2013
2013 Family
Family Law
Law Seminar
Seminar
Unraveling the Mysteries of Social Security
Which Family Lawyers Need to Know
3:15 p.m.-4:00 p.m.
Presented by
Elizabeth Norris
Iowa Legal Aid
1700 S. 1st Ave., Suite 10
Iowa City, Iowa 52240
Phone: (319) 351-6570
Joe Basque
Iowa Legal Aid
532 First Avenue #300
Council Bluffs, IA 51503
Phone: (712) 328-8265
Friday,
Friday, October
October 25,
25, 2013
2013
UNRAVELING THE MYSTERIES OF SOCIAL SECURITY WHICH
FAMILY LAW LAWYERS NEED TO KNOW
Joe Basque & Elizabeth Norris
2013 Family Law Seminar
October 25, 2013
I. Background
You recently negotiated a consent divorce decree for your disabled client. From now on
she will begin receiving $750 each month in alimony payments, plus whatever disability
payments she is now eligible for. Suddenly she calls you to tell you that she applied for
Supplemental Security Income (SSI) for her disability, but was told that because of her alimony
she is ineligible for SSI benefits. The alimony also makes her ineligible for Medicaid benefits as
well. If it wasn't for the alimony, she would have been eligible for $710 each month in SSI as
well as Medicaid to cover her medical expenses. She is pretty upset. Could you have avoided
this? For most family law attorneys, when a client walks through the door wanting to file for a
divorce, the thought of how the final decree might impact upon their eligibility for disability
benefits probably does not leap to mind. However, clients who are receiving, or may become
eligible for, Supplemental Security Income and Medicaid benefits may be profoundly affected by
support payments and how marital property is divided. You ignore those at your peril.
II. Program Basics: Social Security, SSI, Medicaid and Medicare
If you do not know the difference between these programs, you are not alone. Disabled
and retired individuals can be eligible for some or all of these programs, as can their children and
spouses. Some are income and resource sensitive. Some are not. If you know which programs
may be affected by the divorce decree and which are not, you will be way ahead of the game.
A. Social Security Disability
The Social Security Disability Act was passed in 1956 to provide assistance to disabled
individuals who had paid into the Social Security system. Social Security Disability benefits are
available to any individual who is insured for disability insurance benefits (DIB or “Title II”
benefits), has not obtained retirement age, has filed an application for DIB, and is found to be
under a disability as defined by the act.1 As an individual works, a portion of their earnings are
normally paid into the Social Security system. If an individual has paid enough money into the
system over a sufficiently lengthy time, they become qualified to receive DIB if they apply and
are found to be disabled by SSA. Regulations regarding achieving insured status under this act
are located at 20 C.F.R. § 404 Subpart B. Every individual who is fully insured under the act is
eligible for a primary insurance amount (PIA). The PIA is the monthly benefit amount that a
person is entitled to at any given time. The more that a person pays into the Social Security
1
42 U.S.C. § 423(a); 20 C.F.R. § 404.315(a).
1
system (in other words, the more that is deducted from your wages as a Social Security tax), the
higher your PIA. The methods for computing the PIAs are located at 20 C.F.R. § 404 Part C.
Your own PIA is available from Social Security at any time upon request. As your PIA
increases, so does the maximum family benefit available to other members of your family in the
event of your disability or death. You can be eligible for SSD up to 12 months before you file
your application for benefits.2
Title II benefits can also be available for spouses,3 children,4 and parents of disabled
individuals.5
1. Spouses
If a claimant is disabled (or deceased), the claimant’s spouse may be eligible for Title II
benefits on the claimant’s account even if the spouse has no work history. Regulations regarding
spousal benefits are located at 20 C.F.R. § 404.330 et. seq. Under some circumstances, a
divorced spouse can also be eligible to draw spousal benefits.6 Either way, in order to be a
spouse or a former spouse, one must have been married. With the recent demise of the federal
Defense of Marriage Act (DOMA)7 this rule will also extend to same sex couples as well.
Regulations regarding whether a couple is (or was) married for Title II purposes are located at
SSA POMS GN 00305.005. The validity of a marriage is ordinarily determined by the law of
the place where it occurred.8 Under Social Security regulations, marriages will be recognized if
they are valid ceremonial marriages under state law, a common law marriage as recognized
under state law, a void marriage under which the individual would still be eligible to inherit
under state intestate laws, or under a few other rare exceptions.9
2. Children
Children are also eligible to draw off of a claimant’s Title II benefits. Regulations
regarding children’s benefits are located at 20 C.F.R. § 404.350 et. seq. “Child” is defined for
Social Security benefit purposes at 20 C.F.R. §§ 404.355-404.357. The US Supreme Court has
declined to include children conceived through in vitro fertilization in this definition.10
B. Supplemental Security Income (SSI)
The Supplemental Security Income (SSI or Title XVI benefit) program was enacted by
Congress in 1972 to assist individuals who have obtained age 65 or are blind or disabled by
2
3
4
5
6
7
8
9
10
20 C.F.R. § 404.315(a)(3).
20 C.F.R. § 404.330 et. seq.
20 C.F.R. § 404.350 et. seq.
20 C.F.R. § 404.370 et. seq.
20 C.F.R. § 404.331.
United States v. Windsor, 570 U.S. ___ (2013).
POMS GN 00305.005.B.1.
POMS GN 00305.005.020-00305.005.095.
Astrue v. Capato ex rel. B.N.C., 566 U.S. ____; 132 S.Ct. 2021, 80 USLW 4369 (2012).
2
setting a guaranteed minimum income level for such persons.11 Individuals are eligible for SSI
benefits if they are elderly, blind or disabled and meet the program’s income and resource
eligibility requirements.12 Individuals who are age 65 or over are eligible for SSI benefits upon
application and proof of age.13 Other individuals must prove that they are blind or disabled, as
defined by Social Security.14 Unlike Title II benefits, SSI benefits are income and resource
sensitive. Unlike Title II benefits, there can be no retroactive eligibility for SSI benefits, and
children and spouses are not eligible for any type of benefit based on the claimant’s eligibility for
SSI.
The SSI monthly benefit for 2013 is $710.00 for an individual and $1,066.00 for a
couple. The SSI monthly benefit changes annually based on cost of living increases.
Individuals can be eligible for both Title II and Title XVI benefits. Because the purpose of SSI is
to ensure a minimum level of income for the elderly, blind and disabled, individuals receiving
Title II benefits, but whose PIA is below this minimum amount, are also entitled to SSI. For
example, if an individual was insured for and received Disability Insurance benefits totaling
$300.00 per month, they could also be eligible for an SSI payment to bring them up over the SSI
monthly benefit amount. Unless it is clear that an individual will only be eligible to receive
benefits from one program, individuals claiming disability should be encouraged to concurrently
file DIB and SSI applications.
15
C. Medicaid
Medicaid (or “Title XIX”) benefits were created through 1965 amendments to the Social
Security Act as a medical entitlement program to help states pay medical coverage for low
income families, disabled, and some other categorically related individuals (such as pregnant
women). Medicaid covers up to 100% of covered medical services, including medications,
hospitalizations, and physician’s services. Unlike Medicare, it also covers long term nursing
care expenses. For individuals who are also covered by Medicare, Medicaid can cover the 20%
of medical expenses not covered by Medicare. In Iowa, an application for SSI benefits
automatically constitutes an application for Medicaid benefits.16 Because the Iowa Department
of Human Services adopts the disability determinations of the Social Security Administration, a
finding of disability by Social Security will be considered a finding of disability for Medicaid
purposes as well.17 Because Iowa participates in optional Medicaid benefits for the categorically
needy, Iowa Code § 249A.3(2)(d) (known as the Medically Needy Program), a finding of
disability by Social Security should qualify the claimant for Medically Needy benefits if their
Social Security disability amount exceeds the maximum income amount for Medicaid
11
12
13
14
15
16
17
Sullivan v. Zebley, 493 U.S. 521, 524, 110 S.Ct. 885, 888, 107 L.Ed 2d 967 (1990).
42 U.S.C. § 1382(a).
20 C.F.R. §§ 416.202(a)(1), 416.801.
20 C.F.R. §§ 416.202(a)(2)-(3).
http://www.ssa.gov/OACT/COLA/SSI.html
Armstrong v. Palmer, 879 F.2d 437 (8th Cir. 1989).
Id.
3
eligibility.18 Medicaid benefits could be awarded up to three months prior to the date of the
application for Social Security benefits.19
D. Medicare
Individuals receiving Social Security Retirement benefits at age 65 are automatically
eligible for Medicare.20 Claimants who have been receiving SSI, SSD, or widows insurance
benefits for 24 months are eligible for Medicare in month 25 and prospectively. 21 Months of a
previous period of entitlement or deemed entitlement to disability benefits count toward the 25
month requirement.22 Medicare covers part (generally 80%) of the cost of hospitalization and
physician’s services.
III. SSI and Medicaid Eligibility
As discussed above, Supplemental Security Income and Medicaid benefits are income
and resource sensitive. Iowa Medicaid eligibility is based on SSI eligibility rules and
regulations.
A. Income
Regulations regarding SSI income eligibility begin at 20 C.F.R. § 416.1100 and at Social
Security POMS SI 00800. Income is defined as anything an individual receives in cash or in
kind that can be used to meet needs for clothing and shelter.23 Income is counted on a monthly
basis. Generally, the more income you receive the smaller the amount of benefit you will get.24
20 C.F.R. § 416.1111 explains how earned income is counted for SSI eligibility purposes.
Income is counted as income in the month received, and, if retained, as a resource in the
following month.25 The first $20 of income is generally excluded for SSI eligibility purposes. 26
Social Security generally excludes the first $65 of wages and half of remaining non-exempt
wages for SSI income eligibility purposes.27 The $20 and $65 earned income exclusions apply
only once per couple, even if both disabled couples have earned income.28
Almost all income is countable. However, examples of income that are not counted by
SSI include:29
18
19
20
21
22
23
24
25
26
27
28
29
See also 441 Iowa Admin. Code §§ 75.20(2), 86.3(6).
42 U.S.C. § 1396a(a)(34), 42 C.F.R. § 435.914.
42 U.S.C. § 426(a).
42 U.S.C. § 426(b), 42 C.F.R. § 406.12(a).
42 C.F.R. § 406.12(b).
20 C.F.R. § 416.1102.
20 C.F.R. § 416.1100.
20 C.F.R. § 416.1207(d); SSA POMS SI 00810.010.
SSA POMS SI 00810.420.
SSA POMS SI 00820.500.A.3.
SSA POMS SI 00820.500.A.5.
20 C.F.R. §§ 416.1112, 416.1124.
4
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






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medical care and services given free of charge or paid directly to the provider by
someone else;
cash or in kind assistance by a government program whose purpose is to provide
Social Services and vocational rehabilitation, such as Veterans Aid and Attendance;
receipts from the sale, exchange, or replacement of a resource;30
income tax refunds;
payments made under a credit life or credit disability insurance policy on your behalf;
proceeds from a loan;
replacement of lost income;
weatherization assistance;
grants, scholarships, or fellowships used in paying tuition, fees, or other necessary
education expenses;
payments for providing foster care;
any interest earned on excluded burial funds;
food stamps;
the value of any assistance paid under a variety of Federal Housing Programs;
need-based assistance by any state or local governmental program
A list of partial and totally excluded unearned income is located at Social Security POMS
SI 00830.099.
Countable income is divided into 3 kinds, earned income, unearned income, and in-kind
support and maintenance.
1. Earned Income
Earned income includes wages, commissions, bonuses, severance pay, and in-kind items,
such as food, clothing, shelter, or other items provided instead of cash.31
2. Unearned Income
Countable unearned income includes annuities, pensions, alimony and support payments,
dividends and interest, rents, interest from bank accounts, death benefits, prizes and awards,
gifts, and inheritances. It may include monthly proceeds from a tort settlement.32 20 C.F.R. §
416.1123 explains how unearned income is counted.
Note that if a portion of SSI is withheld due to a previous benefit overpayment, that
amount is still counted as unearned income.33 Likewise, amounts garnished from unearned
income are still counted as unearned income against the individual.34
30
31
32
33
20 C.F.R. § 416.1151.
20 C.F.R. § 416.1110.
LaBeaux for LaBeaux v. Sullivan, 760 F.Supp. 761, 765 (N.D. Iowa 1991); 20 C.F.R. §
416.1121.
20 C.F.R. § 416.1123(b)(1).
5
Child support payments (including arrearage payments) made on behalf of an SSI child
(as defined in SSA POMS SI 00501.010) are unearned income to the child. One-third of the
amount of a child support payment made to or for an eligible child by an absent parent is
excluded.35 The child support payment made on behalf of a child is not counted against a
custodial parent receiving SSI. If the child support is for back benefits owed to an adult child,
and the benefit is turned over to the adult child, or paid directly to the adult child, it also does not
count as unearned income for the parent.36 Any amount of that payment that the parent receives
and does not give to the adult child is income to the parent.37 Any amount of that payment that
the parent gives to the adult child is income to the adult child in the month given, not income to
the parent. The one third rule does not apply.38
3. In-kind Income
In kind support and maintenance is defined as “any food or shelter that is given to you or
that you receive because someone else pays for it.”39 Shelter includes “room, rent, mortgage
payments, real property taxes, heating fuel, gas, electricity, water, sewerage, and garbage
collection services.”40 In-kind income can be earned or unearned.41 In kind items are typically
valued at their current market value. Id. In the case of food and shelter, Social Security will
typically assume the dollar value to be the value of 1/3 of the SSI rate. 42 Regulations describing
how Social Security will value various forms of in-kind support and maintenance for individuals
and couples is located at 20 C.F.R. §§ 416.1131 through 416.1148. Generally, if a recipient is
living in the household of another and receives both food and shelter from them, instead of
determining the actual dollar value of the income, SSA will count one-third of the federal benefit
rate as additional income. This is known as the one-third reduction rule.43 If the claimant only
receives in kind support for either food or shelter, but not both, Social Security applies the
“presumed value rule.” Instead of determining the actual dollar value, SSA presumes that the in
kind support is worth one-third the SSI rate plus $20.44 The individual has the right to prove the
value of their in kind support is less than the amount that would be presumed under the one-third
reduction rule.45 Remember that if the one-third reduction rule applies, SSA does not count any
other in-kind support and maintenance the individual may receive.46
34
35
36
37
38
39
40
41
42
43
44
45
46
20 C.F.R. § 416.1123(b)(2).
POMS SI 00830.420(B)(1).
POMS SI 00830.420(C)(2).
POMS SI 00830.420(C)(2).
POMS SI 00830.420(C)(2).
20 C.F.R. 416.1130(b). Note that in 2005 the regulation was revised to exclude
“clothing” from the definition.
20 C.F.R. 416.1130(b).
20 C.F.R. § 416.1130(a).
20 C.F.R. § 416.1131.
20 C.F.R. § 416.1131(a).
20 C.F.R. § 416.1140(a)(1); POMS SI 00835.300.
20 C.F.R. § 416.1140(a)(2); POMS SI 00835.300.C.3.
20 C.F.R. § 416.1131(c).
6
B. Resources
Social Security has established SSI resource eligibility limits for individuals and couples.
The resource limit for an individual with no eligible spouse is $2,000.00 and for an individual
with an eligible spouse is $3,000.00.47 Resource determinations are made as of the first moment
of the month.48 A resource determination is based on what assets an individual has, what their
values are, and whether or not they are excluded as of the first moment of each month.49
1. Excluded Resources
A home is not counted as a resource regardless of its value. 50 “Home” is defined at 20
C.F.R. §416.1212(a). If an individual moves out of the house with no intent to return, the house
becomes a countable resource.51 However, if an individual leaves the home to live in an
institution, the home is still considered to be the individual’s principal place of residence,
irrespective of the individual’s intent to return, as long as a spouse or dependent relative of the
eligible individual continue to live there.52
If an individual moves out of his or her home without the intent to return, but is fleeing
the home as a victim of domestic abuse, Social Security will not count the home as a resource in
determining the individual's eligibility to receive, or continue to receive, SSI payments. In that
situation, we will consider the home to be the individual's principal place of residence until such
time as the individual establishes a new principal place of residence or otherwise takes action
rendering the home no longer excludable.53
Once a house is no longer exempt, Social Security can consider the individual’s equity in
the former home as a countable resource for the first day of the month following the month that it
is no longer the principal place of residence.54 If the house is sold, the proceeds from the sale of
the home will be excluded from resources to the extent that they are intended to be used, and are
in fact used, to purchase another home within 3 months after date of receipt of the proceeds.55
An individual can continue to receive SSI payments conditioned on the sale of non-exempt real
property if they agree in writing to dispose of the property in 9 months.56 This conditional period
ends if the property is sold, if the individual stops making reasonable efforts to sell the property,
if the individual cancels the written agreement with SSA, if the countable non-exempt resources
47
48
49
50
51
52
53
54
55
56
20 C.F.R. § 416.1205.
20 C.F.R. § 416.1207.
Id.
20 C.F.R. § 416.1212(b).
20 C.F.R. § 416.1212(c).
Id.
20 C.F.R. § 416.1212(d).
Id.
20 C.F.R. § 416.1212(d).
20 C.F.R. § 416.1242(a).
7
fall below the resource limit, or if the 9 month disposal period ends. 57 If the house cannot be
sold in the 9 month period and beyond, it cannot be counted as a non-exempt resource if the
individual’s reasonable efforts to see the property have been unsuccessful. 58 If it is determined
that reasonable efforts to sell have been unsuccessful, further SSI payments will not be
conditioned on the disposition of the property and only the benefits paid during the 9 month
disposal period will be subject to recovery. In order to continue to be eligible for SSI payments,
the individual must continue making reasonable efforts to sell the property.59 Reasonable efforts
to sell the property are defined at 20 C.F.R. § 416.1245(b)(3). Essentially, the individual must
list the property with an agent, advertise in appropriate local media, and accept any reasonable
offer.60 Income-producing property located on the home property is addressed at 20 C.F.R. §§
416.1220 through 416.1224.
One automobile, regardless of its value, is excluded as a resource if it is used for
transportation of the individual or members of the individual’s household.61 Other automobiles
are counted against the resource limit to the extent of the individual’s equity.62
In 2005 Social Security eliminated their $2000 household goods resource limit. Social
Security no longer counts household goods as a resource if they are:
(i) Items of personal property, found in or near the home, that are used on a regular basis;
or
(ii) Items needed by the householder for maintenance, use and occupancy of the premises
as a home.63
Such items include but are not limited to: Furniture, appliances, electronic equipment such as
personal computers and television sets, carpets, cooking and eating utensils, and dishes.64
Certain personal effects are not counted at all, such as items of personal property ordinarily worn
or carried by the individual.65 Other exempt items include, but are not limited to: personal
jewelry including wedding and engagement rings, personal care items, prosthetic devices, and
educational or recreational items such as books or musical instruments.66
Other excluded resources include property which is essential to the means of self support,
some life insurance policies, disaster relief assistance, burial spaces and certain funds for burial
expenses, retroactive SSD and SSI payments for up to nine months following receipt, housing
assistance, federal income tax refunds, payments received as compensation for expenses incurred
57
58
59
60
61
62
63
64
65
66
20 C.F.R. § 416.1245(b).
20 C.F.R. § 416.1245(b).
20 C.F.R. § 416.1245(b).
20 C.F.R. § 416.1245(b)(3)(ii).
20 C.F.R. § 416.1218(b)(1).
20 C.F.R. § 416.1218(b)(3).
20 C.F.R. § 416.1216(a)(1).
20 C.F.R. § 416.1216(a)(2).
20 C.F.R. § 416.1216(b)(1).
20 C.F.R. § 416.1216(b)(1).
8
or losses suffered as a result of a crime, and dedicated financial institution accounts.67 Social
Security has an extensive POMS section on when a trust can and cannot be considered exempt.68
2. Countable Resources
Resources that are not excluded (see above) are countable resources. A resource is
defined as cash or liquid assets or any real or personal property that an individual or spouse owns
and could convert to cash to be used for support and maintenance.69 The individual must have
the right, authority or power to liquidate the property, or his or her share of the property for it to
be considered a resource.70 If a property cannot be liquidated, the property will not be
considered a resource.71
Example:
Mary has applied for SSI. She owns a future interest in a piece of land worth $10,000.00.
For SSI purposes, the resource will probably not be valued at $10,000.00, because she
does not have a current possessory interest in the land. One or more appraisals may be
appropriate to determine the actual current value of this interest.
Countable resources can include liquid resources, such as cash, stocks, bonds, mutual
funds, shares, promissory notes, mortgages, life insurance policies, and financial institution
accounts that can be converted into cash within 20 days. 72 Liquid resources, other than cash, are
evaluated according to the individual’s equity in the resources.73 Jointly-held accounts are
discussed at 20 C.F.R. § 416.1208(c).74 All the funds in a jointly held account are presumed to
belong to them in equal shares, but this presumption is rebuttable.
A nonliquid resource is property which is not cash and which cannot be converted to cash
within 20 days.75 Examples of nonliquid resources include loan agreements, household goods,
automobiles, livestock, buildings, and land.76 Nonliquid resources are normally evaluated
according to their equity value.77 “Equity value” is defined as the price that an item can
reasonably be expected to sell for on the open market in the particular geographical area
involved less any encumbrances on the item.78 This is often important in inheritance cases. The
local Social Security office often presumes that the value of a claimant’s interest under a will is
67
68
69
70
71
72
73
74
75
76
77
78
20 C.F.R. § 416.1210.
SSA POMS SI 01120.200 et. seq.
20 C.F.R. § 416.1201(a).
20 C.F.R. § 416.1201(a)(1).
Id.
20 C.F.R. § 416.1201(b).
Id.
See also Anderson v. Iowa Dep’t of Human Serv., 368 N.W.2d 104, 109 (Iowa 1985).
20 C.F.R. § 416.1201(c).
Id.
Id.
20 C.F.R. § 416.1201(c)(2).
9
the full amount indicated in the will, in spite of the fact that the inheritance is not liquid until the
will is probated, and in some cases property in the will is sold and distributed. In those cases, it
may be necessary to get an estimate of the present market value of the claimant’s future interest
in the inheritance. Rules regarding the increase or decrease in the value of a resource are located
at 20 C.F.R. § 416.1207(b) and (c).
C. Income vs. Resource
Items received in cash or in kind during a month are evaluated first under the income
counting rules and, if retained until the first moment of the following month are subject to the
rules for counting resources at that time.79 If an individual sells, exchanges, or replaces a
resource, the receipts are counted as a resource, and not as income. 80 Retroactive SSD and SSI
payments are not counted as income, and do not count as a resource for nine months following
the month of receipt.81 After nine months the unspent portion of any such lump sum payment
can be counted as a resource.82 Once the money from the retroactive payment is spent, the
exclusion does not apply to items purchased with the money.83
IV. SSI, Medicaid and Divorce: Strategies
So what does all this have to do with divorce? Most divorces do not involve a disabled
litigant. However, in the small number of cases where it does come in to play, crafting a decree
to maximize eligibility for benefits can provide long term financial benefit to the client.
A.
Spotting the Issue
Obviously, if your client tells you they receive SSI benefits, you know your client can be
affected by these eligibility rules. How else can you spot the issue? The key is knowing the
household’s sources of income, now and after the separation/divorce. First, if your client
receives a Social Security benefit, determine what type of benefit it is. Do not assume the client
knows. Many SSI recipients do not know the difference between Social Security and SSI
benefits, or which type of benefit they receive. It is generally easy enough to look at your
client’s last benefit notice or obtain a confirmation from their local Social Security office as to
what type of benefit they receive. This should extend to any children in the household that
receive Social Security benefits as well. Second, even if your client does not receive a Social
Security benefit, find out what their income expectations are after the divorce. Because SSI
benefits are income and resource sensitive, some spouses would be eligible for SSI but for their
spouse’s income and/or the household’s non-exempt resources. During the prolonged economic
slump, more and more in their fifties and early sixties are giving up on the job market and filing
for Social Security benefits. Clients currently receiving unemployment, workers compensation,
and private disability benefits (such as private short term or long term disability benefits, such as
79
80
81
82
83
20 C.F.R. § 416.1207(d).
20 C.F.R. § 416.1207(e).
20 C.F.R. § 416.1233(a).
Id.
20 C.F.R. § 416.1233(c).
10
through a former employer), may be looking at applying for SSI once their current source of
income dries up.
Be aware of how your client’s divorce status might affect benefit eligibility prior to the
completion of the divorce as well. Social Security has rules that “deem” a portion of a nondisabled spouses income to the disabled spouse.84 The more income deemed towards the
disabled spouse, the lower their SSI benefit amount will be. However, this income deeming does
not occur if the spouses no longer live in the same household.85 A separated spouse may become
eligible for SSI benefits after separation that she would not have been eligible for while the
couple was living together. In addition, remember that a house loses its exempt status for SSI
resource purposes if the disabled spouse is no longer living there (unless covered by the domestic
abuse exemption). It will be important to weigh the potential loss of benefits into the decision to
move or to try to stay in the house.
B. Fixing the Problem.
Now that you know the rules, how do you use them to your client’s advantage?
1. Alimony
For SSI purposes, alimony and support payments are cash or in kind contributions to
meet the claimant’s needs for food and shelter.86 Instead of a cash alimony payments, consider
crafting the decree to have bills paid directly without the money ever passing through your
client’s hands. According to SSA POMS 00815.400.A, “[p]ayment of an individual's bills
(including supplementary medical insurance under title XVIII or other medical insurance
premiums) by a third party directly to the supplier is not income. However, anything received in
kind as a result of the payment is income if it is food or shelter.” (See also 20 CFR §
416.1103(g)). Remember that according to Social Security, shelter includes “room, rent,
mortgage payments, real property taxes, heating fuel, gas, electricity, water, sewerage, and
garbage collection services.”87
SSA POMS 00815.400.B lists the following two examples:
1. Third Party Payment Results in ISM (“In Kind Support and Maintenance”)
The daughter of Mrs. Harper, an SSI recipient, pays the grocer for food delivered
to her mother. Although the payment to the grocer is not income, Mrs. Harper
receives ISM in the form of food, subject to the PMV (SI 00835.300).
2. Third Party Payment Does Not Result in Income
84
85
86
87
20 C.F.R. §416.1121.
20 C.F.R. §416.1121 (“If you have an ineligible spouse who lives in the same
household, we apply the deeming rules.”
20 C.F.R. §416.1121(b).
20 C.F.R. 416.1130(b).
11
Joshua Hall, an SSI recipient, is unable to pay his phone bill so his sister pays the
phone company with her own money. Neither the payment to the phone company
nor the telephone service received as a result of the payment is income because it
is not food or shelter.
Social Security also does not consider personal services performed for a disabled individual as
income.88 Examples of personal services for an individual which are not income are:
--Mowing the lawn;
--Doing housecleaning;
--Going to the grocery; and
--Babysitting.89
Presumably, if providing those types of personal services is not income, third party
payments to provide those types of personal services should also not count as income.
The upshot of the in kind support and maintenance rule is that if alimony or support
payments are specifically designated as third party payments made by the non-disabled spouse
for anything other than food and shelter, the payments are not counted as income for SSI
eligibility purposes. Obviously, if an uncooperative spouse is not going to make their monthly
payment reliably, the disabled spouse can suffer. But the same is true whether the support
payment are designated for specific bills or just paid directly to the spouse. Payments could
arguably include a variety of items, including:
--Phone, cable, and internet services
--Personal services such as lawn care, laundry, house cleaning, and transportation
--Car and car insurance payments
--Day care
--Tuition for school or other training
--Payments for a computer, uncovered medical equipment, a new refrigerator, etc.
--Travel (not Aruba, but perhaps annually paying travel expenses to visit family over the
holidays).
Be sure to use your imagination. A monthly payment of $710 does not go very far.
Remember that although payments for food and shelter reduce the disabled spouse’s SSI benefit
amount, Social Security will generally only reduce the SSI benefit amount by one third. 90
Consider a case in which the non-disabled spouse would likely pay $800/month in alimony
payments to the disabled spouse. That direct alimony payment would eliminate the disabled
spouse’s eligibility for SSI and Medicaid. However, if that $800/month payment was designated
as a third party payment to cover the monthly mortgage and escrow payment, the disabled spouse
88
89
90
POMS SI 00815.150.A.
POMS SI 00815.150.B.
20 C.F.R. § 416.1131.
12
would continue to receive two thirds of her SSI benefit payment, maintain eligibility for
Medicaid, and have her mortgage, taxes and insurance covered every month.
2. Property Settlements
Property settlements can wreak havoc on an SSI recipient. Most damage from a lump
sum property settlement can be avoided if the client arranges to suspend their SSI and Medicaid
benefit amount for the month in which they receive the settlement, spend down the settlement
prior to the beginning of the next month in order to regain resource eligibility, and then resume
benefits. If the settlement is large enough, the loss of one month’s SSI benefit amount should
not be an issue. It is always more important to make certain the client will not need their
Medicaid for any significant expenses in the month they receive the settlement.
Beyond this, there are ways to avoid resource ineligibility altogether. Typically, the
largest asset in a dissolution action is the home. The home is exempt as a countable resource
regardless of its value.91 If the house is liquidated through the divorce, the proceeds from the
sale of the home will be excluded from resources to the extent that they are intended to be used,
and are in fact used, to purchase another home within 3 months after date of receipt of the
proceeds.92 If the house is sold in installment payments, the down payment and that portion of
any installment amount constituting payment against the principal remain exempt in the same
manner.93 If interest is received as part of an installment payment resulting from the sale of an
excluded home under a promissory note or similar installment sales contract, the interest
payments are not exempt.94
Outside of the home, Social Security exempts cash or the replacement of lost, stolen or
damaged exempt resources.95 There are not regulations exempting proceeds from the sale of
other exempt resources. Consequently, aside from the house, the disabled spouse will generally
be better off having other exempt resources (furniture, appliances, a car, a burial trust, the federal
income tax refund96) transferred to her through the divorce rather than liquidating them and
distributing the cash proceeds. The worst possible solution is for the disabled spouse to receive
monthly payments in compensation for the liquidation of any resource other than the home.
3. Child Support
As discussed above, child support payments (including arrearage payments) made on
behalf of an SSI child are unearned income to the child. One-third of the amount of a child
support payment made to or for an eligible child by an absent parent is excluded.97 For example,
if the non-custodial parent is ordered to pay $500/month in support to a child on SSI, Social
91
92
93
94
95
96
97
20 C.F.R. § 416.1212(b).
20 C.F.R. § 416.1212(d).
20 C.F.R. § 416.1212(e)(3).
20 C.F.R. § 416.1212(h).
20 C.F.R. § 416.1232(a).
20 C.F.R. § 416.1235.
POMS SI 00830.420(B)(1).
13
Security will deduct one-third of the support payment, plus a $20 income disregard. The
remaining amount of income attributed to the child will be $313.33 ($500 - $166.66 - $20 =
$313.33). This will reduce the child’s SSI benefit amount to $396.67 ($710 – $313.33 =
$396.67).
Are there ways for the child support order to reduce the unearned income attributed to the
child? There are several options. First, assume the support order is for two children instead of
one. One child receives SSI and one does not. Assume Iowa child support guidelines would
require a payment of $1000/month for two children. Social Security should assume half of that
support goes to each child, or $500/month for each child. Using the calculations above, the
disabled child would have their SSI benefit amount reduced to $ 396.67/month.
But assume that under the child support guidelines support for one child would be
$687/month and for two children it would be $1000/month. If the decree specifies that the nondisabled child is to receive $687/month in support, and the disabled child is to receive
$313/month ($1000 - $687 = $313), then the actual support amount to the custodial parent
remains the same, but the unearned income attributed to the disabled child is significantly lower.
Social Security will deduct one-third of the support payment, plus a $20 income disregard. The
remaining amount of income attributed to the child will be only $188.67 ($313 - $104.33 - $20 =
$188.67). This will reduce the child’s SSI benefit amount to $521.33 ($710 – $188.67 =
$521.33). In other words, the disabled child would receive an additional $124.66/month in SSI
benefits.
In addition, as discussed with alimony, consider using the decree to specify that the noncustodial parent make direct payments to vendors for specific non-food and shelter items. For
example, if the child is attending a private school and the school’s tuition exceeds $313/month
designated as the disabled child’s support amount, the disabled child would be entitled to the full
amount of SSI, her school tuition would be paid, and the custodial parent would receive
$687/month for the non-disabled child. In other words, the support payment would remain
$1000/month between the two children, but the household would receive $1710/month in
income. Again, direct vendor payments are limited only by your imagination. Because clothing
is excluded from the in kind food and shelter deduction, the non-custodial parent can buy the
child a $50 gift card each month to a store that sells clothes (but not food). The non-custodial
parent could pay the disabled child’s household portion of the cable, phone and internet bill, or a
monthly payment for the child’s computer or car, or for uncovered durable medical expenses or
equipment. The key is to designate specific monthly vendor payments for the disabled child’s
portion of (non food and shelter) household expenses, or for other items that will specifically
benefit the disabled child.
If your disabled client is the noncustodial parent, be aware that under Iowa’s child
support guidelines it is the policy of the State of Iowa that every parent contributes to the support
of his or her child in accordance with the means available. However, “the appropriate figure is
zero if the noncustodial parent’s only income is from Supplemental Security Income.” 98 The
rule seems to indicate that if the noncustodial parent receives both SSI and SSD, they can still be
responsible for the minimal child support obligation regardless of the fact that their income is
98
Iowa Child Support Guidelines Rule 9.4.
14
still about the same as if they were just on SSI, although some judges will accept an argument
that under those circumstances child support should be zero or that this is cause to deviate below
the minimal child support amount.
If the disabled client receives Social Security Disability benefits, their children may also
be able to draw benefits off of their account. It is generally up to the custodial parent to apply
for those benefits at their local Social Security office. The rule in Iowa is that a child support
award may be offset by Social Security benefits during the period in which the benefits are
received.99 Consequently, courts are typically willing to recognize a children’s Social Security
benefit based on the parent’s insured status to suffice for their child support obligation.
Note that in concurrent claims, child support garnished from SSD still counts as income
to the claimant for SSI purposes.100
C. CYA!
Fortunately, your client’s local Social Security office should be willing to work with you
to confirm your reading of how their rules should (or should not) affect your client’s benefit
payments. Because the local office makes those calls normally anyway, the client should have
an SSI worker assigned to them in the local office that can answer your questions on what will
and what will not work in crafting a settlement. If you have questions as to whether a strategy
will work or not, you are much better confirming it with the local office. If your instinct is to
avoid asking them if your strategy passes muster, it is probably a clue that you are on thin ice. It
also never hurts to have copies of correspondence with Social Security showing that you
confirmed your strategy with them in advance of the final decree.
D. Worst Case Scenario: What to do with an Overpayment
Despite the best laid plans, there is still always the possibility that things can go wrong.
In this case, there may still be a slim possibility that Social Security will find that the dissolution
decree results in the creation of a benefit overpayment. All is still not lost—there is the
possibility of appealing the overpayment and, if that is not successful, convincing the agency to
waive collection of the overpayment.
Social Security regulations define an overpayment as a “payment of more than the
amount due for any period.”101 SSD overpayments are addressed at 42 U.S.C. § 404 and 20
C.F.R. § 404.501 et. seq. SSI overpayments are addressed at 42. U.S.C. § 1383(b) and 20 C.F.R.
§ 416.535 et. seq. If the recipient believes that they have not been overpaid, or if they believe
the amount of the overpayment in the notice is incorrect, they can file an appeal. The appeal
procedure is the same as in disability cases, and is initiated by filing a written request for
99
100
101
Iowa Code § 598.22C; Newman v. Newman, 451 N.W.2d 843, 844 (Iowa 1990); Potts v. Potts, 240
N.W.2d 680, 682 (Iowa 1976).
SSR 82-38.
20 C.F.R. § 416.537; see also POMS GN 02201.001.
15
reconsideration. This can be done by sending a letter or the standard agency reconsideration
form to Social Security. As with disability cases, the appeals deadline is 60 days. 102 Social
Security will take no action to try to collect a SSD overpayment until 60 days after the claimant
is notified about the overpayment. If a reconsideration is requested, collection efforts cannot
begin until a reconsideration decision is issued.103 With SSI, SSA will begin collection efforts
after 60 days if no request for reconsideration or waiver was requested within 30 days of the
overpayment notice. Collection efforts will stop once a request for reconsideration has been
filed.104 If reconsideration is requested, claimants are entitled to a personal conference, and the
personal conference may be held by telephone or video conference in both SSD and SSI cases. 105
Recovery is not stopped when the overpaid individual appeals beyond the reconsideration
stage.106
If the recipient agrees that she has been overpaid and does not dispute the amount, she
can request a waiver of the overpayment. If SSA grants the waiver, they will take no further
action to collect the overpayment. In a sense, the overpayment simply ceases to exist.
There is no time limit in which to request a waiver.107 If the recipient requests a waiver
outside of the first 60 days of being notified about the overpayment (SSA does not collect in the
first 60 days), Social Security must stop collection efforts in the month the waiver is requested
and it cannot begin any collection efforts until an unfavorable decision has been issued. 108 As
with appeals, collection efforts can resume after a reconsideration decision.
There is also no limit to the number of times a waiver can be requested. If a request for
waiver is denied because of a finding of fault, res judicata will probably preclude subsequent
waiver applications.109 However, if a request for waiver is denied because SSA finds the
claimant is able to repay the overpayment, and the claimant’s financial situation subsequently
worsens, there is nothing to preclude a new waiver application on that issue.110
SSA should waive an overpayment if the recipient can show that they were without fault
in causing the overpayment,111 and that adjustment or recovery of the overpayment would either
defeat the purpose of the Social Security Act (which generally means that they cannot afford to
repay the overpayment),112 or would be against equity and good conscience.113 The claimant has
102
103
104
105
106
107
108
109
110
111
112
20 C.F.R. §§ 404.909(a)(1), 416.1409(a).
POMS GN 02201.011.A and C.
POMS SI 022201.001.A.2; POMS SI 02220.017.A.4.
20 C.F.R. §§ 404.506, 416.557.
POMS GN 02201.011.C; POMS SI 022201.017.A.4.e and f.
POMS GN 02201.011.A; POMS GN 02250.310.A.
20 C.F.R. § 404.506(b); SSR 94-4p; POMS GN 02201.011.D.3; POMS GN
02201.019.B.1 (Title II); POMS SI 02220.001.A.2 (Title XVI); see also Califano v.
Yamasaki, 442 U.S. 682, 99 S. Ct. 2545, 61 L. Ed. 2d 176 (1979).
POMS GN 02201.011(A).
POMS GN 02201.011(A).
20 C.F.R. §§ 404.507, 416.552.
20 C.F.R. §§ 404.508, 416.553.
16
the burden of proving she is without fault.114 Proving that the claimant was without fault is
generally the most difficult part of the waiver process. However, correspondence with Social
Security showing you confirmed your reading of their regulations before your client agreed to a
decree can go a long ways towards proving the client was reasonably relying on agency
representations and, therefore, was without fault regarding any overpayment caused by the
provisions of the decree.
If the disabled spouse becomes resource or income ineligible for SSI benefits, it is critical
to try to resolve the eligibility issue in less than a year. Benefits are terminated if a suspension
lasts for longer than twelve months.115 If that occurs, the spouse must reapply for SSI benefits, a
process that can easily take a year or longer.
113
114
115
20 C.F.R. §§ 404.509, 416.554.
Coulston v. Apfel, 224 F.3d 897, 900 (8th Cir. 2000).
20 C.F.R. § 416.1335.
17