Preventing In-Kind Support and Maintenance (ISM) Reductions to SSI Benefits
You may have an adult child with special needs, disabled sibling, or senior parent who receives Supplemental Security Income (SSI). If so, you must be careful about providing them with financial support because doing so can cause them to lose some or all their SSI benefits for that month. The Indianapolis attorneys at Frank & Kraft discussing preventing in-kind support and maintenance (ISM) reductions to SSI benefits.
What Is SSI?
Supplemental Security Income (SSI) is a program that is administered by the Social Security Administration (SSA). SSI is a monthly monetary benefit paid to people with limited income and resources who are blind, age 65 or older, or have a qualifying disability. Children with disabilities or who are blind may also qualify for SSI benefits. SSI benefits are not the same as Social Security Disability Insurance (SSDI) benefits. Eligibility for SSDI benefits is determined, in part, on your work history or the work history of a parent or spouse whereas there is no work history requirement for SSI benefits. Both your income and countable resources, however, are considered when determining eligibility for SSI benefits. For 2024, the maximum SSI monthly benefit for an individual is $943 and $1,415 for a couple.
What Are ISM Reductions?
If an SSI recipient receives a cash gift, the recipient’s SSI benefit is reduced dollar-for-dollar. For example, if you receive the maximum SSI benefit ($943) and someone gifts you $200 in cash, your SSI benefit would be reduced to $743 for that month. If an SSI recipient receives food and shelter from someone else, that gift is considered “in-kind support and maintenance” or ISM by the SSA. Because SSI is intended to pay for food and shelter, an ISM gift can also reduce an SSI recipient’s benefit, but the amount of the reduction is different than cash gift. An ISM gift reduces a recipient’s SSI benefit dollar-for-dollar but only up to a maximum of one-third of the SSI benefit. By way of illustration, assume that you live with your cousin who does not charge you rent, a monthly ISM gift equivalent to $1200. Your SSI benefit would be reduced by $314.33 (1/3 of $943), leaving you with a monthly SSI benefit of $628.67.
Ways to Avoid ISM Reductions to SSI Benefits
If your goal is to provide financial support to a loved one who receives SSI without incurring an ISM reduction, consider the following strategies:
- Pay for Expenses Other Than Food and Shelter: Remember, SSI payments are intended to cover food and shelter expenses for the recipient. To avoid reductions triggered by ISM gifts, pay bills that are not considered food or shelter expenses. For instance, instead of paying a recipient’s rent or electricity bill, pay a cable or cell phone bill. Those expenses are not considered “shelter” expenses. Additional examples of expenses that would not be considered ISM include clothing, travel, tuition, medical bills, and vehicle expenses.
- Create and Fund an ABLE Account: An ABLE Account is a special type of tax-advantaged savings account aimed at providing financial assistance to adults with special needs without jeopardizing eligibility for programs such as Medicaid and SSI. If the SSI recipient’s onset of disability was prior to age 26, an ABLE account is a simple way to avoid ISM reductions.
- Execute a Lease Agreement: If the SSI recipient lives with you or lives in a property owned by you, a signed lease agreement may be the solution. The lease agreement sets forth the household expenses that are included as part of the rent payments, such as electric, water, and trash removal – all ISM expenses. All other expenses will be outside of the lease agreement. Be prepared, however, to provide proof that the rental amount falls within fair market value and that the SSI recipient is actually paying the rent.
Do You Need Assistance Preventing ISM Reductions to SSI Benefits?
For more information, please join us for an upcoming FREE seminar. If you would like assistance ensuring that you do not inadvertently cause ISM reductions to SSI benefits, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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