'I was shocked to learn that his monthly Social Security benefit will be only $700'

"My wife, a retired social worker, believes she can help him apply for Supplemental Security Income and Medicaid." (Photo subject is a model.)

Dear Quentin,

My brother turned 65 this past year. He has never been good with money - not that he's ever really had much of it. He's also the kind of person who needs constant encouragement to take action. When our father was alive, he looked after him. Since then, that role has largely been filled by his roommate, who is also a close friend.

With his roommate's help, we were finally able to get him to apply for Social Security. He has worked long enough to qualify for benefits, although he has been self-employed for most of his life, including now. The primary reason we wanted him to sign up for Social Security was so his Medicare Part B premium could be deducted from his monthly benefit.

He applied within the six-month window. I was shocked to learn that his monthly Social Security benefit will be only $700, and that's before the Medicare premium is deducted. When I told him that wasn't enough to live on, he insisted that he would simply keep working, as though he'll be able to do so indefinitely.

My wife, a retired social worker, believes she can help him apply for Supplemental Security Income and Medicaid. He would probably qualify, but SSI benefits are quite modest, and eligibility comes with significant income and asset restrictions. Medicaid would cover his healthcare expenses, including long-term care if needed, but it also comes with its own rules.

I've been considering setting up an annuity to help supplement his income, with the goal of covering the cost of a Medicare supplement plan and providing him with a little additional monthly income. I'm also trying to persuade another brother to contribute. Between the two of us, I estimate we could provide roughly an additional $1,000 per month.

My question is whether that additional income would make him ineligible for SSI, assuming he would even agree to apply for public assistance in the first place.

The Brother

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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

Setting up an annuity for your brother would very likely impact any future SSI eligibility.

Dear Brother,

You face a difficult balancing act when it comes to helping your brother.

SSI and Medicaid can provide a level of stability and protection that would be difficult to replace, particularly if your brother eventually needs long-term care. By working within and with the system, you and your family can ensure he has a roof over his head and medical care.

You don't mention whether he has rental obligations. I'm going to assume that he is living in your father's home and has minimal housing costs, or he is already living in subsidized/low-cost housing, and his monthly rent is pretty low.

To answer your question: Yes. Unfortunately, a privately funded annuity that pays your brother directly would likely affect his SSI eligibility, and could also affect his ability to qualify for Medicaid. The latter is key for any nursing home later in life.

SSI is intended for people with very limited financial means, like your brother. SSI is reduced by countable income and depends on the type and amount of income. Generally, it's $994 for an individual or $1,491 for a married couple, although the limit depends on several factors.

Countable resources, like any money in bank accounts or additional property, generally cannot exceed $2,000 for an individual or $3,000 for a married couple. Your brother's primary residence and one vehicle would be excluded when determining resource eligibility.

Estimated payment

What's more, Social Security benefits are generally considered income when determining eligibility for SSI. Both Social Security retirement and disability benefits are considered unearned income for SSI purposes.

Let's use your brother's $700 per month in Social Security benefits for SSI eligibility. After applying the $20 general income exclusion, countable income would be $680. Therefore, his SSI benefit would be reduced by $680, assuming no other income or exclusions apply.

So if his SSI benefit were $994 per month (using a hypothetical figure for illustration), the calculation would be the $994 maximum SSI benefit minus the $680 in countable Social Security income, leaving an estimated SSI payment of $314 per month.

The exact SSI amount depends on factors like where your brother lives, his living arrangements and other income. You may decide that it's worth setting up the annuity because you will be able to comfortably give him a lot more than $314 a month.

Special Needs Trust

But that brings us to Medicaid, which is also a means-tested program. To be eligible, your brother might not be allowed more than, say, $2,000 in countable assets, which includes bank accounts and investments, and no more than $2,829 a month in income. (These figures vary by state.)

"Planning for long-term care is rarely simple, and Medicaid eligibility rules are one of the biggest sources of confusion for families navigating elder care," according to the Rothkoff Law Group, which has offices in New Jersey and Pennsylvania.

"Medicaid asset and income thresholds can prompt families to reassess their plans," the law firm adds. "For seniors who require ongoing care, exceeding asset or income limits can delay coverage, force private pay, or derail carefully laid plans."

A Special Needs Trust $(SNT)$, funded by a third party, could also help preserve SSI eligibility because assets held in the trust are generally not counted as available resources.

The trust can pay for supplemental needs - such as transportation, personal items, dental care and other quality-of-life expenses - without providing cash income that could reduce his SSI benefits. Whatever you decide, seek out professional counsel.

Protecting your brother's access to SSI and Medicaid should be your first priority, before adding private financial support.

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-Quentin Fottrell