protecting ssi and medicaid benefits

Receiving a windfall, such as a cash settlement or inheritance, can be a life-changing event. However, for individuals who rely on Supplemental Security Income (SSI) and Medicaid benefits, it can also be a cause for concern. Fortunately, a few options can help individuals keep their SSI and Medicaid benefits while benefiting from the extra resources. Learn what you can do to protect these benefits.

Asset Limits for SSI and Medicaid

Before delving into the options available, you will want to know the asset limits for SSI and Medicaid. All countable resources for any individuals must not exceed $2,000 for SSI eligibility for unmarried individuals.  

Recently, Illinois increased the asset limits for unmarried individuals to qualify for Medicaid from $2,000 to $17,500. These federal and state programs consider countable resources as cash, inheritances, and settlement proceeds.

Now that you understand the limits, here is how to protect your assets and remain eligible for these assistance programs. 

Do Nothing

Recipients of an unexpected windfall will have to report the assets to the Social Security Administration and Illinois’ Medicaid department if they receive resources beyond the $2,000 limit. These individuals have the option to spend their funds until they reach that threshold. 

Until then, their benefits will be suspended until their funds are reduced to the allowable limit. For example, an individual might need to pay for nursing home care privately until their assets are below the $2,000 threshold.

Send a Letter

Sending a letter to Medicaid and providing documentation may be an option if the funds are exempt from the program’s resource calculations, such as receiving a settlement from a lawsuit filed under the Nursing Home Care Act. This option allows the individual to make a case for their continued eligibility, and if Medicaid agrees, the funds can remain available for the recipient’s use.

Spend Down Option

If you receive a smaller windfall, it may be best to use the spend-down option. With this option, you must spend the money within the same calendar month it was received, except for the allowable $2,000.  

For example, if you receive the windfall on January 1st, you have until January 31st to spend all but $2,000. If you don’t spend the excess funds within the month, you will not qualify for Medicaid benefits for that month. 

Recipients can use the funds on various qualifying expenses, including:

  • Making home modifications to accommodate disabilities
  • Paying off mortgages, student loans, credit cards, and other existing debts
  • Prepaying funeral expenses  

By allocating the funds toward these necessary expenses, recipients can ensure their money is put to good use while maintaining their Medicaid eligibility. 

Pooled Trust

People younger than 65 and with a disability can deposit their funds into a pooled trust. This trust helps them remain eligible for Medicaid while still having access to their funds. They or their power of attorney/guardian can contact the managing trustee to make purchases on their behalf. 

However, if they pass away before using all the trust funds, Medicaid may require reimbursement for care provided during their lifetime. Any remaining funds will typically go to the individual’s heirs.

ABLE Account

If you become disabled before age 26 (which will change to age 46 in 2026), you may benefit from an ABLE Account. This account allows you to manage your finances and still receive Medicaid benefits. You can fund the account up to $17,000 and use the assets to pay for expenses related to your disability.

Trust and Annuity

You might want to consider setting up an irrevocable trust and annuity arrangement. This option involves giving a part of the windfall to an irrevocable trust and using the rest to buy an annuity. The annuity will fund nursing home care during the “penalty period.” 

Once this period ends, Medicaid will start covering the expenses. If the person dies before the annuity runs out, Medicaid is reimbursed for the care expenses, with the remaining annuity funds passed down to the person’s heirs. 

Protect Your SSI and Medicaid Benefits

When faced with a windfall while receiving SSI and Medicaid benefits, exploring these options is vital to determine the best course of action. At Bielski Chapman, LTD., we can help you find the right options to protect your benefits after a windfall. Please call our office at (312) 583-9430 to schedule a complimentary 15-minute consultation.