A SPEND DOWN: WHEN A SPECIAL NEEDS TRUST ISN’T THE BEST OPTION
To be eligible for Supplemental Security Income (SSI), Medicaid, or In-home support services (IHSS), you cannot have assets in your name that are valued at more than $2,0001. If you have assets that exceed this limit, more than $2,000 dollars in most states, you may need a Special Needs Trust to protect ongoing eligibility for your state's Medicaid program, SSI and IHSS.
However, if your settlement is small and/or you have urgent needs that will exhaust(use up) your settlement funds, then you may consider spending down your settlement funds in the calendar month you have received them; this is commonly referred to as a “Spend Down” in the legal community. Keep in mind that you only have until the end of the month you received your settlement funds to spend them down, or your benefits will be suspended. Also, whenever any individual receives Medicaid, SSI and/or IHSS they are required to notify the state in writing by the tenth day of the month after they receive their settlement funds. You must show how you have spent down your settlement funds or notice the state they have placed the funds in a Special Needs Trust.
Mistakes to Avoid with a Spend Down
Many people are tempted to give their money to friends or family or buy gifts when they are trying to spend funds in their bank account, this is prohibited. The government considers this to be a “resource transfer at less than market value.” The assets can still be counted against you even if they no longer belong to you.
Spending Money Without Wasting It
There are ways to spend down your settlement funds while still retaining something of value for yourself. You just need to follow the rules. You can spend down your funds by:
- Paying back debts such as credit card debts (debts must have the right paperwork to count)
- Buying a home or paying off a mortgage if your name is on the title
- Paying rent (just for that month)
- Buying furniture or appliances
- Making repairs or remodeling a home if your name is on the title
- Hiring an attorney for estate planning or Medicaid planning
- Buying a car your name must be on the title and you usually can only have one registered vehicle in your name some exceptions may apply
- Pre-paying burial expenses
- Paying for uncovered medical bills, educational expenses, entertainment, or vacations
- Buying clothing or personal items
As you spend your money, make sure you keep receipts, as you are required to send in notice with how funds were spent to the applicable state agency to maintain your ongoing eligibility for benefits.
Notifying the Right Agency
You are required to send notice to the local Social Security Administration (SSA) office if you receive SSI, and notify your local state Medicaid office if you receive Medicaid.
The notice should include:
- Your legal name, Social Security Number, phone number and contact address
- A statement saying that you used a spend down and that you have enclosed appropriate documents to prove it
- Receipts for every dollar that you spent
- Bank statements for the month
- Bank statements showing the balance the next month with the funds removed
It is a good idea to make copies of everything and send your notice via certified mail or registered mail (signature NOT required) as SSA will not sign for documents and they will be returned. Consult your Special Needs Planning Attorney for help with providing notice.
Getting Help with Spend Downs or Other Issues
If you are already working with CPT, you can call our main line at 877.695.6444 and ask to speak to your Trust Officer for help. Advice from a Special Needs Planning Attorney can also be very helpful. If you don’t already have an attorney, you can find a qualified lawyer through one of the websites below:
1 Except California where you may have $130,000 for Plaintiff/Applicant plus $65,000 for spouce & each dependent effective July 1, 2022.
DISCLAIMER: The information provided by CPT is for informational purposes only and is intended to be used as a non-legal guide prior to consultation with an attorney familiar with your specific legal situation. CPT is not engaged in the practice of law or in rendering legal advice or counsel. No such legal advice or counseling is either expressly or impliedly intended. This form is not a substitute for the advice or counsel of an attorney. If you require legal advice, you should seek the services of an attorney.