Mary has severe arthritis. Her only income is Supplemental Security Income (SSI) benefits of $500 per month, making her automatically eligible for Medicaid in her state. Medicaid pays for her doctor visits, prescription drugs and her wheelchair.

    Mary will receive $550 in monthly alimony payments under a negotiated settlement. The SSI program will disregard the first $20, but the remaining $530 will be counted to reduce her monthly SSI check to $0. Thus, despite a $550 alimony award, Mary’s net benefit is $50 per month. Mary’s loss of SSI means she also loses automatic Medicaid eligibility. Although she may be able to retain Medicaid if her state has a “spend down” program, she might now be responsible for a significant part of her medical expenses each month.

    Mary’s case may be settled in such a way as to maximize her benefits: Mary’s ex-husband agrees to pay up to $550 as direct payments to Mary’s creditors to cover a van payment and insurance, a phone bill, and a cable T.V. bill. Since Mary receives neither cash nor an in-kind payment for “food, clothing or shelter,” these payments will not be treated as income by SSI and will not affect her eligibility. She will continue to receive a monthly check of $500 and remain automatically eligible for Medicaid.

    To properly settle a case like Mary’s, an attorney should have a good working knowledge of SSI’s income and resource rules. Without that expertise, an otherwise good settlement could inadvertently result in reductions to SSI. Worse yet, if alimony or child support makes a person ineligible for SSI, that person could also lose Medicaid.

    This article covers the basic SSI rules an attorney must know to competently represent an adult or child with a disability who is expected to benefit from alimony, child support or any other cash or property settlement that results from a divorce or related action. We explain the types of cash and property settlements that will affect SSI and those that will not.

    This article should be valuable to family law attorneys as well as other attorneys and advocates who specialize in disability law. It should also prove valuable to persons with disabilities and their families. A much longer version of this article, with extensive legal citations, was published in the July-August edition of Clearinghouse Review and is available either by calling the National AT Advocacy Project at 716-847-0650 or by visiting our web page, www.nls.org.

    The principles stated in this article will allow the attorney to creatively design resolutions that will greatly enhance clients’ quality of living. In selected cases, the creative resolution of alimony, child support or property issues may bring thousands of extra dollars into the family and allow a child or adult with a disability to obtain funding for expensive services and assistive technology (AT) to enhance independence and self sufficiency.

    SSI is a cash benefit for persons with disabilities who have limited income and resources. SSI can be a person’s only form of income or it can supplement other income such as Social Security benefits or wages. SSI may be affected by a family law resolution that involves a periodic payment, lump sum or transfer of property. For this reason, it is important to determine whether a client or client’s child is receiving SSI benefits or whether the adult or child in question might be eligible for SSI if his or her income and resources were limited.

    In 39 states, an SSI recipient automatically qualifies for Medicaid. Depending on the optional services covered by your state, the range of services Medicaid could cover include doctor visits, hospital costs, psychiatric care, prescription drugs, speech therapy, physical therapy, occupational therapy, personal care services (i.e., home health care), private duty nursing, skilled nursing facility costs, durable medical equipment (DME), and prosthetic devices.

    SSI’s 1999 federal benefit rate (FBR) is $500 per month. States supplement the FBR at their option. The examples used in this article use the $500 FBR with no state supplement. The amount of the monthly SSI check is determined by subtracting countable income from your state’s SSI base rate (i.e., FBR plus state supplement, if any).

    Income is defined as anything received in cash or in kind that can be used to meet needs for food, clothing, or shelter. Earned income includes gross wages and net earnings from self-employment. Unearned income is any income other than earned income and includes income from a parent or spouse, that is “deemed” available to the SSI recipient. Both alimony and child support payments are forms of unearned income.

    Spousal Income and Alimony Payments: If a spouse resides in the same household and has income that is high enough, the SSI program will treat a portion of that income as available to the spouse with a disability. If spouses live apart, SSI will not automatically consider the income of the non-disabled spouse as available to the spouse who is the SSI recipient. SSI will only count income from the spouse who is living in a separate household if some of that income is paid to the SSI recipient. If an adult SSI recipient receives alimony payments, SSI will ignore the first $20 received each month. The remaining amount will count as income and reduce the monthly SSI check that a person would otherwise receive.

    Parental Income and Child Support Payments: If a child receiving SSI is under 18 and has a custodial parent with a high enough income, SSI will treat some of that income as available to the child. The non-custodial parent’s income will be counted by SSI only if it is paid and is available to meet that child’s needs for food, clothing and shelter. For example, Tom is a custodial parent for 10 year old Cheryl, who receives $500 per month in SSI benefits. Tom’s ex-wife, Susan, earns more than $30,000 per year, but SSI will not treat any part of that as available to Cheryl unless the money is, in fact, being paid. Assume that Susan is ordered to pay $480 in child support payments for Cheryl’s needs. SSI will treat these payments as income to Cheryl and, under SSI’s rules, will exclude one third of the $480 to reduce that amount to $320. An additional $20 is excluded under the general unearned income exclusion, reducing the income to $300. Cheryl will be eligible for a monthly SSI check of $200 ($500 - 300).

    Cheryl need not receive so little: As an alternative to traditional child support, Tom’s ex-wife agrees to pay up to $480 as direct payments to a private school to cover the cost of Cheryl’s tuition. Since no cash has been received on Cheryl’s behalf nor any in-kind payment for “food, clothing or shelter,” the payment for the tuition will not be treated as income and will have no effect on her SSI eligibility. Her monthly SSI check will remain at $500.

    A resource is defined as cash or other liquid assets or real or personal property that an individual owns and could convert to cash which can be used for food, clothing, or shelter. SSI’s general resource limit for 1999 is $2,000 for an individual and $3,000 for an eligible couple. We typically say that the person can have no more than $2,000 in the bank, but the general resource limit goes beyond bank accounts. A parent’s resources will be considered available to the child and counted against the child’s $2,000 resource limit to the extent that they exceed $2,000 for one parent or $3,000 for two parents in the household.

    In addition to cash and bank accounts, SSI will count “liquid resources,” i.e., property which can be converted to cash within 20 working days. Such resources include stocks, bonds, and the cash surrender value of life insurance policies. SSI also counts “non-liquid resources,” i.e., property which is not cash and cannot be converted to cash within 20 working days. This includes, among other things, household goods, automobiles, boats, machinery, livestock, buildings and land. Except for automobiles, only the equity value of the non-liquid resource is countable.

    Since many family law resolutions involve property transfers, the attorney should know some of the more common resource exclusions, i.e., resources that are not counted for purposes of the $2,000 resource limit. The following list of exempt resources, although by no means complete, includes those most likely to come up in the context of a family law case:

• the residential home, regardless of its value

• household goods and personal effects with an equity value of less than $2,000

• equipment required because of a disability, e.g., a wheelchair or telecommunication device for the deaf (TDD), is totally excluded

• an automobile, up to $4,500 of its current market value

• an automobile’s total value if it is necessary for employment of a household member, for medical reasons, or is specially modified for a person with a disability

• property, including the tools of a tradesperson and the machinery and livestock of a farmer, that is used in a trade or business or by such individual as an employee

• the full value of burial spaces

• burial funds, up to $1,500 for an individual and $3,000 for a couple

    Consider Darlene, who has multiple sclerosis and receives SSI payments. The resolution of Darlene’s divorce requires her ex-husband to deed over his interest to the couple’s home and give her a lump sum of $25,000. The deed to the home will not affect Darlene’s SSI eligibility, as it falls within the residential home exemption as long as she continues to live in the house. However, the $25,000 cash payment is not exempt. Since it is more than the $2,000 general resource limit, retention of that money will make Darlene ineligible for SSI until that amount, combined with all other non-exempt resources, goes below $2,000.

    A viable alternative to the $25,000 payment would be to direct the ex-spouse to use that money to pay off the existing mortgage, make repairs to the property, or both. Such a payment would not affect Darlene’s SSI eligibility as it is not money available for food, clothing or shelter. Instead, the payment only adds equity value to an exempt resource. Later, if Darlene uses the equity in her home to secure a home equity loan or line of credit, the loan proceeds will not be treated by the SSI program as income.

    Traditionally, a family law attorney advocates for the periodic payment, lump sum, or property settlement that best serves the client. To put the article into context, we will provide a very basic summary of the rules which govern child support under the federal Family Support Act of 1988. We will also provide a brief summary of the kind of provisions an attorney may encounter regarding alimony and division of property.

    Congress passed the Family Support Act of 1988 because it was concerned about the disproportionate number of children who reside with single parents in poverty. The Act requires states, as a condition of receiving federal grants for aid to needy families, to establish guidelines for use in any judicial or administrative proceeding wherein child support would be determined. The Act mandates that the guideline calculation result in the presumptively correct amount of support, and allows the presumption to be rebutted by written findings or findings on the record that the amount so calculated would be unjust or inappropriate. A state’s child support guidelines must consider all earnings and income of the absent parent, its computations must be based on specific descriptive and numeric criteria, and the criteria for rebutting the presumption must take into account the best interests of the children. Otherwise, the details are left to the individual states. The methods of calculation vary greatly from state to state, as do the definitions of income, the allowable deductions and the specified reasons for deviation.

    New York has met the federal mandate through its Child Support Standards Act (CSSA) of 1989. The CSSA presumes that it takes 17 percent of the combined income of both parents to support one child, 25 percent to support two, 29 percent to support three, 31 percent to support four, and 35 percent to support five or more. Courts may deviate from the guidelines if the resulting order would be unjust or inappropriate. One factor a New York court may consider is the physical and emotional health of the child and the child’s special needs and aptitudes. Our experience in New York has been that the receipt of SSI by the child and the child’s special needs may be factors a court will consider in determining whether application of the guidelines would be unjust or inappropriate under the circumstances. Once the court finds that support calculated pursuant to the guidelines would be unjust or inappropriate, it must set support that it finds to be just and appropriate.

    The term “alimony” is used here in the generic sense to include both maintenance and spousal support, or any similar terminology that states may employ. There are no federally mandated guidelines for the calculation of alimony or disposition of property. The only requirement is that these obligations be gender neutral. See Orr v. Orr, 440 U.S. 268 (1979)(U.S. Supreme Court held that a state statute that provided alimony for women only was unconstitutional).

    Although alimony and property division will be regulated by each state, one can expect the general approach to these issues to be similar from state to state. In New York, for example, a support order may arise in informal separations as well as in court actions for divorce, separation or annulment. Alimony may be paid in one sum or periodic sums, and may be payable to third persons for such items as real and personal property, services supplied to the spouse, insurance, taxes and repairs or other carrying charges on premises occupied by the spouse. In New York, whether to award alimony and the amount of alimony awarded is largely left to the discretion of the court. To the extent that courts are afforded discretion on these issues, in your state, this may make it easier to design creative resolutions for SSI purposes.

    The following examples are based on New York child support guidelines, but use SSI’s 1999 federal benefit rate of $500 per month. For simplicity’s sake, they assume the custodial parent is not also receiving alimony payments. A parent’s receipt of alimony could, if high enough, affect the child’s SSI eligibility. Based on experience, we believe the scenarios and the alternative resolutions of these cases are realistic.

    Child Scenario # 1: Wanda lives with her two children, Bonnie, age 11 and Chris, age 13. Chris is profoundly deaf and is eligible for SSI; Bonnie does not have a disability. The family’s only income is $1,100 gross each month from Wanda’s job and monthly SSI of $500 for Chris. Wanda has been awarded child support payments of $1,000 per month for her two children, which is 25 percent of her ex-husband’s $4,000 in monthly income as required by New York child support guidelines. The Family Court order does not specify how much of the $1,000 is allocated for each child.

    Affect on Chris’s SSI. We can expect SSI to presume that half of the child support money is for Bonnie and half for Chris. SSI would then exclude one-third of Chris’s child support payments, reducing the amount from $500 to $333.33. Another $20 would be deducted as an unearned income exclusion, reducing Chris’s countable income to $313.33 and his monthly SSI check to $186.67 ($500 - 313.33). Chris will continue to qualify for Medicaid. Chris receives a net value of $186.67 from the child support payment, the amount that was excluded by SSI.

    Alternative resolution # 1. At the time of disposition, Wanda’s attorney asks the Family Court judge to allocate $680 of the $1,000 as payment for Bonnie, and $320 as payment for Chris. The legal rationale is that $680 represents 17 percent of the father’s income, New York’s child support guideline for one child; $320 represents the amount added on when payments are made for two children at 25 percent of the father’s income. The court’s support order reflects this allocation. SSI will now exclude one third of the $320 ($106.67) per month and an additional $20 as an unearned income exclusion. Chris’s countable income is now $193.33 per month ($320 - 126.67) and the SSI check will now be $306.67 per month ($500 - 193.33). This minor change to the court’s order will allow the family to retain an extra $120 of Chris’s monthly SSI benefits.

    Alternative resolution # 2. Wanda’s attorney seeks the same $320 per month allocation for Chris. She also asks that the ex-husband be required to pay the $320 directly to vendors or creditors for the benefit of Chris and his family. She asks that the first month’s payment of $320 be paid to XYZ Electronics for a telecommunication device for the deaf (TDD), to allow Chris to communicate on the telephone through a keyboard and screen display despite his lack of hearing. For subsequent months, she asks that the $320 be paid directly to vendors or creditors as follows: $80 for therapeutic dance lessons; $30 for cable TV; $30 for a separate phone line to allow Chris to use the TDD in his bedroom; $50 for the lease of a laptop computer that will allow Chris to use it at home and at school; $50 for Wanda’s car insurance; and $80 each month toward the $960 fee for a two-week summer residential camp for deaf teenagers. The ex-husband agrees to this arrangement and the Family Court judge orders it.

    Under SSI’s rules, none of these payments will be treated as income to Chris. Therefore, his SSI check will remain at $500. This is because income, for SSI purposes, must be something received in cash or in kind that can be used to meet Chris’s needs for food, clothing or shelter. No part of the $320 allocation comes as cash and none of the items paid for fall into the categories of food, clothing or shelter. Comparing the financial result of this resolution to the traditional resolution, it is clear that this creative alternative will result in an enhanced quality of life for Chris and his family.

    Child Scenario # 2: Ten year old Jenny is spinal cord injured and paralyzed from the waist down. She uses a power wheelchair to get around. Jenny lives with her mother who has no other children. Jenny’s mother earns $900 gross each month which allows Jenny to qualify for a full monthly SSI check of $500. In a divorce settlement, Jenny’s father agrees to pay $480 per month, which meets New York’s child support guidelines for one child. The SSI program will exclude one third of the child support payments, reducing Jenny’s income from $480 to $320. Another $20 will be deducted as an unearned income exclusion, reducing her income to $300. Jenny now qualifies for a $200 SSI check ($500 - 300). The child support helps balance the family’s budget, but Jenny’s mother does not have enough money left to purchase a lift-equipped van to allow her to easily transport Jenny to medical appointments, family outings and recreational activities. Jenny’s mother currently pays $160 per month in loan payments for a used car that is not suitable for transporting Jenny in her wheelchair.

    Alternative resolution. A more creative resolution will help finance the lift-equipped van. In lieu of paying child support, the father agrees to pay the following monthly bills directly: telephone ($35), cable TV ($25), YMCA membership for Jenny ($20) and loan payments on a new lift-equipped van ($400). The court approves this arrangement. Since the $480 is now paid directly to the vendors and bank, the money is not available to Jenny’s mother to pay for Jenny’s food, clothing and shelter. Therefore, Jenny has no countable income for SSI purposes and her SSI check will remain at $500.

    Compare the family’s balance sheet using the old and new divorce settlements. Under the original settlement, Jenny and her mother wind up with $1,420 per month to meet expenses other than car payment expenses ($900 wages + $480 child support + $200 SSI - $160 car payment). Under the new settlement, they net $1,480 to meet expenses other than van payment expenses ($900 wages + $500 SSI + $80 for telephone, TV and YMCA). They now have $60 more for household expenses and will have the needed lift-equipped van.

    The following example is based on New York law governing alimony. For simplicity’s sake, it assumes there will not also be issues involving child support.

    Adult Scenario: Arlene is legally blind and has a severe arthritic condition. She receives $500 in monthly SSI benefits. Under a divorce settlement, Arlene is to receive $420 per month from her ex-husband in alimony. Since the $420 is unearned income, the SSI program will disregard the first $20 and count $400 to reduce her SSI check to $100.

    Arlene plans to open an accounting business out of a home office. To accommodate her visual impairment, she will need an enhanced computer screen and a computer with voice output. Since her arthritis limits her ability to type for prolonged periods, she needs a scanner to enter documents directly into her computer. After receiving the maximum assistance from her state’s vocational rehabilitation (VR) agency, Arlene will still need approximately $12,000 for additional computer equipment, office supplies, advertising and business cards.

    Under an alternative resolution of Arlene’s case, the ex-husband agrees to pay a $12,000 lump sum rather than pay the first three years’ worth of alimony. The intent is to allow Arlene to use this money for business start-up costs. The SSI program will still treat this as income in the month of receipt and as a resource in later months, making her ineligible until all bank accounts combined total $2,000 or less.

    There are two alternatives which will preserve SSI eligibility. Arlene could propose a Plan for Achieving Self Support (PASS) in anticipation of receiving this money. She could designate in her PASS how she will spend the $12,000 to purchase items related to her home accounting business. If approved, the PASS would make the $12,000 an exempt asset and Arlene would continue to receive a full SSI check of $500 per month. The husband could also agree to hold the $12,000 and make payments directly to vendors as money is due. This latter method also preserves SSI eligibility as Arlene never has this cash available to her to pay for food, clothing or shelter.

    Family law attorneys will find that in some cases a creative solution is unrealistic. For example, there may not be any alternative ways of directing periodic payments to minimize the impact on SSI. There may also be tax considerations that will dictate the attorney’s strategy. The attorney may also encounter clients who have been victims of domestic violence, who prefer to quickly sever all ties with the abusive spouse. In that case, the creative resolution may, realistically, be limited to a transfer of property or lump-sum buy out in lieu of alimony.

    A creative resolution typically will depend on the cooperation of the payor parent or ex-spouse. If the other party is not willing to agree to a creative approach, it may not be realistic. In some cases, it may be necessary to provide the payor with a “better deal” in order to get them to agree to the special arrangement. The creative resolution in that case could be one that serves the interests of both parties. When a creative resolution is available, it can make a tremendous difference in the quality of life of the individual or family.

SELECTED LEGAL CITATIONS

    We have designed a word-searchable digest, using computer technology, to store and retrieve hearing decisions and other administrative documents. We also have indexed more than 400 documents from more than 100 pending and decided court cases. All documents are available through our AT Resource Library. Please send us your hearing decisions, briefs and other documents involving AT.

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