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Ask an Expert – What is the Disabled Adult Child Benefit?

Jason Conger Financial Advisor

Answered By

Liz Yoder

Financial Planner

 

liz@planningacrossthespectrum.com

Question

What is the Disabled Adult Child Benefit?

Answer

The Disabled Adult Child benefit or the DAC is a program that is part of the Social Security Disability Insurance (SSDI) program. Unlike SSI, the DAC benefit is not solely related to someone’s disability. The benefit is also directly related to their parents’ working life. A disabled adult child is an adult who had a medical diagnosable disability prior to the age of 22. This disability would have been a named disability in the Social Security Administration’s (SSA) list of named disabilities or it would have been medically determined by the SSA with an application to receive SSI or SSDI.

One does not have to have received SSI prior to receiving the DAC benefit. More than likely, an adult older than 22 would have been eligible for SSI. The reasons for not receiving it may have been by choice, such as an interest not to use government benefits, a belief that independence would come easier to them than it had or just lack of understanding of what is available for an adult once they turn 18 now that their benefits are not connected to their parent’s income. The DAC can fully or partially replace any SSI benefit currently being received by the adult child.

 

How does the benefit work?

The disabled adult child benefit is a benefit received by an individual whose parents had worked and paid into the Social Security system throughout a work life and either became disabled themselves and qualifies for SSDI, retired and is now receiving Social Security retirement benefits, or passed away. The individual then will be eligible for half of a disability benefit received by the parent. At any parents’ full retirement age, the individual would also be eligible to receive half the benefit of their parent while SS retirement is being received. The benefit to the individual increases to 75% of the parent’s full retirement age benefit when a parent passes away.

When a parent is ready to file for Social Security for their own disability or in retirement, they will identify their child to the SSA as disabled. The SSA will request the Social Security number of the child and verify that they have either been receiving SSI payments or have a medical determination from the SSA. Benefits will start for the adult child in the same month that benefits are received by the parent if a medical determination is in place or will be on back pay based on the application date if determined eligible.

 

What if my child starts to work while receiving the DAC?

The DAC operates under the same rules as SSDI in that there is an earned income cap of the Substantial Gainful Activity (SGA) amount, which is currently $1,310 per month in 2021 to be considered competitive earned income.
The SSA will determine what benefit is the highest to be received by an eligible recipient and switch to the higher payment when available and have an order of operations that move payments from one program to another.

For example, SSI is called the program of last resort. If a DAC benefit is equal or higher than SSI, it will completely transition away from the rules of the SSI program and apply the rules of the SSDI program. If SSI was lost by way of continuing to have more assets in an account, neither the DAC nor SSDI would be lost.

In a similar line of “order of benefits,” if the individual’s own income and SSDI benefit amount start to increase, the DAC would start to fade out. The individual would not see a change in the money they receive, it would just be categorized by the SSA from a different program. If the individual continues to earn money over and above what they would have received from their DAC benefit, their own SSDI and eventual retirement benefit from traditional Social Security would only be enhanced from their time at work.

 

What if the individual is not speaking to one of their parents?

An individual is eligible for the DAC benefit off of any biological parent regardless of the engagement or activity from the parent. In the case of a divorce or separation of parents prior to or during the child’s life, the child is still eligible for a benefit based on the biological connection to the parent. To access the benefit, the individual would need to contact their SSA office, ideally with the Social Security number of the parent. The parent, again, does need to be receiving a benefit at the time of the request for the individual to be eligible for the DAC. Once the individual has confirmed they are the disabled adult child of a SS recipient, the individual will be eligible to receive any benefit owned to them regardless of connection with the parent themselves. The parent will not be notified and will not need to know that that their work record and their Social Security is benefiting anyone else.

 

When to get advice:

The decision to file for Social Security is one that is discussed within a financial planning office. A financial advisor will review the benefits that individuals are eligible to receive and will determine the best filing strategy. Some of the items that impact the filing choices may be expected life expectancy, their own need for the monthly benefit, and their spouse’s current income and work record. Some retirees will be able to wait to file for their own benefit. What is important to know in regards to the DAC is that waiting beyond the full retirement age benefit will not increase the benefit earned throughout their life time as it would for their parents.

The DAC benefit is always based on the full retirement age, so it might be worth looking at whether one parent or both file prior to or at their full retirement age instead of delaying towards 70. This would again be based on the individual family experience and work records and would not be a recommendation that everyone takes.

Everyone’s life is so specific and unique that it is worth it with you to review how to get the best benefit for everybody involved.

 

Other things to consider:

The SSDI program, including the DAC program, does not have asset limits as SSI had. Medicare is also a benefit to receiving SSDI after having received it for 2 years. A review of any Medicaid benefits continues to be important when reviewing how assets are to be handled within the planning of someone receiving the DAC benefit.

Special Medicare plans exist for Medicaid beneficiaries who are eligible for Medicare and Medicaid. Many times there is no cost for better coverage due to savings programs offered by various states. Whenever possible, use the help of an insurance specialist who understands these dual-eligible plans so that health care costs can be covered as much as possible with the least cost to the person receiving the DAC benefit. Planning Across the Spectrum has a specialist to help.

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