Many young adults with special needs live with their loved ones; however, doing so after reaching the age of 18 can result in a 1/3 reduction of Supplemental Security Income (SSI) benefits due to the receipt of In-Kind Support and Maintenance (ISM).

What can you do to avoid a reduction in your adult child’s SSI benefit due to the provision of ISM? The solution for your child is to pay rent pursuant to a written rental agreement. The rental amount should be reasonable or in an amount of their fair share of household expenses. In other words, to avoid ISM, families are encouraged to establish a written rental agreement for full-rate room and board that accounts for the individual’s contribution towards household operating expenses and food.

If you decide to establish a rental agreement to recognize that your child pays you for their food and shelter expenses, it is important to know that the money you receive from your child is viewed as taxable income. If this is a concern, it may be better to opt for determining your child’s fair share of household expenses, which does not impact your tax status.

When determining a reasonable payment amount, evaluating rent prices in the surrounding area and determining your household expenses can be helpful. For Social Security purposes, an individual’s fair share can be calculated by adding the following costs and dividing it by the number of people within the household.

• Mortgage/Rent
• Home Insurance
• Property Tax
• Heating Oil and/or Gas
• Electricity
• Food
• Water, and
• Sewage/Garbage Removal

It is important to note that phone and cable bills and renter’s insurance, among other costs, are not considered calculable components of household expenses.

Another option is to consider how much actual space your child uses within your home. If they are limited to a single room and a shared bathroom most of the time, and if that space is smaller than the areas occupied by the other residents, it may be better to divide by the percentage of square feet inhabited rather than the number of residents.

Typically, an amount between $400 and $600 a month will be accepted; however, you should use realistic calculations to determine rent. Even though you may not be asked to share your calculations, it is best to be prepared to do so.

In Arizona, court-appointed legal Guardians may not use funds from their ward’s estate for room and board provided by the guardian or the guardian’s spouse, parent, or child unless a charge for the service is approved by order of the court made upon notice to at least one of the next of kin of the ward, if notice is possible. So, if you are the legal Guardian for your disabled child and intend to charge rent for purposes of maximizing your child’s SSI benefit you must also obtain approval of the same under order of the court per ARS Sec. 14-5312(A(4)(b).

Regardless of whether or not your child is subjected to a benefit reduction, it is highly important to apply for and maintain SSI as it can help them to qualify for Medicaid and DAC (Disabled Adult Child) in the future. Over the lifetime of your child, these benefits can be significant.

We routinely work with parents of disabled children (minors or adults) and understand the network of public benefits available to individuals with special needs or disabilities. We also help Arizona families every day with guardianships, conservatorships, Medicaid (ALTCS) benefits planning, and all types of special needs trusts and planning. Call us today at 480-922-1010 or email info@bivenslaw.com to schedule your consultation to see how we can help you plan for your special needs loved one’s current and future needs.

-Stephanie A. Bivens, Esq.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as offering legal advice or creating an attorney-client relationship between the reader and the firm or author. You should not act or refrain from acting on the basis of any content included in this article without seeking appropriate legal advice about your individual facts and circumstances from an attorney licensed in your state. Bivens and Associates, P.L.L.C. expressly disclaims all liability with respect to actions taken or not taken based on any or all information contained in this article.