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CARES Act Payment Doesn’t Affect Benefits or Taxes

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CARES Act payment

This week we heard from a client about his brother’s CARES Act payment:

“My brother Dave, who receives SSI and is on AHCCCS, just got his CARES Act check for $1200. Actually, I got it, since I am his representative payee. I am very worried that he might lose his long-term medical care benefits under ALTCS. Can I just send the check back? Should I spend it immediately? Can I send it to ALTCS to pay down his care costs?”

There’s a lot packed into that question. Let’s pick it apart a little bit (which we’re doing here with the client’s permission, incidentally).

The CARES Act payment

In the past two months the federal government has sent out millions of “economic impact” payments to its citizens. Sometimes people refer to the money as “stimulus” payments, though that’s not quite the right name. For people receiving benefits from the Social Security Administration, the payments arrive in the same fashion as those benefits payments.

The payments were, of course, welcome news to most who received them. But for some people, they were a cause for anxiety.

Because Dave has a disability, he receives monthly payments from the Supplemental Security Income (SSI) program. That $783 check has to cover nearly all of his needs — including housing, food, and everything else from transportation to entertainment. He does also get some help with food costs (through the SNAP program) and rent (through a rent subsidy program).

One big issue for Dave is his medical care. He needs regular mental health treatment, and he is enrolled in Arizona’s version of Medicaid, the Arizona Health Care Containment System (AHCCCS). His mental health care actually comes from a division of that program, called ALTCS (the Arizona Long Term Care System).

Financial eligibility for benefits

As Dave’s brother knows all too well, most of the benefits Dave receives are “means-tested.” If his assets climb above $2,000, he can lose his SSI and his ALTCS benefits, at least. With income over the SSI maximum of $783 in a month, he might lose all of his benefits — at least for that month.

But the news for Dave (and his brother) is good: CARES Act payments are not income for public benefits purposes. Not for SSI, nor for AHCCCS or ALTCS, and not even for SNAP or housing subsidies.

Note that most of the benefits Dave receives are funded by the federal government. AHCCCS and ALTCS are partly funded by, and fully administered by, the state of Arizona. But that doesn’t change anything. The CARES Act payment is not income for either federal or state eligibility purposes.

What about asset limitations?

But Dave’s brother is actually worried about a different problem. Because Dave lives in a state-operated care facility, his brother has a hard time spending the monthly checks he gets. His assets are always near the $2,000 asset limit for SSI and ALTCS. In fact, when he wrote his question, Dave’s account had suddenly jumped to almost $3,000, and Dave’s brother was worried.

We could give him more good news: the CARES Act payment doesn’t count against asset limitations, either. At least, that is, not for twelve months.

So Dave’s brother could leave the CARES Act payment sitting in Dave’s representative payee account for up to a year. There would be no effect on Dave’s SSI or ALTCS benefits.

Note, though, that the special treatment is only for CARES Act payments. If the account jumps above $3,200 in the next year, Dave’s benefits could still be interrupted. But that should give his brother plenty of time to plan for spending down the money.

What about next year’s tax time?

Will Dave’s $1,200 payment require him to file a tax return next year, or even to pay taxes? No. The check is not income for tax purposes, either.

That’s also true for Arizona state income taxes. Dave will not have to file a state income tax return because of his CARES Act payment, either.

Dave’s brother worried that perhaps he would have to return some part of his benefit check at tax time next year if it had not been sent. We reassured him that was not an issue, either. Dave’s check will not be reportable, will not affect his benefits or his taxes. The only concern is to make sure it has been spent or disposed of within twelve months.

How can Dave’s brother spend the money?

For most recipients, spending the CARES Act payment will not be hard at all. People living on $783/month almost always need other things taken care of, and the additional money was (or will be, if it hasn’t yet arrived) be welcome.

But remember that Dave’s brother has a hard time keeping his account below the $2,000 threshold. How can he utilize the money over the next year? We offered a handful of options for him to consider:

  1. Because Dave started receiving his SSI benefits before he was 26 years old, he is eligible to have an ABLE Act account. In fact, that would be a good way to keep Dave’s balance below the $2,000 level in the future, as his brother keeps struggling with how to spend his checks (and keep him eligible for ALTCS).
  2. Dave’s brother could make prepaid funeral/burial arrangements for Dave. While not essential for Dave’s current care, it would remove one anxiety point for the coming years.
  3. ALTCS doesn’t cover everything. One notable shortcoming: dental care. If Dave requires (or would benefit from) dental surgery, or extensive dental work, this might be a good time to arrange and pay for it.

There are other good ideas, of course — but Dave’s individual circumstances should be considered in figuring out how to proceed. We will consult with his brother to figure out what works best for him.

Taking care of a brother with a disability can be challenging, as Dave’s brother knows full well. We were delighted to be able to reassure him that the CARES Act payment would not complicate his — or Dave’s — life.


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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

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Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.