The third round of government stimulus payments has been authorized by President Biden’s American Rescue Plan Act of 2021. Importantly, adults with disabilities who are dependents for tax purposes are now eligible to receive a stimulus payment.

If you have a dependent with special needs, you are probably wondering how the stimulus payment may affect your loved one’s situation, especially his or her eligibility for government benefits. We have good news.

The stimulus payments:

• are not taxable,
• are not considered income to a Supplemental Security Income (SSI) recipient, and
• are excluded from the recipient’s resources for 12 months.

So what does this mean for you and your family member with special needs? Here’s a quick summary.

General Rules to Qualify for Government Benefits

Usually, to qualify for certain government benefits, the recipient’s assets are capped at $2,000. In other words, a person with disabilities can’t have a savings account or other resources totaling more than $2,000 to qualify for Medicaid or SSI. One way to address this limitation is by establishing an Achieving a Better Life Experience (ABLE) account to hold excess funds. 

Most states sponsor ABLE accounts which currently allow yearly deposits up to $15,000 without affecting the account holder’s eligibility for benefits such as Medicaid. These accounts usually have a maximum cap of $100,000 before social security benefits are affected.

The funds in an ABLE account can be used at any time to pay qualified disability expenses like food, housing, health care, transportation, and living expenses that will improve the account holder’s quality of life. For more details about the benefits of an ABLE account, be sure to read our blog article, “What is an ABLE Account and How Does it Work?” Anyone can contribute to an ABLE account but the funds can only be spent for the account holder’s benefit.

Stimulus Money Does Not Affect Benefit Eligibility if Handled Properly

If your dependent with special needs receives a stimulus check and that money is placed in a regular account, it must be spent within 12 months or it will be considered income to the recipient and could jeopardize their right to benefits. If this money is placed into an ABLE account, you can stretch its use without affecting benefits.

Sadly, only a small fraction of the eight million eligible Americans have established an ABLE account. High fees can be a deterrent in some states, however you do not need to open an ABLE account in your home state. Other states may offer different ABLE account rules, tax benefits, or fees, and most accounts are available to out-of-state residents. An experienced special needs planning attorney can help you find the ABLE account that’s best for your situation.

Protecting Every Possible Resource for Your Loved One With Special Needs

We know you want to ensure your family member with disabilities receives the full benefit of an economic stimulus payment while also protecting his or her eligibility for government benefits. We suggest placing stimulus money into an ABLE account where it is not considered income for Medicaid and SSI purposes and you can stretch its use past the 12-month spend-down requirement.

Rubin Law is the only law firm in Illinois exclusively limited to providing compassionate special needs legal and future planning to guide our fellow Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. For more information, email us at email@rubinlaw.com or call 866-TO-RUBIN.