How to Avoid Being Cut Off SSI Benefits When You Get a Sum of Money

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Sometimes a supplemental security income (SSI) recipient will become eligible to receive a moderate or large sum of money that could make them ineligible for SSI. This can happen for any number of reasons, but we often see this happening if a person receives an inheritance or settles a personal injury claim.

There are two ways to handle the situation. For a large sum, a special needs trust should be considered. If it’s a smaller sum, then “spending down” the money to below the SSI resource limit— another way of saying “Go spend it!”—may be the right solution.

The resource limit is $2,000 for unmarried individuals and $3,000 for married couples, meaning that if you receive a sum of money, you will need to spend down those funds until you have less than $3,000 if you are married or less than $2,000 if you are not. See SI 01110.003.

But if you choose to spend down a lump sum, be careful and follow the rules:

1) Timing: In order to minimize the loss of SSI and Medicaid, goods and services must be purchased in the same calendar month in which the lump sum is received. See SI 01110.600. Note that the individual does not have a period of a month or 30 days to complete the spend down. If a lump sum is received on the 20th of August for example, the spend down should be completed in 11 days to bring resources below the applicable limit before September 1.

2) What to Purchase: Recipients of SSI need to plan spend-downs carefully. Here are some suggestions for what an individual could buy to spend down a lump sum:

  • Buying a home or paying off a mortgage, if the SSI recipient is on the title or has a lifetime agreement to be a tenant of the home. Additionally, home repairs, maintenance, remodeling or adding accessibility features could all be approved expenses.
  • Buying a car or paying off a car, if the SSI recipient is on the title.
  • Buying homeowner’s insurance or car insurance
  • Squaring up debts. It is important to know that there are restrictions on how and whether an SSI recipient can pay back a loan from friends or family.
  • Educational costs
  • Medical bills (if these bills aren’t covered by Medicaid or Medicare)
  • Estate planning, including pre-paying for funeral and burial expenses. It may be possible to pay an attorney in advance to help with this kind of work.
  • Furniture, appliances, and other home furnishings
  • Entertainment/recreational/vacation expenses, including travel
  • Personal items such as clothing, household goods, and personal effects

3) Keep the Limits in Mind: Only certain purchases count as “exempt resources”—other purchases might end up counting toward the $2,000/$3,000 resource limit, which could quickly accumulate to the point of disqualifying you. Certain purchases—if you were to give any of your money away, or if you used some of your money to buy gifts for other people—would also disqualify you from continuing to receive SSI. Here are some of the exempt resources that will not count toward the resource limit:

  • One home, including the land it stands on
  • One vehicle, operational or not. See SI 01130.200.

For more information on exempt resources, see SI 01110.210.

4) Reporting: The spend down must be reported to Social Security by the 10th day of the month following the month in which the lump sum was received. Here are some guidelines to follow in order to properly prepare for the reporting:

  • Keep receipts for all items or services purchased, including payments for home remodeling.
  • The claimant must be on the title to any real property or vehicle purchased with the lump sum.
  • The claimant must be the loss payee for any auto or homeowners insurance purchased with the lump sum.
  • Make copies of current bank statements from all accounts, as well as a printout on the last day of the month showing the balance as of that day.
  • Checks to purchase items and services should clear the beneficiary’s bank account by the last day of the spend-down month. If there is any question that a check may not clear the account in the month, payment should be made by certified check or a cashier’s check.
  • Have the bank provide documentation of the bank balance on the first day of the next month to verify the spend down was successfully completed.

When you send copies of the relevant paperwork (receipts, bank statements, copies of any relevant titles, etc.) to your local SSA office, make sure to include a dated cover letter with your full legal name, contact information, and Social Security Number explaining that you have utilized a spend down and that you are enclosing the necessary documentation. For more information on how they will use your documentation to evaluate whether to approve your spend down, see SI 01150.007. Make sure to make a copy of all the documentation for your own records. It is wise to send this information via Certified Mail to be absolutely sure the SSA receives it.

Your spend down may also need to be reported to the local state Medicaid office, depending on whether your state is a 1634, 209(b), or SSI criteria state. You can find out which policy your state uses here, in SI 01715.010. Generally, if you receive both SSI and Medicaid, you may need to notify both your local SSA office and your local state Medicaid office—but if you receive just SSI or just Medicaid, you may only need to notify one office or the other. It is important to research the proper procedure for residents of your state to ensure your benefits are not interrupted.

For more information:

For another write-up on this subject, see this article by the CPT Institute:

Originally posted March 2014, updated December 2018.