receive the full SSI award minus other earnings, if any). If the “pro rata share of household expenses” is greater than the total amount of the SSI award plus earnings, SSA will consider the difference to be ISM and will reduce the SSI check by a maximum of one third the full monthly benefit.

There are two ways to avoid the one third loss of SSI. One way is for the SSI Beneficiary to pay rent if living in the home of another for the cost of fair share of household expenses listed above. The second way comes in play if your income is not enough to pay the fair share of housing expenses. In this case, contributions to an ABLE Account may enable a SSI Recipient to receive the full SSI check.

An ABLE Account is a special savings account created by federal law (Achieving a Better Life Experience Act) that allows some individuals with disabilities to establish a savings account which will not be counted as a resource by SSI or other means tested government programs. ABLE Accounts can be used to pay for Qualified Disability Expenses (QDE). Housing and living expenses are treated as a QDE under ABLE regulations. If one’s income does not stretch to cover the fair share for housing costs in the home of another or if one is receiving help with a basic living expense, a contribution of up to $15,000 per year can be made to an ABLE Account. Once the ABLE Account is funded, the funds can be withdrawn from the ABLE Account to pay for one’s pro rata share of household expenses or for the rent or other housing expenses needed to live independently. Distributions from an ABLE Account used for food and shelter are treated as a QDE and will not result in a one third loss of SSI. (SI 01130.740). Once the ABLE Account is funded, the Account fund manager can supplement the cost of household expenses as a QDE and avoid the loss of one third of the SSI.

In summary, if a parent or other third party subsidizes the cost of living expenses for a SSI beneficiary directly, the individual will lose one third of his or her SSI. If the parent or other third party makes a contribution for a similar amount to an ABLE Account, and the funds are then withdrawn to pay for the shelter or food expense, the SSI beneficiary will receive the full SSI amount he or she is entitled. Distributions from an ABLE Account for food and shelter are not deemed by SSI.



©2021. 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 March 2021.

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