The CAO must allow deduction of certain expenses from a lump sum. All persons whose lump sum is counted get these expense deductions. The CAO must deduct expenses before deeming the lump sum or determining eligibility. Allowable expense deductions include, but are not limited to:
Expenses the person must pay to be eligible for or receive the lump sum, such as attorney fees, court costs, and transportation costs.
Expenses directly related to the type of lump sum, such as burial expenses from an insurance payment or medical expenses from a personal injury award.
NOTE: The CAO must not allow a deduction for the cost of lottery tickets or earlier losses from cash prizes or lottery winnings.
The reimbursement amount that is owed to DHS for any Cash Assistance payments received while delayed or retroactive benefits were pending.
The reimbursement amount owed to DHS for medical expenses already paid by DHS but covered by the lump sum.
Payment to a rental agency to handle rental property.
Fees paid to a guardian who controls the income of a budget group member if the guardian has been court appointed and the fee is imposed by the court order.
Replacement costs of property that is part of a damage award or insurance settlement. Determine deductible replacement cost as follows:
If it is personal property or nonresident real property and an acknowledgement of liability was signed, the replacement cost is the value of the property up to the budget group’s resource limit.
If it is resident real property, the replacement cost is the value specified by the payer, such as the insurance company.
If it is property for which an acknowledgement of reimbursement has not been signed, the replacement cost is the greatest of:
the value specified by the payer;
the value determined at the last redetermination before the property's destruction;
the fair market value; or
other evidence substantiating the property’s replacement value when it was lost, stolen, or destroyed.
The CAO must deduct expenses from countable earned lump sum using these steps:
Determine the gross amount of the lump sum earned income.
Deduct expenses related to getting the lump sum income using Section 157.3.
Add the person’s other budget month gross earned income.
If the person who gets the lump sum is a budget group member, deduct appropriate work and personal expenses and earned income incentives, if eligible, according to Chapter 160.
If the person who gets the lump sum is a legally responsible relative (LRR), parent of a minor parent, stepparent, or sponsor of an alien, deduct the appropriate work expense deduction.
NOTE: The earned income deduction and dependent care deduction are not allowed when deeming lump sum income. See Section 157.4.
The result is the total net earned income, including the lump sum.
Example: Ms. Arnold receives TANF for herself and one child. She reports receipt of $1,820 in delayed wages. Attorney fees for getting the wages totaled $250. She owes $886 reimbursement to DHS. Ms. Arnold is employed part-time with gross monthly earnings of $125.
Gross lump sum |
$1,820.00 |
Expenses |
- 250.00 |
|
1,570.00 |
Reimbursement due |
- 886.00 |
|
684.00 |
Ms. A's other earnings |
+ 125.00 |
|
809.00 |
50% Disregard |
- 404.50 |
Income after 50% Disregard |
404.50 |
Total net income including lump sum |
$404.50 |
The CAO must deduct expenses from countable unearned lump sum income as follows:
Verify the gross amount of the unearned lump sum.
Deduct expenses related to getting the lump sum according to Section 157.3.
The result is the countable lump sum income.
Examples:
Mrs. Bland reports receipt of a $20,000 personal damage settlement on an automobile accident claim filed two years ago. She and her two children have been receiving assistance pending settlement. The insurance company has specified an auto replacement value of $3,000. She owes DHS $8,000 for Cash Assistance and medical expenses related to the accident. Mrs. Bland verified that her attorney repaid the $8,000 to DHS and charged her $2,000 for legal fees.
Gross lump sum |
$20,000 |
Expenses |
- 2,000 |
|
18,000 |
Replacement cost of automobile |
- 3,000 |
|
$15,000 |
Reimbursement |
- 8,000 |
Countable lump sum |
$7,000 |
Mr. Cox reports receipt of a $15,000 personal damage settlement on a claim filed on nonresident property destroyed by fire three months ago. When cash benefits were authorized ten months ago, Mr. Cox signed an Agreement to Dispose of Non-Resident Real Property (PA 176-NR) pending the sale of the property. The settlement specifies $3,000 as replacement value of the resource. Attorney fees totaled $500. Reimbursement owed DHS is $5,000.
Gross lump sum |
$15,000 |
Expenses |
- 500 |
|
$14,500 |
Replacement cost of property |
- 1,000 |
|
$13,500 |
Reimbursement due |
- 5,000 |
Countable lump sum |
$ 8,500 |
NOTE: Because the client acknowledged liability by signing the PA 176-NR, replacement value is limited to the budget group’s maximum resource limit.
Citations:
Reviewed July 30, 2013