Take these steps towards SSI and Medicaid eligibility before age 18

When a young person with a disability turns 18, the youth and his/her parents are under pressure to complete a lot of tasks quickly.  The young person may need Powers of Attorney or some form of guardianship so that parents can continue to provide input for financial, health care, and other decisions.  The youth will benefit from filing for Social Security disability benefits but may also need updated testing to accurately reflect her or his support needs.  It may be necessary for the youth to make decisions about graduating or delaying graduation and, if delaying, what elements they need to make the subsequent post-senior “transition” years productive.  Here in Illinois, the young person needs to update her/his status on the Developmental Disabilities Waiver waiting list from “planning for” to “seeking” services. These things cannot be done before the youth turns 18 but should be done as quickly as possible after that birthday.  However, there are some preparatory steps that the young person and her/his family can complete prior to age 18 to make that birthday less stressful.  

Obtain a driver’s license or state ID

Both the Social Security Administration and many state Medicaid offices prefer that claimants apply, appeal, and manage their benefits through online accounts.  To open a My Social Security account at ssa.gov, one needs to open a corresponding identity-verification account at either Login.gov or ID.me.  Each of those requires a driver’s license or state ID as a primary identity document.  ID.me has recently expanded its self-serve process to consider a US passport as another primary identity document, but since most 18-year-olds do not have a sufficient online footprint to use the “self-service” path for verification, they will be required to provide additional primary and sometimes secondary identity documents.  Similarly, setting up a benefits management account at abe.illinois.gov requires data from a claimant’s driver’s license or state ID to create a corresponding identity verification account at ILogin.illinois.gov.  Other states also require identity verification.

Create a dedicated email account and consider a smart phone

Every online account requires two-factor authentication these days, and this is generally accomplished by sending an email or text with a code or “pinging” an authentication app.  A particular phone number or email address can be attached to only one My Social Security account and, at least in Illinois, only one account to manage Medicaid and SNAP.  This means that multiple family members cannot use the same phone number or email to set up their benefits accounts or corresponding identity verification accounts.  If parents are helping their youth with a disability set up a My Social Security account, they may want to anticipate the fact they, themselves will need their own My Social Security account—if not now, then eventually.  It is easy enough to create a separate email for the youth specifically for the purposes of benefits management.  Even if the youth would not or could not use a cell phone, it may be worth purchasing a simple smart phone and basic phone plan in order to have a separate phone number for the youth’s accounts two-factor authentication.

Decide what to do with 529 College Savings Plans

Eligibility for both Supplemental Security Income (SSI) and Medicaid require that the claimant have few or no financial assets or what the SSA and state Medicaid agencies refer to as “countable resources”.  Per SI 01140.150, Qualified Tuition Programs (QTPs), such as a state’s 529 Plan, are countable resources to the individual who is the legal owner of the plan for both SSI and Medicaid purposes.  Most frequently, parents or grandparents are the owners of the 529 plan, and the young person is the beneficiary but not the owner of the account.  Thus, if an 18-year-old 529 plan beneficiary applies for SSI and/or Medicaid, the plan is not a countable resource to the applicant.  Distributions from the plan to pay for qualified educational expenses are not income to the beneficiary and are not a countable resource for the following 9 months.  Distributions from the plan that are not used for educational purposes will be considered countable income and also, when retained, a countable resource. 

Note that both the SSA and the state Medicaid agencies may need additional information about distributions because the 1099-Q, the IRS form that accompanies the distribution, will carry the beneficiary’s Social Security number, making it appear that the distribution is income to the beneficiary.  To avoid confusion, it may be worth it to roll the funds in the 529 plan into a 529 A (ABLE) account.  Funds in an ABLE account may also be used for education but are not limited to that use.  However, the rollover in any one year is limited to the ABLE annual contribution limit, less any other contributions already made.  Also, in some states, Medicaid can recover from ABLE accounts after the account holder/beneficiary has died.  Medicaid recovery is not a feature of 529 College Savings plans.

Take note of UGMA and UTMA accounts

Under the Uniform Gifts to Minors Act and Uniform Transfers to Minors Act, adults can set aside financial resources for the use of minor children.  Contributions to accounts established under these acts are considered irrevocable gifts.  An adult, who may be the same as the donor, acts as custodian of the funds, which must be used for the minor’s benefit.  Once the minor’s beneficiary reaches the respective age of majority for her/his state, s/he becomes the rightful owner of the account assets.  This is true regardless of whether the beneficiary has a legal guardian.  Per SI 01120.205 Uniform Transfers to Minors Act, an item int the Social Security Administration’s Program Operations Manual System (POMS), UGMA and UTMA accounts are not counted as resources to the claimant and any income generated by these accounts is not counted as income to the claimant while the claimant is still under the state’s age of majority. 

However, the accounts and the income they generate become countable for SSI and may be countable for Medicaid once the claimant reaches the age of majority.  In my home state of Illinois, the age of majority is 21.  So, a young person applying for SSI and Medicaid at 18 may be deemed financially eligible for both programs even though s/he is the beneficiary of a UTMA or UGMA account.  Then, age 21 hits and the young adult is suddenly financially ineligible due to that account.  It may be worth spending down the assets in a UTMA account on the youth’s needs prior to the age of majority while building up assets held in an exempt account, such as an ABLE account.  Note that funds cannot be “rolled” from an UTMA or UGMA account to an ABLE account as can funds in a 529 College Savings account.

Many young people with disabilities are not eligible for Social Security, Medicaid, and certain types of Medicaid-Waiver funded services prior to 18, because the income and the financial assets of the entire family exceed the relevant thresholds.  At 18, though, the young person can be evaluated on her/his own financial merits.  This creates a “wait, wait, then hurry up” scenario.  Taking the steps above prior to the 18^th birthday can ease some of the stress.