By Neal A. Winston, CELA 
When individuals with disabilities live with family members, it can complicate their eligibility for Supplemental Security Income (SSI). Since SSI’s monthly cash payments are meant to pay for food and shelter, contributions from others for such living expenses may reduce SSI or could disqualify the beneficiary completely.
With planning, that can be avoided. SSI rules are complicated, and there’s decision-making discretion at the local Social Security office, so it’s important to prepare for the questions that SSI personnel will pose. Detailed SSI requirements can be found here , and families may wish to consult a special needs attorney.
In-Kind Support and Maintenance
When an individual receiving or applying for SSI is receiving assistance from a third party for food or housing, it’s considered in-kind support and maintenance (ISM) . ISM can reduce the monthly benefit the same as if cash were received.
If the individual is receiving both complete food and shelter expenses from the third party, the SSI benefits for which they would otherwise be eligible will be reduced by one-third. For cases in which help is being provided for food or shelter, or not completely for both, the SSI reduction is capped at one-third of the maximum allowable benefit plus $20 (in 2017, a total of about $265 for an individual). However, if an individual receiving SSI is paying reasonable rent in order to live with relatives in a complete unit considered separate from the others, a separate household has been established and ISM isn’t applicable. Even when living with others, paying a proportionate amount that covers both food and shelter will avoid a reduction in SSI.
Unfortunately, the rules are open to some interpretation and discretion by a local office. In some cases, the amount paid by the recipient has not been accepted as being reasonable for food and shelter. In others, ISM has been applied if the individual lacked a separate area for the storage, preparation and consumption of food. Families faced with such determinations should consider appealing the decisions .
Note that some states supplement federal SSI payments and may have different regulations governing living arrangement eligibility.
To avoid ISM, families should put in place a written rental agreement, covering the individual’s proportional share of household operating expenses and, if applicable, food. The agreement should include the renter’s and landlord’s names, the rental address, and the amount, purpose and frequency of payment. Upon request, the renter should be able to produce rent receipts. Families should also document prevailing rents in the area. An important condition is that the individual pay fair market value for what is received.
Loans and Retroactive Payments
It can take many months to be approved for SSI, and families sometimes loan the individual funds while waiting for the decision and retroactive benefits. If considered a “gift,” the funds count as income, and the retroactive benefits would be reduced accordingly. However, if a family puts a loan agreement in place, the adult with disabilities can be eligible for retroactive payments without reduction with which they can use to reimburse family members. The loan of ISM or even cash itself is not considered income by SSI as long as there is an understanding and agreement between the parties to pay it back.
Depending on the state, the agreement may or may not need to be writing. Other requirements include:
- Statement of amount loaned and repayment terms. Interest is not required.
- Understanding by both borrower and lender that the money must be repaid, regardless of whether or not the individual ultimately receives government benefits.
- Repayment plan must be feasible, given the individual’s resources.
- Services, such as chores, cannot be considered as payment contributions.
- Agreement must be in place for the full time to be covered by retroactive SSI payments.
Another option to consider is establishing an ABLE account . This relatively new planning tool is a tax-free savings option for qualifying individuals that does not interfere with their eligibility for means-tested government benefits, including SSI. Only individuals whose disability appeared prior to their turning 26 are eligible. Up to $14,000 per year can be put into an ABLE account, including funds from the SSI-eligible individual, family members or any other source.
In effect, as long as the individual does not gift away the ABLE funds or retain the funds withdrawn from the ABLE account month-to-month in their own personal bank account, the use of the funds will not affect SSI eligibility. Funds from ABLE accounts may be used to pay for housing, food, transportation, clothing, utilities, cable subscriptions and many other basics without affecting SSI. ABLE funds used for certain housing expenses may create an IRS penalty, but it is usually very small. A key advantage to an ABLE account is that is it can be funded by family members, and the individual can then use the funds to pay for rent and food without having an SSI ISM reduction as described above.
With forethought, it’s quite possible for adults with disabilities to collect SSI while living in the family home. But doing homework ahead of time and understanding the rules is a must.