THE $2,000 LIMIT WHEN DOES MORE BECOME TOO MUCH?

BY ROB WRUBEL, CFP®

Several times a year, I get a call that sounds something like this: "What do I do? Help! SSI payments are building up in my son's account and it's getting close to $2,000. I keep spending and it just keeps coming."

Most of us don't complain from having too much money. It's why we play the lottery or look forward to a bonus or having a better-than-expected year in our investment accounts. More is always better, right?

We all know that more is not always better – last time I went to buy mayonnaise I was shocked by the options. Vegan. Real. Sugarfree. Smart-balanced. Canola. Keto. Seriously, do the companies sell enough of all of those? I don't need that many mayo choices and more is definitely not better in that category of the supermarket. Supplemental Security Income (SSI) is a federal benefit that pays a monthly income to people with a qualifying disability and limited resources. In 2021, the federal payment for an individual is $794. It's more for couples and some states add to the amount. 

A person does not qualify if he or she has resources (assets) over $2,000.

Money in bank, investment and retirement accounts count towards the $2,000. Cars and real estate not used for personal use also count towards the limit. There are some exclusions. A person with a qualifying disability can own a house or condo to live in as a personal residence. "Use" items do not count – things like furniture, clothing, decorations and electronic devices.

SSI payments usually go to a checking account with the idea that the funds will be used each month on basic living – food, rent, clothing and medical needs. (Yes, I know, it's not enough for those needs, but that's the idea.) There are issues to be aware of. First, who is the owner of the account where the payments go? Is it your son or daughter or has a Representative Payee (rep payee) been appointed through the Social Security Administration? Mom or Dad can act as the rep payee.

If your family member receives the money in her own name, you will want to educate her about the $2,000 limit and help monitor the account to keep it below that. You don't have any authority to act directly and can only educate and assist as requested. My daughter needs help with money. She does not know the difference between the value of $1, $10 or $100 when handed a bill. She does not, yet, know how to shop and spend money other than when I take her to buy the occasional purse, necklace or gift for a friend. Her account, when we get the approval for SSI, will have someone on it as rep payee.

The rep payee sets up the account and makes payments or transfers for spending on behalf of the person getting the funds – your son or daughter. This is what most families that I've been in touch with do. This puts someone with financial capacity in charge. Even with that, money can pile up in the account if you're not careful. Many individuals with disabilities live at home or in care settings where most of their spending needs are met. They live at home and food, shelter, clothing, utilities and more are covered. As much as it seems like we never have enough money, in three months those $794 payments add up to more than $2,000.

There are strategies to put in place to make sure this doesn't happen. You can charge for rent, utilities, food and more to your family member. Keep good records and sweep the money you're charging every month from the rep payee account to your own checking account. Another option is to sweep money each month from the rep payee account to an ABLE account. This preserves the funds for the beneficiary and is then accessible as needed to support your family member. Review ABLE rules and regs to stay your family member. Review ABLE rules and regs to stay compliant.

Consider a pooled-income trust. Some families use these vehicles as a way to preserve funds and to have a professional trustee involved that usually specializes in people with developmental disabilities.

Whatever choice you make, automate it as much as possible. Technically, your son or daughter could lose access to their monthly payments, health insurance and community programs if the account balance crests $2,000. Automating your sweep ensures that the funds move out of the account, no matter how busy or distracted you become. More is always better, right? Well, not so much when important benefit programs are at risk.

Planning for the future is made up of lots of small steps that can lead to big results. Take a few minutes to automate distributions from the rep payee account of your family member. If you use the funds each month to support your household, it will show up like an additional paycheck. If you are fortunate enough, you can put it towards an account for future use.

ABOUT THE AUTHOR:

Rob Wrubel is a CFP who has a daughter with Down syndrome. He is recognized as a leading expert on financial planning for families with special needs members. Wrubel has written two books about financial planning and special needs families — Financial Freedom for Special Needs Families: 9 Building Blocks to Reduce Stress, Preserve Benefits, Create a Fulfilling Future and Protect Your Family: Life Insurance Basics For Special Needs Planning — and he has been published recently by Law360.com and The Good Men Project. Wrubel holds the Certified Financial Planning (CFP®) designation, the Accredited Investment Fiduciary® (AIF®) designation from Fi360, and the Accredited Estate Planner (AEP®) designation from the National Estate Planning Council.