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Disability, Divorce, SSI, and Medicaid

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Mary has severe rheumatoid arthritis and uses either crutches or a wheelchair to get around.1 She is separated from her husband and her only income is Supplemental Security Income (SSI) benefits of $637 per month.2 She lives in one of 39 states, the District of Columbia, or the Northern Mariana Islands in which an SSI recipient automatically qualifies for Medicaid. Medicaid pays for Mary's doctor visits, physical therapy, prescription drugs, crutches, and the wheelchair. If her condition worsens, Medicaid could also pay for home health care services.3 Starting next month, Mary will receive $657 per month in alimony payments under a negotiated settlement. The SSI program will disregard the first $20 of her alimony, but the remaining $637 will be counted to reduce her monthly SSI check to $0. Thus, despite a $657 per month alimony award, the net benefit to Mary is $20 per month. The net benefit could turn into a net loss, however, because her loss of SSI benefits means that she also loses her automatic eligibility for Medicaid.
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FUNDING OF ASSISTIVE TECHNOLOGY SERIES
Disability, Divorce,
SSI, and Medicaid
Using Creative Alimony, Child Support and Property
Settlements to Maximize SSI, Ensure Medicaid Eligibility,
and Create Funding for Assistive Technology
National Assistive Technology Advocacy Project
Neighborhood Legal Services, Inc. - Buffalo, N.Y.
September 2008


FUNDING OF ASSISTIVE TECHNOLOGY SERIES

Disability, Divorce,
SSI, and Medicaid
Using Creative Alimony, Child Support and Property
Settlements to Maximize SSI, Ensure Medicaid Eligibility,
and Create Funding for Assistive Technology
James R. Sheldon, Jr., Esq.
Supervising Attorney
jsheldon@nls.org
Diana M. Straube, Esq.
Staff Attorney
dstraube@nls.org
National Assistive Technology Advocacy Project
A Project of Neighborhood Legal Services, Inc.
237 Main Street, Suite 400
Buffalo, New York 14203
(v) 716-847-0650; (fax) 716-847-0227
(tdd) 716-847-1322
www.nls.org
September 2008
© Copyright 2008 • Neighborhood Legal Services, Inc.


Preface
This version of the publication, Disability, Divorce, SSI and Medicaid: Using Creative Alimony, Child
Support and Property Settlements to Maximize SSI, Ensure Medicaid Eligibility, and Create Funding for
Assistive Technology, is published through the National Assistive Technology (AT) Advocacy Project
of Neighborhood Legal Services, Inc., as part of its Funding of AT manual series. Information about
the AT Advocacy Project, and the federal grant that supports it, appears in the Publication Credits and
Disclaimer on page iii, below.

This funding manual was originally published in 1999 under the title, SSI and the Family Law
Attorney: Using Creative Alimony, Child Support and Property Settlements to Maximize SSI, Medic-
aid and Create Funding for Assistive Technology. This is both an update and expansion of the original,
1999 publication. Our targeted audience, in 1999 and again in 2008, includes Protection and Advocacy
(P&A) program staff (attorneys and advocates) and attorneys who specialize in divorce law in both the
private and public sectors (i.e., legal services and legal aid lawyers). The 1999 publication appeared in
three formats: as a featured article in the July-August 1999 issue of Clearinghouse Review, a bi-monthly
journal distributed primarily to legal services and P&A programs nationwide; as one of several funding
manuals published as part of our Funding of AT series; and as one of many publications that appear on
the Neighborhood Legal Service website, www.nls.org.

Why have we published this funding manual? Prior to 1999 the co-authors, James R. Sheldon,
Jr. and Diana M. Straube, both employed as attorneys at Neighborhood Legal Services, Inc., in Buffalo,
New York, regularly found themselves counseling divorce attorneys whose clients with disabilities re-
ceived SSI and Medicaid. Mr. Sheldon approached these calls as an attorney with many years of experi-
ence with SSI and Medicaid, but minimal experience in divorce or family law; Ms. Straube approached
these calls as an attorney with many years of experience in divorce or family law, but minimal experi-
ence with SSI and Medicaid at the time. Without advertising or holding themselves out as “disability
and divorce” specialists, many private attorneys found their way to Ms. Straube or Mr. Sheldon, through
word-of-mouth, as the private attorneys struggled with how to best settle a case when an adult client or
that client’s child had a disability and received SSI and Medicaid benefits.

As Ms. Straube and Mr. Sheldon consulted with more and more private attorneys on these issues,
often collaborating to analyze each new set of facts, two things became clear: first, that failure to struc-
ture a family law or divorce resolution, in a way that ensures and maximizes SSI eligibility, could cost
a client and his/her children thousands of dollars through lost SSI benefits, lost opportunities to directly
fund disability-related services and equipment, and lost Medicaid coverage; and second, that very few
family law attorneys possessed enough knowledge of SSI and Medicaid law to either structure a resolu-
tion geared to maximize those benefits or to fully understand the implications of failing to do so.

This publication covers the basic SSI rules an attorney must know to competently represent the
interests of an adult or child with a disability who receives SSI and is expected to benefit from alimony,
child support, or any other cash or property settlement that results from a divorce or related action. We
explain SSI’s income and resource rules, the types of cash and property settlements that will affect SSI,
and those that will not. We also explain how SSI becomes the conduit to automatic Medicaid eligibil-
ity in most states and why the retention of Medicaid may be more important than the retention of SSI.
Disability, Divorce, SSI, and Medicaid
i

The hypothetical examples which are included should provide the reader with guidance as to how these
principles will apply in real life cases.

When this publication first went to press in 1999, we believed that the information and settle-
ment strategies outlined could be of great benefit to adults and children who would need funding for a
range of medical equipment that is often classified as assistive technology or AT. By avoiding monthly
alimony or child support payments and substituting “vendor payments” for items other that food and
shelter, the SSI program would not treat these alternative payments as income and SSI eligibility would
not be affected. Similarly, by structuring property settlements and lump sum distributions to avoid the
receipt of cash, the divorcing spouse would be able to keep resources within the SSI program’s $2,000
limit. In many cases, these alternative vendor payments or property settlements could be structured to
allow for purchase of disability-related services and equipment that might not otherwise be available
through Medicaid or a private insurance program. More importantly, if the settlement strategy could
be used to ensure SSI eligibility it would also ensure Medicaid eligibility in most states. Based on the
many calls and emails we have received from attorneys who were using our publication as a guide, we
know that many individuals with disabilities have benefitted from these strategies.

What has changed since our 1999 publication? Two major changes have occurred, as discussed
in the manual, that will affect when something is counted by the SSI program as either income or a re-
source. In 1999, income included anything received as cash or in-kind that could be used to meet needs
for “food, clothing or shelter.” Similarly, resources included most liquid assets that could be converted
to cash to meet needs for “food, clothing and shelter.” Effective April 2005, “clothing” was removed
from these definitions, meaning that an SSI recipient could receive clothing as a gift or as part of a fam-
ily law resolution and not have it affect SSI eligibility. Also, effective April 2005, all “household goods
and effects” are considered to be exempt assets, where prior to that a $2,000 limit applied. This change
means that kitchen appliances, living room and dining room furniture, T.V. and stereo equipment, and
bedroom furniture, for example, could now be provided in lieu of a cash property settlement without any
adverse consequences to SSI eligibility. These changes are discussed in the body of the publication.

Many have asked whether the strategies suggested in this publication are legal as a matter of SSI
law. Keeping in mind that SSI law and policy changes from year to year, all the information and exam-
ples used in this publication have been thoroughly researched and represent what is possible under SSI
law and policy as of mid-2008. Readers must also keep in mind that any minimal changes in the facts of
our case examples could lead to a different legal analysis. What we can say is that tens of thousands of
hard copies and electronic copies of this publication have been distributed through Clearinghouse Re-
view, through our Funding of AT manual series, and through our website, and we have never heard from
an attorney that we had misstated what is possible.

We do hope that attorneys, advocates, and others find this publication helpful. If you have expe-
riences in using this guidance that might be helpful to others, please share it with either of the co-authors
whose contact information appears on the title page.
ii
Funding of Assistive Technology Series

Publication Credits and Disclaimer
This publication, Disability, Divorce, SSI and Medicaid: Using Creative Alimony, Child Support and
Property Settlements to Maximize SSI, Ensure Medicaid Eligibility, and Create Funding for Assistive
Technology, was originally published in 1999 under the title, SSI and the Family Law Attorney: Us-
ing Creative Alimony, Child Support and Property Settlements to Maximize SSI, Medicaid and Create
Funding for Assistive Technology. Both the 1999 version of this publication and this 2008 version are
published and distributed through the National Assistive Technology (AT) Advocacy Project.* That
project is fully funded under a Cooperative Agreement, number H224B050003 from the Rehabilitation
Services Administration, U.S. Department of Education, to the Rehabilitation Engineering Society of
North America (RESNA) and its subcontractors. Neighborhood Legal Services, Inc. and its National
AT Advocacy Project are subcontractors of RESNA as part of the National AT Technical Assistance
Partnership.

The co authors of this publication are James R. Sheldon, Jr., the Supervising Attorney of the
National AT Advocacy Project, and Diana M. Straube, a Staff Attorney with the project. Both authors
work part time with the AT Advocacy Project (see About the Authors, p. v.).

This publication contains an extensive discussion of the Supplemental Security Income (SSI)
program’s income and resource rules, particularly as they relate to the practice of a family law special-
ist. The opinions and positions expressed herein are those of the individual authors and do not neces-
sarily reflect the position of the Social Security Administration, the U.S. Department of Education, or
any other federal agencies, and no official endorsement by the Social Security Administration, the U.S.
Department of Education, or any other federal agency, of the opinions and positions expressed herein
should be inferred.

*The National AT Advocacy Project provides technical assistance, training, and a range of other
support services, nationwide, to attorneys and advocates who work at Protection and Advocacy pro-
grams and specialize in assistive technology issues. For access to our many publications, you can go to
our website at www.nls.org/natmain.htm.

Disability, Divorce, SSI, and Medicaid
iii


About the Authors
James R. Sheldon, Jr. is a 1978 graduate of the University of Buffalo Law School and is the Super-
vising Attorney of the Disability Law Unit at Neighborhood Legal Services (NLS). He joined NLS in
late 1980 and focused his work, initially, in the areas of consumer law, public benefits, Social Security,
and SSI. Beginning in the mid 1980s, Mr. Sheldon focused exclusively on disability-related issues, in-
cluding administrative appeals and litigation. He focused on both the medical issues of Social Security/
SSI (supervising an SSI appeals unit from 1989 to 1996) and Social Security’s work incentives (super-
vising four separate work incentives projects between 1998 and 2008). He has worked on AT-related
advocacy since the late 1980s, having handled cases involving Medicaid, Medicare, special education,
vocational rehabilitation agencies, private insurance plans, state specific programs, and the SSI work
incentives as AT funding sources. Since 1995, he has supervised NLS’s State AT Advocacy Project and
since 1996, he has supervised the National AT Advocacy Project. During the past 13 years, Mr. Shel-
don has: authored numerous newsletter articles for IMPACT and AT Advocate; authored or co-authored
publications for the funding of AT manual series on Medicare, Social Security/SSI work incentives,
funding of work-related AT, and the prior version of the current Disability, Divorce, SSI and Medicaid
publication (co-authored with Ms. Straube); served as editor of all AT-related publications; provided
technical assistance to attorneys and advocates throughout the country; and presented on all of the afore-
mentioned funding sources at many conferences throughout the country.
Diana M. Straube is a 1987 graduate of the University of Buffalo Law School and is a Staff At-
torney with the Disability Law Unit at Neighborhood Legal Services (NLS) in Buffalo, New York. Ms.
Straube worked for one year in a private firm handling personal injury litigation before joining the staff
at NLS in 1988. Between 1988 and 2003, she worked in NLS’s Family Law Unit, handling a range of
divorce, child support, custody, and related cases. She served a three-year term (2000-2003) as Chair
of the Bar Association of Erie County’s Policy and Procedure in Family Court Committee. In late 2003,
Ms. Straube moved into NLS’s Disability Law Unit where she now spends all her time on assistive tech-
nology (AT) issues, splitting her time between individual appeals and litigation (the New York State AT
Advocacy Project), and technical assistance and training (the National AT Advocacy Project). Her indi-
vidual practice and technical assistance work focuses primarily on Medicaid, including the special rights
of children under Medicaid’s Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program.
She is a regular contributor to both the IMPACT and AT Advocate newsletters, as published by the State
and National AT Advocacy Projects. During the past several years, Ms. Straube has presented at numer-
ous conferences, both within New York and around the country, on a range of Medicaid issues and on
using the Department of Veterans Affairs as an AT funding source. Ms. Straube co-authored, with Mr.
Sheldon, the earlier, 1999 version of the current Disability, Divorce, SSI and Medicaid manual.
Visit the Neighborhood Legal Services web site at www.nls.org and check out the growing
number of references that are disability-related. Our National AT Advocacy Projects website,
www.nls.org/natmain.htm, includes past newsletters, all publications from our funding of AT
manual series, and many of the handouts from our past national conferences.

Disability, Divorce, SSI, and Medicaid
v


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