Gift Cards And Disability Recipients: What You Should Know Before You Give

The holiday spirit tends to make people generous and it's becoming increasingly common to express that generosity through gift cards. More than 70% of people in the U.S. give gift cards during the holiday season.

However, if you know someone who is receiving disability benefits through the Social Security Administration, hold back on your generosity until you know for sure how your gift card might affect that person's benefits. Here's what you need to do:

Find out what type of benefit he or she receives before you make your gift.

The Social Security Administration handles two different benefit programs: Social Security disability (often called "SSDI" benefits) and Supplemental Security Income (also called "SSI" benefits). The rules for each program are vastly different and that can cause a lot of confusion.

If the intended recipient of your gift receives SSDI, there's nothing to fear. He or she can receive any gift that you want to give.

If the intended recipient of your gift receives SSI, however, a gift card could cause significant problems. His or her benefits could be reduced or stopped for a period as a result of the gift. He or she could also potentially lose entitlement for a time to medical coverage because SSI (and the medical coverage under Medicaid that comes with it) is considered a need-based benefit. If a person on SSI has too much available income or resources, it ends his or her entitlement to benefits.

Reconsider gift cards and opt for other gifts instead.

Ordinarily, a small gift card at the holidays that's worth less than $60 can be discounted under a policy known as the "Infrequent or Irregular Income Exclusion" -- however, the beneficiary can only use that exclusion once in a calendar quarter. That means that if you give an SSI beneficiary a $60 gift card and someone else does the same thing, Social Security will end up counting one of the gift cards as "unearned income" that can be easily converted to food or shelter.

At best, this could cause the SSI beneficiary's next disability check to be reduced by the amount of the gift. If the gift is sizeable, however, it could put the recipient's entire benefit check at risk by putting him or her over SSI's resource limitation. Resources are anything of value that could be easily turned into cash for food or shelter expenses. The government excludes certain things, such as a single car or a house, but the countable resources a person owns has to be below $2,000 to continue being eligible. Keep in mind that anything you give a person on SSI will be added to any resources they already own and counted together.

What kind of gifts, then, are safe to give to an SSI recipient? Instead of gift cards, consider giving actual, physical gifts, which are not considered refundable or sellable by Social Security. Things like clothing, shoes, new tires for a car, and even personal electronics are generally safe because they depreciate in value after purchase and can't easily be exchanged for cash. Be careful about giving jewelry, however, because high-value items can be resold quickly for cash and are more likely to be counted as expendable resources.

If you want to set aside a sizeable amount of money for an SSI recipient to use, without disrupting his or her entitlement, there are legal ways to do so through things like trusts and educational funds. However, you need the advice of a lawyer who is familiar with the process to walk you through the complexities involved -- otherwise, your generous gift could end up benefiting the government and not the person you intended!

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