A Spend Down:
What is a Spend Down?
For an individual receiving Supplemental Security Income (SSI) and/or Medicaid, a “Spend Down” literally refers to spending excess money that he/she receives within a calendar month to maintain eligibility for public benefits. This is allowable because SSI determines a lump sum of money to be considered income only in the month received if it is spent within that same calendar month (SI 01110.600). In most states, that means that on the last day of the same calendar month that the funds were received the recipient can have not a penny more than the resource limit, which is generally $2,000 for an unmarried individual and $3,000 for a married couple. For example, if John Doe, an unmarried individual, is on SSI and receives $28,000 dollars on September 12th, he must spend down his total resources to $2,000 dollars before October 1st.
What Can a Recipient Spend Their Funds On?
It is often assumed that a recipient of SSI and/or Medicaid must make rapid and irresponsible purchases when utilizing a Spend Down. This is incorrect. A Spend Down can allow individuals to plan and purchase a variety of items that would improve their quality of life now and in the future. Some purchases may include:
What Limitations Does a Recipient Have When Utilizing a Spend Down?
There are limitations on what can be purchased. A recipient cannot purchase items for other people or give money to other people. This is referred to as a resource transfer at less than market value and could cause the individual to be ineligible for public benefits (SI 01150.001, SI 01150.007).
There are certain exempt resources that a recipient can purchase. Exempt resources can be defined as items that will not impact a recipient’s eligibility for SSI and/or Medicaid. Some examples of this include but are not limited to:
https://secure.ssa.gov/poms.nsf/lnx/0501110210. It is important to note that even if a vehicle is not operational, a recipient can still only own one (SI 01130.200).
Sending Notice to Appropriate State Agencies
A Spend Down must be reported to the appropriate agency: the local Social Security Administration (SSA) office and/or the local state Medicaid office. Furthermore, it must follow certain criteria addressed in this section.
The first step is determining which agency to notify. When it comes to eligibility for SSI and/or Medicaid there are three different types of states: 1634, 209(b), and SSI criteria states. If the recipient resides in a 1634 state they must notify the following agency based on the benefits they receive:
The second step is ensuring that the notice is sent correctly. As well as abiding to the limitations addressed in the previous section, it is important that the spend down is reported accurately, if not the recipient may lose eligibly. The letter to the appropriate agency should include the following:
Prior to sending the documents to the appropriate agency, the recipient should consider sending them certified mail with a signature confirmation to ensure that the documents arrive in a timely manner and are received. Documents have been known to get lost in the mail or the SSA states, “they did not receive the documents.”. To prevent your documents from being lost forever, make sure you make a copy of all the documents prior to sending. We highly recommend that if a recipient is uncomfortable with providing the agency with notice that they should contact his/her Trust Officer or a Special Needs Planning Attorney using the information provided in the next section.
I Have Concerns or Questions, but I Don’t Know Where to Find the Answers?
A great place to start is the sources listed at the end of this text which provides more detailed information. Searching the SSA’s Program Operating Manual System (POMS) is the primary source of information used by SSA employees to process claims for Social Security benefits. However, it is always a good idea to consult a Special Needs Planning Attorney which can be located at either of the websites below:
Are you already working with CPT Special Needs Trusts? Call our main line at 855.278.7681 and ask to speak to your Trust Officer, who may be able to assist you.
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. © 2017 CPT All rights reserved.
SI 01110.600: https://secure.ssa.gov/poms.nsf/lnx/0501110600
SI 01150.001 https://secure.ssa.gov/poms.nsf/lnx/0501150001
SI 01150.007 https://secure.ssa.gov/poms.nsf/lnx/0501150007
SI 01130.200 https://secure.ssa.gov/poms.nsf/lnx/0501130200
Spotlight on Resources-2020 Edition
William E. Lindahl, MBA, CLPF