The Difference Between a Loan and a Gift When Applying for and Collecting SSI, Part II

In Part I, we discussed the role of the SSI program and how loans and gifts are treated differently by the Social Security Administration (SSA).  In Part II, we will discuss how one can financially assist a disabled claimant applying for or receiving Supplemental Security Income (SSI) in a manner which will cause the least amount of reduction to their potential or ongoing SSI check so as to maximize the amount of financial assistance they are receiving.  

In Part I, we discussed how a cash gift in a given month can result in a dollar for dollar reduction in the amount of entitlement in that given month to a potential SSI check.  There are two potential workarounds to this concern.  One of the options to reduce the amount of reduction to one’s SSI check is to receive what is called an “in kind” support from that friend or family member.  Examples of “in kind” support would include the payment of one’s rent  or the provision of room and board in one’s home.  SSA treats the payment of such support directly much differently than what would be a payment of cash (which is treated as income to the claimant and thus results in a dollar for dollar reduction).   Social Security’s rules call for such examples of “in kind” support to be assumed to be one-third (1/3) of the federal SSI benefit rate, which in 2016 amounts to $733.00 per month for an individual (plus $20.00 of unearned or earned income disregarded) for what can amount to a total of $264.33 in reduction of SSI monthly income.   Certainly, this can prove a much more beneficial reduction than if the actual cash is provided.

An even better scenario results from when a “loan” agreement between the claimant and the benefactor takes place that is considered valid under SSA’s rules.   The first rule of thumb si that it always preferable to place such a loan agreement in writing so that this can be provided to the local SSA office that is processing the SSI  claim.  It is not absolutely necessary, however, that the loan agreement be in writing: it must, however, be an enforceable loan under State law.  Likewise, the loan agreement must be in effect at the time the lender is providing the payment to the borrower: according to basic principles of contract law, there can be no legal consideration for a loan to be established if it is not done at the time the actual money is transferred (and thus would not be enforceable in such a circumstance).   What also must be clear, however, is that the loan arrangement can not be “contingent” upon or dependent upon the receipt of SSI benefits: it must establish a requirement that payment be made regardless of whether SSI benefits ever become payable.  While this would seem to be rather onerous to those that remain concerned as to how such a date would be paid, they should simply consider the fact that if they are remain longer term disabled and unable to work there would be no way the grantor of the money would have a way of going after them in court.   It is also important to consider the fact that if one does not provide for such a loan agreement, then the grantor of these charitable funds may have no manner of ever getting reimbursed and, likewise, SSA will simply be in a position of having to pay less funds per month to the claimant with the Federal Government receiving the benefit rather than the kind friend or family member that has been so kind as to provide the interim assistance.

If you or someone you love has been placed in the position of having to seek disability assistance from the Federal or State government, seeking the advice of a competent lawyer who has been practicing many years in this field is critical to understanding your rights. Contact the Law Offices of Russell J. Goldsmith at 1-800-773-8622 so you know which way to turn next for the financial assistance you or your loved one requires to survive.