Ted is a 37 year old man who has not worked since 2003. He suffers from a number of physical and mental impairments. His parents deposit $1100 every month into his bank account so that he can pay his rent, buy food and otherwise live independently. Ted’s SSI application was turned down initially. He came to see us to file for reconsideration. One of the first things we emphasized to Ted is that his parents’ cash support could mean difficulties in his attempt to get approved for benefits, or could reduce his benefits if he did get approved.
Fortunately, there’s a solution. If someone loans you money, rather than gives it to you, the value of the cash doesn’t count as income and does not reduce your SSI benefit. To prove that it’s a loan, the best approach is a written agreement. Several key aspects of the agreement include:
1. The loan agreement must be legal and enforceable under state law where Ted lives. It must be made in good faith, not for the purpose of subverting the law.
2. The loan agreement must be in effect at the time that Ted’s parents give him the money. In other words, no back dating.
3. Both Ted’s parents and Ted must believe that he has an obligation to repay the money when he can.
4. The agreement must have a schedule for repayment, even if what it says is that Ted intends to begin repayment within 60 days, for example, of receiving hoped-for SSI benefits.
Here is an example straight from Social Security rules:
EXAMPLE 2: Feasible loan repayment based on anticipated benefits
Claimant applies for SSI disability benefits and alleges a loan:
- Claimant files for SSI on 05/13/11 and alleges his mother pays his rent of $300 each month.
- The claimant states that he must pay his mother back. You contact his mother and she states that she has been paying her son’s rent and he must pay her back.
- The claimant also states that he hopes he is approved for SSI so he can use the money to pay his mother back
Determination:
- Both parties confirmed that repayment was not dependent on whether the claimant’s financial situation improved, and
- The repayment plan is feasible because the claimant intends to use anticipated SSI benefits to pay back the loan.