Life Insurance: Dshs Resource Or Not?

Life insurance payouts can be a complex topic, and their treatment as a resource or income varies depending on the specific circumstances and the governing laws of a particular state. In the state of Washington, for instance, the Department of Social and Health Services (DSHS) considers a one-time lump-sum payment, such as an insurance claim, to be a resource that must be reported within a specified timeframe. However, the nature of the lump-sum payment also plays a role in how it is treated by DSHS, with certain types of payments, like wrongful death or personal injury settlements, being classified as resources, while others are considered income.

DSHS benefits and one-time payments

In the state of Washington, if you receive DSHS benefits and get a one-time payment such as a settlement from a court case, insurance claim, or a back payment of benefits you are owed, you must report this to the Department of Social and Health Services (DSHS) by the tenth day of the next month. For example, if you receive a $5,000 settlement on May 20, you must report it to DSHS by June 10. A one-time settlement payment in a divorce does not count as a lump sum settlement.

Lump-sum payments can affect your food stamps and cash assistance. If you receive food stamps, a lump sum payment for a past period is considered a resource. A lump sum for current or future months is considered income. If you receive cash assistance, a lump sum payment awarded for wrongful death, personal injury, damage, or loss of property counts as a resource. A lump sum received for any other reason is considered income. If you receive cash assistance and get a lump sum to replace lost, stolen, or damaged property or to pay medical bills, the funds do not count as income or resources for 60 days. DSHS treats money left over after 60 days as a resource.

Regarding life insurance, it is considered a resource if it has a cash surrender value. Burial insurance and most kinds of term insurance have no cash surrender value and are therefore not considered resources. Life insurance with a cash surrender value is excluded from countable resources if the total face value of all policies owned on any one person is not more than $1,500. However, if the total face value exceeds $1,500, the cash surrender value counts as a resource unless designated as funds set aside for burial.

Life insurance proceeds received as a beneficiary due to the death of the insured person are generally not includable in gross income and do not need to be reported. However, any interest received on the proceeds is taxable and should be reported. If the policy was transferred to the beneficiary for cash or other valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration paid, additional premiums paid, and certain other amounts.

If you are collecting Social Security retirement benefits and are the beneficiary of a life insurance policy, the payout is considered unearned income and will not impact your retirement benefit. However, if you are collecting Social Security disability benefits, receiving a life insurance payout or taking out a loan against your policy's cash value can impact your benefit amount and may even put your benefits in jeopardy.

The Supplemental Security Income (SSI) program, which is available to people with disabilities, has strict asset limitations. To qualify for SSI, your countable resources cannot exceed $2,000 as an individual or $3,000 as a couple. While many assets do not typically count toward the resource limit, such as your home, burial plots, and life insurance policies with a combined face value of less than $1,500, a life insurance payout is considered a countable asset. A life insurance payout that exceeds $2,000 would put an individual above the asset limit, resulting in decreased benefits or discontinuation of benefits until assets fall below the limit again.

Food stamps and lump sum payments

Food stamps, or Supplemental Nutrition Assistance Program (SNAP), is a federal program that provides benefits to supplement the food budgets of people with low incomes.

If you receive food stamps and are expecting a lump-sum payment, it is important to understand how this may affect your eligibility for the program. A lump-sum payment is typically a one-time payment, such as an insurance settlement, lawsuit settlement, inheritance, lottery winnings, or retroactive Social Security Disability benefits.

In the context of food stamps, it is important to distinguish between "resources" and "income." A lump-sum payment received for a past period is considered a resource, while a lump sum for the current or future months is considered income. This distinction is crucial because it determines how the payment will impact your food stamp benefits.

If you receive a lump-sum payment while on food stamps, you are required to report it by the tenth day of the next month. Failure to do so may result in penalties. The treatment of the lump-sum payment will depend on whether it is considered a resource or income.

If the lump-sum payment is considered a resource, it will not directly affect your food stamp benefits. Resources are generally not counted when determining eligibility for food stamps. However, if the lump-sum payment causes your total resources to exceed certain limits, it may impact your eligibility for other public assistance programs, which could indirectly affect your food stamp benefits.

On the other hand, if the lump-sum payment is considered income, it will likely impact your food stamp benefits for the month it is received and possibly future months. The specific impact will depend on the amount of the payment and your household's income and needs.

Cash assistance and lump sum payments

Cash assistance and lump-sum payments

If you receive cash assistance, such as TANF, or food stamps, and you get a lump-sum payment, you must report it to DSHS by the tenth day of the next month. For example, if you receive a $5,000 settlement on May 20, you must report it to DSHS by June 10.

A lump-sum payment will affect your food stamps. If you receive food stamps, a lump-sum payment for a past period is considered a resource. A lump sum for current or future months is considered income.

Whether a lump-sum payment will affect your cash assistance depends on the reason for the payment. If you receive cash assistance, a lump-sum payment awarded for wrongful death, personal injury, damage, or loss of property counts as a resource. A lump sum received for any other reason is considered income. If you receive cash assistance and get a lump sum to replace lost, stolen, or damaged property or to pay medical bills, the funds won't be counted as income or resources for 60 days. DSHS treats any money left over after 60 days as a resource.

You can have up to $6,000 in a savings account and a vehicle worth up to $10,000. DSHS does not count the entire value of one vehicle used to transport a physically disabled household member.

One-time payments

If you receive DSHS benefits and then get a one-time payment, such as a settlement from a court case, insurance claims, or a back payment of benefits you are owed (e.g. from Social Security or L&I), you must report this payment to DSHS.

Spend-down requirements

If you get public benefits like SSI, food stamps, or TANF, and you have received legal financial obligations (LFOs) refunded by the Court, you may need to follow "spend-down requirements" to keep getting benefits. You should tell DSHS about this refund as soon as possible.

DSHS and SSI, food stamps, and TANF

The Washington State Department of Social and Health Services (DSHS) provides a range of services and programs to support individuals and families in need.

DSHS and SSI

The Supplemental Security Income (SSI) program is a federal initiative that provides basic support to individuals who are aged 65 or above, blind, or disabled. In Washington State, the State Supplementary Payment (SSP) serves as a state-funded supplement to the SSI. To be eligible for SSP, individuals must meet specific criteria, including receiving SSI cash benefits or Social Security Title II benefits as a disabled adult child.

DSHS and Food Stamps

The U.S. Department of Agriculture Supplemental Nutrition Assistance Program, referred to as SNAP or Basic Food in Washington, assists low-income individuals and families by providing monthly benefits for purchasing food. The Basic Food program includes SNAP and the Food Assistance Program (FAP), which caters specifically to legal immigrants who are ineligible for federal SNAP benefits due to their immigration status.

DSHS and TANF

Temporary Assistance for Needy Families (TANF) is a program that provides temporary monthly cash assistance to eligible families, including those with a pregnant individual or minor child. To qualify for TANF, families must meet specific income requirements, resource limits, and TANF time limits. Washington State also offers the State Family Assistance (SFA) program for residents who are ineligible for TANF due to eligibility changes under the Welfare Reform Act.

Additionally, the Non-Needy TANF program, also known as child-only or Kinship TANF, provides support to caregivers of relative children who are not their own. In this program, the caregiver's income is not considered when determining eligibility.

DSHS and reporting requirements

The Department of Social and Health Services (DSHS) has specific reporting requirements for individuals who receive DSHS benefits and then obtain a one-time payment, such as a settlement from a court case, insurance claim, or a back payment of benefits owed (e.g., from Social Security). This includes public benefits like SSI, food stamps, or TANF. If you find yourself in this situation, you must report the receipt of this payment to DSHS.

The deadline for reporting is crucial. For instance, if you receive a $5,000 settlement on May 20, you must report it to DSHS by June 10. Failure to report within the specified timeframe may impact your continued receipt of benefits.

The nature of the lump sum payment also determines its treatment by DSHS. A lump sum payment awarded for wrongful death, personal injury, damage, or loss of property is considered a resource. Conversely, a lump sum received for any other reason is classified as income. Notably, if the lump sum is intended to replace lost, stolen, or damaged property or to cover medical bills, DSHS does not consider it income or a resource for 60 days from the month after receipt. Any funds remaining after this 60-day period are then treated as a resource.

It is important to understand that DSHS has specific rules regarding the amount of money you can have in a savings account and the value of your vehicle. You can have up to $6,000 in a savings account, and DSHS will exclude the entire value of one vehicle used to transport a physically disabled household member.

Frequently asked questions