This part is mostly about adults with disabilities.
I am not affiliated with Prudential Life Insurance Company, the provider of this information:
“This material has been prepared to assist our licensed financial professionals and clients’ advisors. It is designed to provide general information in regard to the subject matter covered. It should be used with the understanding that we are not rendering legal, accounting or tax advice. Such services should be provided by the client’s own advisors. Accordingly, any information in this document cannot be used by any taxpayer for purposes of avoiding penalties under the Internal Revenue Code.
©2008 The Prudential Insurance Company of America 751 Broad Street, Newark, NJ 07102-3777 IFS-A137988 Ed. 12/08 Exp. 12/10 Social Security Disability Insurance for Adults (SSDI) Title II. Benefits from SSDI are paid for total disability only and are dependent on meeting two different earning tests: (1) a recent worktest based on the age of the person at the time he or she became disabled and (2) a duration of work test to show that the person worked long enough under Social Security.
To satisfy the recent work test, claimants who become disabled in the quarter they turn age 31 or later must have worked and contributed to Social Security for at least five years out of the ten-year period (20 out of 40 quarters) ending with the quarter in which the disability began. If disability begins before age 31 but after age 23, a claimant must have worked for at least one- half (but not less than six) of the quarters after reaching age 21 and before becoming disabled, and if disability begins at age 23 or younger, 6 quarters of work during the three-year period ending with the quarter the disability began is required. The number of quarters of work needed to satisfy the duration of worktest and to qualify for disability benefits depends on an individual’s age at the time the person becomes disabled.
Generally, 40 quarters of work are needed. However, younger workers may qualify with fewer quarters. Here are several examples of years of work generally needed if disabled at various ages.
If disabled Years of work needed
Before age 28 1.5
At age 34 3.0
At age 42 5.0
At age 50 7.0
At age 58 9.0
See the Social Security website for more information.
The definition of disability is “the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”
There are a number of steps an adult must go through to qualify for disability benefits. If a claimant is working and earnings average more than $980 per month in 2009 (adjusted yearly), the person generally cannot be considered disabled. If earnings are less than that and the condition is severe enough to interfere with basic work-related activities, the claimant goes to the next step. There is a list of medical conditions that are so severe that they automatically qualify an individual as disabled. If a condition is not on that list, the Disability Determination Services (DDS) office in each state determines whether that condition is of equal severity to a condition that is on the list. If it is, the claimant is considered disabled.
If the condition is severe but not at a high enough severity level to be considered disabled, the next step is to determine whether the condition interferes with work the claimant did previously. If it does not, the claim will be denied. If it does, the DDS considers whether the claimant can adjust to other work, taking into consideration medical conditions, age, education, past work experience and transferable skills. The claim will be approved only if the claimant cannot adjust to other work.
Medical evidence from a claimant’s doctors will be collected and, if that evidence is inadequate or more information is needed, a medical examination by a physician selected by the Social Security Administration may be required. Qualification for SSDI does not require needs-based testing. Qualifying for SSDI automatically qualifies the person for Medicare (described later) after SSDI benefits have been paid for 24 months.
Social Security for Unmarried Children. A disabled person whose disability began prior to the age of 22 is entitled to benefits if one of his or her parents is entitled to Social Security, meaning the parent paid into the system for the required period of time. The child will be eligible to receive benefits based on the parent’s earnings beginning at the death, disability or retirement of the parent. Needs-based testing is not required; however, the adult child must meet the definition of disability for adults.
Medicaid. Medicaid is a joint program between the federal and state governments. It is administered by the states using federal funding and provides medical benefits to low-income children, seniors and people with disabilities. Congress and the Centers for Medicare and Medicaid Services establish the rules under which Medicaid operates, but each state is responsible for its own program. The eligibility rules are somewhat different in every state, but the basics of the program are the same throughout the country. The term Medicaid generically applies to numerous specific programs designed to meet specific needs and assist persons with specific disabilities. The primary program pays for nursing, home care and general medical care. Other programs include aid for assisted living, some in-home care and supplemental payments for Medicare. These additional programs vary significantly between states in both design and availability.
As is the case with SSI, Medicaid is needs based and eligibility must be protected against unintentional loss resulting from a lack of proper planning. Both income and asset levels are determinants of eligibility. Medicaid imposes constructive ownership rules, meaning that assets owned by a spouse in excess of certain amounts are deemed to be owned by the individual applying for Medicaid. However, the applicant’s home is often not counted. Recent federal legislation, which is being implemented in the states, limits the equity in the home that is disregarded to between $500,000 and $750,000 for single persons.
Avoiding eligibility disqualification using trusts is difficult and complex. The Omnibus Budget and Reconciliation Act of 1993 (OBRA) established so-called “look-back” periods of 36 months for outright transfers and 60 months for transfers in trust to prevent circumvention of Medicaid eligibility requirements. Legislation in 2006 (currently subject to court challenge) made the look-back period five years or 60 months for all transfers.
Medicare. Medicare is a non-needs-based federal program that provides benefits based on age or status. Persons age 65 or older, persons of any age with permanent kidney failure, and certain disabled individuals are eligible.
Part A is a hospital insurance program that pays for inpatient hospital care, medically necessary inpatient care in a skilled nursing home, or home health care following a hospital stay. Intermediate care and custodial care are not covered.
Part B is voluntary medical insurance that pays for necessary physicians’ services, outpatient hospital care, physical therapy, ambulance trips, medical equipment, prosthetics, and other services not covered under Part A.
Veterans Benefits: Veterans benefits are provided to individuals who have served in the military and certain of their dependants. There are two types of benefits available from the Veterans Administration. “Compensation” benefits are entitlements that are not means tested. Benefits such as pension and medical benefits can have a means test. A special needs trust can be a solution to these issues.
HUD Housing: Section 8 (HUD) housing provides either vouchers or reduced or subsidized rent. A person’s income and assets impact both the qualification for, and the amount of, the subsidy.
Other Programs. There are a number of other sources of assistance available to individuals with special needs. They depend on the nature of the disability and will vary from state to state.
Summary. Because of the wide variation of programs and complexity of rules in this area, it is important that financial professionals work with legal advisors who have extensive knowledge and specialize in working with families that have children with special needs.