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Death Benefits Left to Someone with a Disability? What Happens?

Death Benefits Left to Someone with a Disability?  What Happens?

Caregivers routinely name their dependents with special needs as beneficiaries of life insurance and annuity contracts and distribute money in wills to surviving "issues" without understanding how the death claim payments will affect government benefit eligibility. Inheritances and death benefits distributed to someone with a disability may or may not cause the loss of government benefits depending on the nature of the benefit program. The various government programs available to them will be discussed below, as well as corrective actions that can be taken to preserve government benefit eligibility. 

Supplemental Security Income (SSI) is a needs based program available to people with disabilities. When a recipient of SSI receives a death benefit distribution, the surviving caregiver is often shocked when the Social Security Administration audits their financial situation and terminates their SSI monthly payments and valuable corresponding Medicaid insurance benefits to his or her dependent. SSI has very strict asset limitations and only allows their recipients to keep up to $2,000 in assets. A death claim payment can cause the immediate loss of these benefits, until the payment is spent down below the $2,000 SSI limit.

Social Security Disability Insurance (SSDI) payments are made to adults with disabilities who have a previous qualifying employment record and have paid taxes into the system in recent years.  It is considered an entitlement program, and Medicare benefits will follow after receiving twenty-four months of these payments.  If the SSDI recipient is the caregiver of an adult dependent with a disability that occurred prior to the age of twenty-two, they can receive SSDI benefits, as well.  Payments made under the SSDI program do not have asset restrictions and may not cause the loss of SSDI payments or Medicare.  However, payments may be reduced if too many family members receive benefit payments and exceed the family maximum.

What steps can a caregiver take to preserve SSI and Medicaid if their dependent with special needs receives a death benefit distribution, without spending down all the money? The solution is discussed below.

 

The 1993 Omnibus Budget and Reconciliation Act (OBRA '93) led Congress to provide special treatment for transfers to or for the benefit of people with disabilities. Asset transfers could be made to special needs trusts by the person seeking SSI and Medicaid with no disqualification period, provided that the government agency is reimbursed for the cost of benefits provided after the death of the person for whom the trust was established. Recent changes in the SSI law seem to be tightening these transfer and payback provisions.

 

Errors in planning for individuals with disabilities can be remedied under OBRA '93 provisions. Yes, the trust may have payback provisions. However, money in the trust can be used on behalf of the person during his or her lifetime. This trust can certainly provide a safety net and help safeguard the immediate loss of government benefits.

 

Due to the complexity of federal and state laws, you may require a specially trained professional to work with you and your other advisors to help you plan for the future of your dependent with special needs. Call Special Needs Planner Gib Sloan at (804)592-5880 for a confidential consultation.

 

MetLife Center for Special Needs PlanningSM

 

For more information about this and other related topics, visit our organization's website at www.metlife.com/special needs or call 1-877-638-3375.

 

MetLife does not provide tax or legal advice. We will work with you and your tax and legal advisers to help you select the most appropriate product solutions to suit your specific needs and circumstances.

Metropolitan Life Insurance Company, 200 Park Avenue, New York, NY 10166.

 

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About the Expert: F. Gibbons Sloan

Production Manager
Financial Advisor
Registered Principal
Financial Representative

808 Moorefield Park Dr., Suite 102, Richmond, VA 23236
Phone: 804-592-5880
Fax: 804-592-5881
gsloan1@metlife.com

BUSINESS PHILOSOPHY

My goal is to provide families and business owners
with assistance in building their financial freedom. I have the skills, knowledge and experience required to help meet my client’s established goals. My personal goal is to become a lifetime resource for each and every client.

PRODUCTS AND SERVICES

  • Special Needs Planner
  • Fixed Annuities
  • Variable Annuities
  • Charitable Giving Strategies
  • Disability Income Insurance
  • Estate Conservation Strategies
  • Education Funding Strategies
  • IRA Consolidation/Rollovers
  • Long-Term Care Insurance
  • Mortgage Protection (through life insuranceand disability income insurance)
  • Medicare Supplement Coverage
  • Pension Payout Alternatives
  • Pension Transfer/Rollovers
  • Mutual Funds
  • Tax Sheltered Annuities, 403(b) Plans
  • Term Insurance
  • Universal Life Insurance
  • Variable Universal Life Insurance
  • Whole Life Insurance

QUALIFICATIONS

  • Lifetime resident of Chester, Virginia
  • Family: Jennifer, Abigail & Tucker
  • Hobbies: Boating, Skiing

PERSONAL

  • Lifetime resident of Richmond, VA
  • Family, married with 3 daughters
  • Hobbies: Gardening, Cooking, Reading and charity/volunteer work.

ORGANIZATIONS

  • Member of NAIFA
  • Graduate of Wharton School of Business, Aresty Institute of Executive Education – Degree in “Wharton Retirement Planning Program”
  • Member of the United States Coast Guard Auxiliary – Flotilla 31
  • Member of the Country Club of Petersburg
  • Member of the Bull & Bear Club

I will work with you and your tax and legal advisers to help you select the most appropriate product solution to suit your specific needs and circumstances.  Some health insurance products offered by unaffiliated insurers through Enterprise General Insurance Agency, Inc.(EGA), Somerset, NJ  08873.  Metropolitan Life Insurance Company(MLIC), New York, NY 10166. Securities products offered through MetLife Securities, Inc. (MSI) (FINRA/SIPC). EGA, MLIC & MSI are MetLife companies. L0311167798[exp1112][VA]

 

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