Medicaid programs have both asset and income limitations. When it comes to assets, many state Medicaid programs impose a $2,000 limit, especially for individuals over the age of 65. However, there is good news for those receiving Social Security Disability Income (SSDI). During the month that you receive SSDI, it is not considered as an asset. So, if it pushes your bank account over $2,000 during that month, you don’t need to worry as long as you spend it down before the end of the calendar month. However, if your account remains over $2,000 at the end of the month, it will exceed the asset limit.
The STABLE Account Option
If you don’t have sufficient needs to spend the money down during the month, you can consider using your STABLE account to shelter the excess funds. STABLE accounts are Ohio’s version of an ABLE account, which was created under the Achieving a Better Life Experience Act passed by Congress in 2014. These accounts enable individuals who became disabled before age 26 to protect their assets without setting up a special needs trust. It is important to note that currently the age limit for ABLE accounts is 46, set to increase in 2026. This option is particularly beneficial for beneficiaries over the age of 65 since it becomes more challenging to establish a special needs trust at that stage.
The Purpose of ABLE Accounts
The ABLE Act was enacted as a response to two other aspects of current law. Firstly, it addresses the issue where parents and grandparents set aside educational funds in 529 accounts to assist with college expenses for their children and grandchildren. ABLE accounts aim to create a level playing field by allowing these individuals to save tax-sheltered funds for their children and grandchildren who are less likely to attend college.
ABLE Accounts: Helping Medicaid and SSI Beneficiaries
ABLE accounts offer a potential solution for individuals who are struggling to comply with the $2,000 asset limit set by Medicaid and Supplemental Security Income (SSI). It’s important to note that this asset limit has remained unchanged since 1984. However, Ohio senators Rob Portman and Sherrod Brown have introduced a bill, S.4102 – SSI Savings Penalty Elimination Act, to address this issue.
Raising the Asset Limit
The proposed bill aims to raise the asset limit for eligibility for SSI beneficiaries from $2,000 for individuals and $3,000 for married couples to $10,000 and $20,000 respectively. Additionally, it suggests indexing the asset limit for inflation. Considering cumulative inflation since 1984 stands at 186%, the indexed limit would now reach $5,720. Essentially, if this change had been implemented earlier, there would have been a gradual 40-year reduction in the asset limit for SSI.
Transferring Excess Income
To cope with the challenge of excess assets, ABLE account holders can transfer their surplus income into their STABLE accounts before the end of each month. This strategy effectively addresses the excess asset issue. However, managing excess income can be more complicated. Different Medicaid programs impose various income limits, making it difficult to shelter excess income.
Pooled Trusts for Sheltering Excess Income
In some states, beneficiaries may be able to shelter excess income in a type of pooled trust. Unfortunately, it is unclear whether Ohio allows the use of pooled disability trusts to shelter excess income. If you are facing an income limit, it is advisable to consult with a special needs planning attorney. They can provide guidance on your specific circumstances and inform you about available options.