Lump Sum & SNT Handout
Lump Sums
A lump sum is a substantial one-time amount of money that you receive that represents a gain or benefit to
your household. For example: retroactive Social Security benefits, gifts, inheritances, life insurance
proceeds, lottery winnings, litigation settlements and retroactive unemployment benefits.
Lump sums are generally counted as income in the month received and as a resource thereafter (except for
SNAP which count them as resources in the month received). If the individual is in receipt of public
benefits (SSI, public assistance, Medicaid, SNAP, Section 8), then the lump sum must be reported to each
appropriate agency. Each agency has its own rules about the treatment of lump sum benefits.
Effect of Lump Sums on Public Benefits
Supplemental Security Income (SSI)
Resource limit for HH1: $2000
Generally, retroactive SSI or SSD benefits are considered unearned income in the month received and an
individual will not receive a monthly SSI payment for that month. The retroactive benefit will be considered
an exempt resource for nine months after the month it is received. For SSI purposes, an individual should
have no more than $2,000 left by the tenth month after the lump sum is received.
A lump sum award from another source (gifts, inheritances, litigation settlements, etc.) is considered
unearned income in the month received and a resource thereafter. If the lump sum places the individual’s
resources over the $2000 resource limit, the individual will be found ineligible for SSI.
SSI recipients can spend the money on excluded resources, like furniture, and on other daily necessities (if
their SSI benefits are suspended). SSI will require proof of spenddown of a lump sum so an individual
should keep very good documentation and receipts as to how all of the money was spent. If the individual
cannot show how all the money was spent, they will be found ineligible for ongoing SSI benefits due to the
belief that they are hiding the money or gave the money to someone else (thus invoking a transfer penalty).
Regs: POMS SI 01150.001 – What is a Resource Transfer; POMS SI 01150.007 – Transfer of Resources by
Spend-Down; POMS SI 01120.000 et. seq; 20 CRF 416.1210 – Exclusions from Resources.
Public Assistance (PA)
Resource limit for HH1: $2000
Period of ineligibility: Lump sum (plus any monthly benefit) divided by HH’s standard of need (SON)
Example: $5,000 SSA retro received & client usually receives $500 from PA (cash + rent)
$5,000 retro divided by $500/month from PA = ineligible for 10 months
This period can be reduced by purchase of big ticket items: automobile to find employment; college tuition
account; burial plot; funeral agreement [limited amount $ allowed for each]
This period can also sometimes be reduced by payment for other things like furniture, debts, etc –
but this has to be carefully documented & is not assured that it will be accepted even then.
Avoiding ineligibility: If client requests a PA case closing and case is closed before lump sum is received,
then client can reapply as soon as lump sum is spent down below $2000.
This only works if the lump sum has not yet been received and is certain to be received by a certain
date thus making it safe to request case closure. This certainty is unlikely with SSA retro benefits.
New York Legal Assistance Group | 7 Hanover Sq. New York, NY 10004 | www.nylag.org
Last updated: July 15, 2015
Regs: SSL 131-a(12)(b) and (c); 18 NYCRR 352.29(h); TASB 18U; 03-ADM-10; 04 INF-17; 01-INF-8.
Medicaid
Resource limit for HH1: $14,850
The resource test has been eliminated for all Medicaid and all FHP individuals EXCEPT for individuals
receiving SSI-related Medicaid (blind, disabled, or elderly). This includes SSI & SSD recipients.
See http://www.health.state.ny.us/health_care/medicaid/publications/docs/adm/10adm-1.pdf
SSI/SSD retroactive benefit lump sum: exempt for nine months following the month of receipt
If PA case is closed and client receives a Medicaid notice, submit it with bank statements that show
resources are above Medicaid limit but also include SSA retroactive lump sum award letter and a
letter explaining that the nine months are not yet elapsed and therefore it should be exempt.
On the 10th month, if the SSI/SSD retroactive benefit lump sum has not been spent down below
$14,850 (or more depending on household size), then the client will no longer be Medicaid eligible.
See also http://www.wnylc.com/health/entry/85/
A lump sum award from another source (gifts, inheritances, litigation settlements, etc.) is considered
unearned income in the month received and a resource thereafter. If the lump sum places the individual’s
resources over the $14,850 resource limit, the individual will be found ineligible for Medicaid.
Regs: Medicaid Reference Guide (MRG); 18 NYCRR 360.
Supplemental Nutrition Assistance Program (SNAP) / Food Stamps
Resource limit for HH1: none
There is no resource limit for food stamps. Monthly SSI/SSD benefits will be treated as income.
HPD Section 8
Resource limit for HH1: none
There is no resource limit. The interest on the lump sum is income and, if there is no interest, a HUDdetermined average interest rate is attributed to the lump sum.
Interest: HUD regulations provide that if a family has assets over $5,000, income includes the greater of
actual income from assets or a % of assets equal to a “passbook savings rate” determined by HUD. 24 CFR
§ 5.609 (2006). In New York City, this rate has been set at 2.5% in recent years. See NYCHA Management
Manual, Chapter VI, § (IV)(B)(8). The interest rate used is determined by the local HUD field office.
Supplemental Needs Trusts
Supplemental Needs Trusts (SNTs) are legal tools used to help disabled people keep more of their income
or assets without losing their public benefits. A SNT can be used when a disabled person under age 65
receives a lump sum. Ordinarily this asset would make the individual ineligible for Medicaid, SSI, and other
benefits. By transferring it to a SNT, the person can remain eligible for all their benefits, and use the money
in the SNT to supplement their regular monthly income.
For individuals over age 65, there can be a transfer penalty for transfers of either income or assets into an
SNT, depending on which public benefit is involved.
Review this detailed training outline which covers how SNTs work and how they impact on public benefits.
See: http://www.wnylc.com/health/afile/5/9/
See also: http://www.wnylc.com/health/entry/2/
Effect of SNTs on Public Benefits
Cash is always considered income and the trustee of the SNT should never give cash to the beneficiary.
However, the SNT can pay directly for certain expenses, depending on which public benefit is involved.
Supplemental Security Income (SSI)
Disabled SSI recipients under 65 often set up SNTs which are not considered as a resource.
Disabled SSI recipients over 65 can set up SNTs but there is a three year penalty period, depending on
amount transferred. (The penalty is calculated by dividing the amount transferred by the individual’s SSI
monthly payment rate, including the state supplement).
SNTs for SSI recipients CANNOT be used to pay for shelter or food. Shelter expenses include rent,
mortgage, property taxes, heating fuel, gas, electricity, water, sewer, and garbage removal. Payments made
to 3rd parties for food or shelter are considered In-kind Support and Maintenance (ISM) and will reduce SSI
payments by the lower of (1) the actual value or (2) a maximum of 1/3 of the federal benefit amount.
SNTs CAN be used to pay for clothing, furniture, cable, telephone, cell phone, internet, homeowner’s
insurance, car service, local transportation, entertainment expenses, educational expenses, and vacations.
Pre‐payment of burial expenses is permitted through an irrevocable funeral agreement.
Public Assistance
Disabled PA recipients have the option of setting up a SNT and it is not considered a resource
OTDA makes a distinction between a recipient who receives a lump sum and “directly” puts it into a SNT
and a recipient who receives a lump sum and waits to put it into an SNT. The former would not be subject
to the lump sum rule whereas the latter would.
Under office regulation 352.29(h) lump sum income must be budgeted to calculate a period of
ineligibility even if the client intends to later establish a SNT with the funds. Only if receipt of the
lump sum “simultaneously coincides” with the creation of a SNT will there be no period of
ineligibility. 01 INF-8, p. 3.
SNT disbursements to third parties are considered income by PA unless the disbursement is clearly for an
item not provided for in the standard of need (SON) like: education, medical expenses, childcare, and other
non-shelter/energy/food expenses.
Medicaid
Disabled Medicaid recipients under 65 often set up SNTs which are not considered as a resource.
Disabled Medicaid recipients over 65 can set up SNTs if they currently receive community Medicaid but
face possible disqualification for nursing home care if needed within 5 years of the transfer.
SNTs can also be used to eliminate the Medicaid spenddown if an individual has excess income.
See http://www.wnylc.com/health/afile/6/4/
See also http://www.wnylc.com/health/entry/6/
SNTs for Medicaid recipients can be used to pay for almost anything, including rent, utilities, food,
clothing, credit card bills (as long as no cash was withdrawn with the card), vacations, etc.
Supplemental Nutrition Assistance Program (SNAP) / Food Stamps
No resource limit for SNAP so this only comes into play for SNT disbursements
SNT disbursements will be treated as income if they are made for normal living expenses. Other
disbursements will not be treated as income. See 01 INF-8, p. 5 and FSSB.
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