It's hard to think about building assets for the future when you get public benefits and don't have much income. Additionally, programs like Supplemental Security Income (SSI) and the Food Assistance Program have resource limits that make it hard to save money.

However, there are ways you can build your assets, even if you are on public benefits and have low income.

Building your assets means saving up money or making investments by putting money in the bank, buying stocks, putting money into a retirement account, or buying a home. It’s important to build your assets, because assets help you:

• Become financially secure and more independent
• Deal with unexpected expenses that may come up, and
• Achieve your goals, like paying for school, going on vacation, buying a computer, starting a business, or owning a home.

Financial Literacy

"Financial literacy" means having a general understanding of how to manage your money. Over time, financial literacy can help you do big things, like pay for college, buy a house, or have money during old age. Financial literacy can also help you stay away from scams and be ready for unexpected expenses and difficult life events.

Financial literacy is especially important for people with disabilities, because they often:

• Spend more on everyday activities
• Have high medical costs, and
• Get public benefits that have rules and restrictions about money and assets.

A tax-free ABLE account lets people with disabilities save some money without affecting their benefits. It also allows family and friends to give them money to use for various expenses.

You can open an ABLE account if your disability began before you turned 26 and meets the Social Security Administration's standards. (SSA has different standards for children, for adults, and for blindness.)

• Build assets in an account that has tax advantages. Your investments in an ABLE account aren't taxed, so your wealth grows faster. Plus, If you work and save earned income in your ABLE account, you may qualify for the federal Saver’s Credit.
• Use your savings on many types of expenses. There are rules about spending the money in your ABLE account, but there’s also a lot of flexibility.
• Save up money without losing benefits. Many benefits programs have resource limits, but:
  • You can have up to $100,000 in your ABLE account and keep getting Supplemental Security Income (SSI) benefits, as long as you meet all other SSI rules. If your ABLE account balance goes over $100,000, your SSI benefits stop. However, if the balance drops back below $100,000, your benefits start up again and you don't have to reapply.
  • No matter how much you have in your ABLE account, the money in it doesn't affect Medicaid, FIP, Freedom to Work, Food Assistance Program, and most other programs with resource limits.

The bottom line: An ABLE account means that if you get a job, you can save up money without losing your benefits. It also lets family and friends give you money without affecting your benefits.

ABLE account rules are introduced below and covered in detail in DB101's ABLE Accounts article.

Opening an ABLE Account

An ABLE account is easy to set up, and you don't need a lawyer or other advisor. You can open your own ABLE account or, if needed, it can be opened for you by a parent, a legal guardian, or someone with a valid power of attorney.

Some states offer ABLE accounts and others don’t. Michigan's ABLE account program is MiABLE.

If you qualify for an ABLE account, you can open one in any state that offers a nationwide program. Although you can only have one ABLE account at a time, you can switch your ABLE account from one state program to another. Compare the ABLE account options in different states.

Rules About ABLE Account Money

There are two limits on how much money can be deposited in an ABLE account in a single calendar year:

• Up to $17,000 in total deposits can come from any source (you, your family and friends, your benefits, and other unearned income), plus
• If you have a job, another $13,590 in deposits can come from your own earned income.
  • Note: If you or your employer make contributions to a retirement plan set up by your employer, you might not qualify for the extra ABLE contribution amount based on having a job (you can still make regular ABLE contributions). If you aren't sure about this, ask your ABLE account program or check with a tax expert. Get more information about this rule from the ABLE National Resource Center.

Important: You need to keep good records, to make sure that too much money isn’t put into your account.

State ABLE programs also have limits on the total amount in your account — typically $200,000 to $500,000, depending on the state. For example, if the cap is $300,000, you cannot make a deposit until your account balance drops below $300,000 again.

You have to use the money in your ABLE account for certain qualifying expenses, like daily living expenses, education, or housing. Many expenses qualify. It's your job to make sure an expense qualifies, and to keep records of how you use your ABLE account money.

If you take money out of your ABLE account but do not use it for qualified disability expenses, you might have to pay income tax on it plus a 10% penalty, and it could affect SSI and other benefits

Learn more in DB101's article about ABLE accounts.

If you save money in an Individual Development Account (IDA), the IDA program’s sponsor or financial institution will match the money you save. The match may be anywhere from one to four times the amount you deposit. For example, if your IDA program has a 2:1 match and you deposit $50 into your account, the program will add an additional $100 towards your savings goal, so that your total savings for that month will be $150!

To open an IDA:

• Your annual income must be 200% of the Federal Poverty Guidelines (FPG) or less ($29,160 per year for individuals)
• You must have earned income from a job or your own business
• You have to take financial literacy classes about things like money, lowering debt, developing a savings plan, credit, and investing; and
• Depending on the program, you may also need to be a U.S. citizen or permanent resident.

You also have to use the IDA to save money for an approved goal. IDA programs usually allow one of the following goals:

• Buying a first home
• Paying for education or training costs, or
• Funding a small business.

Most IDA programs only let you save a limited amount of money in your account, usually $4,000 - $6,000. This includes the money you deposit plus the matching funds. Once you reach the limit, you aren't allowed to deposit any more money into the account. IDA programs also limit how long you can save (usually three years).

Finding and Applying for an IDA

Once you’ve decided to do an IDA, you must take several steps to enroll in an IDA program:

1. Decide how much money you plan to save and what you are going to do with it. You could use the money for something that will help you with your education, with your small business, or with buying a home.
2. Find an IDA program in your area. There are IDA program directories at the Michigan Individual Development Account Partnership (MIDAP) and Prosperity Now.

   • Note: There aren't as many IDA programs as there used to be. Some are still active, but it can take a bit of effort to find one that is accepting applications.

3. Find out as much as you can about the IDA program you are considering.
   • How is the program funded? Is it federally funded?
     • If the IDA program is federally funded, money deposited and matched in that account will not be counted by SSI or Medicaid. That means it will not impact your benefits.
     • If you enroll in an IDA that is not funded by the federal government (for example, an IDA funded by a nonprofit or private company), the money in your IDA may cause you to lose your SSI and Medicaid benefits.
   • Does the program fund your goal?
     • Federally funded programs only let you save for developing a small business, getting a higher education, and buying your first home.
     • Some privately funded IDAs may let you save for other goals, like buying a new computer or car.
4. Go to an orientation meeting to learn more about an IDA program that interests you.
5. If you decide to enroll, give the required personal and financial information to make sure you qualify for the program.

After you have been accepted into an IDA program, you will work with an IDA caseworker who will help you with your account. You’ll open a savings account with a bank or credit union that is tied to your IDA program. Depending on the program, you may need to deposit a certain amount of money into your account each month.

Usually, if you get Supplemental Security Income (SSI) benefits and have income from a job or from another benefits program, like Social Security Disability Insurance (SSDI), your SSI benefits amount goes down. Also, if you save up too much money in a bank account or build your assets in any other way, you could lose your SSI benefits if you go over SSI's resource limit ($2,000 if you’re single, $3,000 for couples).

Social Security’s Plan to Achieve Self-Support (PASS) program lets people who get SSI earn more money and save that money in a special type of account. There are two main benefits:

• You can save up resources without losing your SSI benefits.
• The income you put into your PASS won’t be counted as income by SSI, so it won't make your benefits amount go down.

The money that you save has to be used for a work-related goal you choose, such as:

• Paying for school or training
• Starting a business, or
• Paying for equipment, support services, and other expenses related to your goal.

Note: If you already go to college or have a job, you can set up a PASS to help pay for your current work, school, or health expenses.

Applying for a PASS

To set up a PASS, you must:

• Get SSI benefits or become eligible for SSI benefits as a result of an approved PASS application.
• Have income that's not from SSI (for example, SSDI benefits or wages from a job) or have resources over $2,000 that you can use to fund your PASS.
• Choose a work goal that will help you earn enough money to lower your SSI benefits or get off SSDI benefits altogether.
• Write a plan that shows how saving a certain amount of money will let you reach your work goal. The Social Security Administration has PASS specialists who can help you write your plan.
• Be under age 65. If you are 65 or older, you may be able to set up a PASS if you were getting SSI benefits based on disability or blindness in the month before your 65^th birthday.

On the PASS application form, you must describe your goals and how you plan to achieve them. This description should be detailed enough to convince Social Security that:

• You have a clear plan
• The plan is realistic, and
• If you complete the plan, your need for SSI benefits will go down or you won't need SSDI at all.

If you do not yet have a clear goal or way to achieve it, try working on one with an organization like Michigan Rehabilitation Services (MRS), the Michigan Bureau of Services for Blind Persons (BSBP), or an Employment Network (EN) through the Ticket to Work program.

Using a PASS

After Social Security approves your plan, they send you instructions about how to keep good records and make sure your PASS funds and expenses are separate from your other money. Follow these rules carefully.

If a medical situation or some other issue comes up that impacts your ability to continue your PASS, talk to your PASS Cadre about your options. You may be allowed to put your PASS on hold for up to 12 months without having to reapply.

Tax credits can help you save money and build assets. A few important credits include:

• The Child Tax Credit (CTC)
• The Credit for the Elderly or Disabled, and
• The Earned Income Tax Credit (EITC).

To get any of these tax credits, you must file your taxes!

Child Tax Credit (CTC)

The Child Tax Credit (CTC) gives parents with children under age 17 up to a $2,000 tax credit for each child. Eligible families must be working and earning at least $2,500 a year.

Note: If you get Supplemental Security Income (SSI) benefits and get money from a CTC, you should spend it within 12 months. After 12 months, Social Security counts that money toward SSI's resource limit.

Credit for the Elderly or Disabled

If you or your spouse got taxable disability income and was permanently and totally disabled during the tax year, you may be eligible for the Credit for the Elderly or the Disabled.

Earned Income Tax Credit (EITC)

If you have low income, the Earned Income Tax Credit (EITC) may help lower your federal income taxes. Even if you don’t earn enough money to owe federal income taxes, you may be able to get this tax credit. Many people who qualify for an EITC don’t get it, because they don’t know they could or they don't file their taxes.

To qualify, you must have income from employment, self-employment, or employer-paid disability benefits that is below certain limits and you must file your taxes.

The amount you get from your EITC depends on your Adjusted Gross Income (AGI), whether you are married, and the number of children you have. For 2023 (filing taxes by April 2024), the EITC ranges from $2 to $7,430.

Qualifying Children

A child must meet some requirements to be considered a “qualifying child” for an EITC:

• Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example, your grandchild, niece, or nephew).
• Residence: The child must live at the same residence as you for more than half the year and have a valid Social Security number.
• Age: At the end of the tax year, the child must be 18 or younger. Or, if going to school full-time, the child must be 23 or younger. The only exception is if your child is permanently and totally disabled, in which case there is no age requirement.

A qualifying child can only be listed on one tax return for an EITC.

How to Get an EITC

To claim an EITC, you must file a federal tax return, IRS Form 1040. If you have a qualifying child, be sure to attach a Schedule EIC.

To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your 1040 instruction booklet. Or you can ask the IRS to calculate it for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To see whether you qualify for an EITC and how much you might get, use the IRS EITC Assistant.

A trust is a legal arrangement in which a person or organization manages assets for someone else. The trust's assets can then be used to make payments for that person's expenses. The person whose expenses are paid for by a trust is called the “beneficiary” and the person or organization who is managing the assets is the “trustee.” Many kinds of assets can be put into a trust, such as cash, stocks, bonds, and real estate.

Some kinds of trusts, called Special Needs Trusts, can be set up to hold assets for a person with a disability. Assets in a Special Needs Trust do not affect the person's eligibility for programs like Supplemental Security Income (SSI), Medicaid, and Section 8. That means that if you are the beneficiary of a Special Needs Trust, your trust can have more assets in it than the resource limits for benefits programs usually allow. This can let you be in a more secure financial situation without losing your benefits. For more details, see Social Security's information about Special Needs Trusts and SSI eligibility.

You or the person setting up the trust for you must do so correctly. If your Special Needs Trust is not set up correctly, the assets in your trust might be counted toward public benefits resource limits and you could lose your public benefits. And after you die, the type of Special Needs Trust that was set up determines if the assets in the trust have to be used to repay the government for any Medicaid expenses.

Special Needs Trust Rules

While public benefits, such as SSI and Medicaid, offer basic support for food, shelter, and medical care, you can use a Special Needs Trust to pay for other things. For example, you could use money from the trust to pay for your recreation expenses, telephone bill, education, and vacations. You cannot use money from a Special Needs Trust for expenses that are already paid for by one of your public benefits.

Additionally, the funds in a Special Needs Trust must be used to benefit only you; no one else can benefit from that trust. That said, while the trust is set up to help you, payments should not be made directly to you. Payments made directly to you count as income and may affect your benefits. When you need to pay a provider for something that is not food or shelter, the trustee will pay the money from the trust directly to the provider. Only the trustee can handle the money from the trust.

There are three common types of trusts: First Party Special Needs Trusts, Pooled Special Needs Trusts, and Third Party Special Needs Trusts. They each have their advantages and disadvantages, and the right type for you depends on your specific circumstances.

First Party Special Needs Trusts (Medicaid Payback Trusts)

First Party Special Needs Trusts, often called Medicaid Payback Trusts, are used if you have built up your own assets, inherited assets, or gotten assets from a court settlement. In these situations, you actually own the money.

It used to be that people with disabilities were not allowed to set up their own First Party Special Needs Trust, even though it was their own money. A parent, grandparent, guardian, or court had to set up the trust, the trustee controlled the funds, and you could not be your own trustee. The laws changed in 2016, and this type of trust can now be set up by you, or by your parent, grandparent, legal guardian, or the court.

To qualify, you must be under 65 years old and must have a disability that meets Social Security's standards. If your disability doesn't meet these standards, you cannot have this type of trust.

The trust has to specify that after you die, any money left in the trust will be used to pay back the state for the amount of money it spent on Medicaid for you after the trust was set up. If money is still left over after the state has been paid, the trustee will give it to whomever you listed to get the money after you die.

Pooled Special Needs Trusts

This type of trust pools assets from different people and puts them into a large investment fund. Although the funds are pooled (used together), you still have your own separate account. Pooled Trusts offer both First Party accounts (funded with only your own money) and Third Party accounts (funded only with money from other people). As with a First Party Special Needs Trust, all beneficiaries of a Pooled Special Needs Trust must have a disability that meets Social Security's standards.

A Pooled Special Needs Trust is set up through a nonprofit organization. The nonprofit organization will administer the Pooled Special Needs Trust, take care of all the tax preparation, make investment decisions, and act as the trustee.

Before the Pooled Special Needs Trust is set up, you or your family members must explain what you want the trust to pay for and who should be consulted about these matters. Anyone can put money into the Pooled Special Needs Trust for you — parents, grandparents, even you.

Any money left in the Pooled Special Needs Trust after you die will be used to pay back the state for the amount of money it spent on Medicaid for you after the trust was set up.

Third Party Trusts

Third Party Special Needs Trusts are not as well known as First Party Trusts and Pooled Trusts, but they have the advantage that after you die, a Third Party Special Needs Trust does not need to repay the government for any Medicaid expenses.

Only certain people are allowed to set up a Third Party Special Needs Trust:

• Your parent
• Your grandparent
• Your legal guardian
• The court

Parents usually set up and supply the money for Third Party Special Needs Trusts, often through their wills and sometimes by purchasing life insurance payable to the trust. These types of trusts are often set up for a child with a disability, but they can also be for a child (or other person) without a disability. A parent can set up a trust for a child of any age, from a baby up to a senior. For example, a mother who is 90 years old could set up a trust for her 65-year-old daughter.

Other family members, such as grandparents, aunts, and uncles, can also put money into a Third Party Special Needs Trust. The only person who cannot place money into this type of trust is you, the person who is the beneficiary of the trust.

Some parents place their property in a "living" trust and leave instructions that a separate trust will be created for their child when the parents die. This type of trust is often effective immediately. Anyone can give money to the trust by either writing a check or writing a will naming the trust as the beneficiary.

If you get SSI, the money from a Third Party Special Needs Trust should not be used for housing or food. Housing and food are considered "basic needs" under Social Security laws. If you are getting free housing or food from someone else, including from a family member or a trust, then your SSI benefits go down or stop. Note: Money from an ABLE account that is used for housing or food does not reduce SSI benefits. An ABLE account can be used in combination with a Special Needs Trust. Learn more about ABLE accounts.

Whoever sets up a Third Party Special Needs Trust must decide who will get any assets that are left in the trust after you die.