Spending Down an Inheritance or Other Lump Sum

Resources of a parent over $2,000 ($3,000) are deemed countable resources for a disabled child. If a parent retains a lump sum beyond the month in which it is received and the child’s deemed resources exceed the allowable limit, the child would lose eligibility for SSI. However, a lump sum is considered income for the month in which it is received and can be completely spent down on exempt assets during the month in which it is received to prevent ineligibility.

Here are some examples of exempt assets:

  • Pay off existing debts. Special scrutiny is applied if paying back a loan from a family member or friend. The loan must be a bona fide note with a realistic expectation of repayment at the time the loan was provided.

  • Purchasing a home or paying off all or part of a mortgage on a home.

  • Paying rent for that calendar month only

  • Home repairs, remodeling, deferred maintenance expenses, or Modifying a home to accommodate an individual’s disabilities

  • Purchasing home furnishings or appliances

  • Pay an attorney to do estate planning and/or Medicaid planning

  • Medical expenses/bills not covered by Medicaid or Medicare

  • Educational expenses

  • Entertainment/recreation expenses

  • Vacation travel

  • Pre-pay burial arrangements

  • Purchase an automobile including registration and insurance (Note: The recipient must be on the Title.)

  • Personal products or services such as clothing, hygiene products, hair styling, etc.

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What limitations does a recipient have when utilizing a spend down?

There are limitations on what can be purchased. A recipient cannot purchase items for other people or give money to other people. This is referred to as a resource transfer at less than market value and could cause the individual to be ineligible for public benefits (SI 01150.001, SI 01150.007).

​A Spend Down must be reported to the local Social Security Administration (SSA) office.

It is important that the spend down is reported accurately; if not, the recipient may lose eligibility. The letter to the appropriate agency should include the following:

  • Date

  • Full Legal Name, Contact Phone Number and Address, Social Security Number

  • A statement that the recipient utilized a Spend Down and that the appropriate documentation is enclosed according to SI 01150.007.

  • Receipts for all transactions

  • All bank statements for that entire calendar month.

  • All bank statements for the following month confirming that the funds were successfully spent down.

It is important to keep receipts for all the purchases made in the month that the funds for the Spend Down were received. Keep in mind an individual recipient is only allowed to have a total of $2,000 or $3,000 for a married couple in resources.

Prior to sending the documents to the appropriate agency, the recipient should consider sending them certified mail with a signature confirmation to ensure that the documents arrive in a timely manner and are received. Also, make sure you make a copy of all the documents prior to sending.

Special NeedsY.T. ClarkTrusts