WILL A SPEND DOWN SAVE YOUR CLIENT’S BENEFITS?

Medi-Cal) and/or Supplemental Security Income (SSI), assets are typically limited to $2,000 for individuals or $3,000 for a married couple. For those on public benefits who receive a settlement, a special needs trust may help protect those benefits. However, in some cases, a spend down might be a better option.

Special Needs Trust vs. Spend Down

While a special needs trust can in some instances allow your disabled client to enjoy the proceeds of their settlement without jeopardizing benefit eligibility, the expense of setting up and administering a trust may not make sense if your client’s settlement is relatively small or if your client needs to make major purchases to accommodate their disability (e.g. a house, a handicapped-accessible vehicle, etc.). Luckily, certain assets are exempt from Medicaid (Medi-Cal) and SSI eligibility limits. These types of assets can vary from state-to-state, but typically include the beneficiary’s house, certain household goods, an automobile, and personal items such as clothing, shoes, etc. Spending down the settlement proceeds on exempt goods and services could be the answer to meeting your client’s immediate needs, while maintaining public benefit eligibility, especially if your client is receiving Medicaid (Medi-Cal) paid nursing home care or over the age of 65 in a state that chooses to impose a penalty for transfers into a special needs trust.

The Spending Plan

If your client is considering a spend down, a spending plan should be developed before your client receives the settlement proceeds. Your client’s caseworker or local agency is a good resource for providing the exact guidelines that exist within your client’s state or jurisdiction. Generally speaking, allowable expenses can include, but are not limited to:

• Home repairs to accommodate the beneficiary’s disability
• Estate planning costs
• Funeral and burial arrangements
• Automobile purchases
• Clothing
• Entertainment
• Travel
• Furniture and home furnishings
• Eyeglasses
• Fitness equipment
• Non-food grocery items
• Certain other goods and services not otherwise covered by Medicaid (Medi-Cal)/Medicare, including medical expenses, dental work, and over-the-counter medications

Funds should only be spent on exempt goods and services purchased for the sole benefit of the beneficiary. Purchasing goods and services for anyone other than the beneficiary or giving away the funds carries the risk of program penalties or even worse, a loss of benefits. To prevent unnecessary issues, your client should keep any relevant receipts and/or records to demonstrate that spend down rules have been properly followed.