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What is lump sum income and why is it such a problem?

Produced by Deborah Harris, Massachusetts Law Reform Institute
Reviewed December 2017

You are about to receive a settlement from an accident.

You finally got back money from unemployment compensation.

Your luck has finally changed, or has it?

Lump sum income is money that you do not get regularly, such as a lottery award, an inheritance, a lawsuit award or settlement, or an award for back unemployment compensation. 106 C.M.R. § 204.240.

If you or your children get this money while you are on TAFDC, you will be ineligible for TAFDC for a certain number of months. This number of months is equal to the amount of the lump sum divided by the monthly standard of need for your family size. 106 C.M.R. § 204.240(D). You can deduct the first $600 in lump sum income. 106 C.M.R. § 204.250(B).

Example

Martha and her two children get a TAFDC grant of $633 a month. Martha gets a check from an accident settlement for $6,000. She can deduct $600 from the settlement. The rest, $5,400, divided by her monthly standard of need, $633, is 8.5. Martha and her children will be ineligible for TAFDC for eight months, and some of the lump sum will count against her grant when she goes back on TAFDC in the ninth month.

Advocacy Reminders

  • The lump sum rules only apply to money you get while you are on TAFDC. But if you got a lump sum within the 12 months before you applied for TAFDC, you may be subject to the transfer of assets rules. See How does DTA treat assets you no longer have?. See DTA Transitions, Jan. 2004, p. 2.
  • There is no lump sum rule for SNAP (food stamps) or MassHealth.
  • Applying the lump sum rule to any money other than inheritances, lottery or other contest winnings, or damage awards may be illegal. For example, the lump sum rule should not apply to back child support. Consult an advocate. 
  • Money in a pension fund is an asset and should therefore not be countable as income when it is withdrawn, but DTA has said that a one-time withdrawal from pension funds may be considered lump sum income. DTA Transitions, Feb. 2014, p. 5. DTA’s position may not be correct or legal. 
  • Retroactive TAFDC benefits are not countable as income and are therefore not subject to the lump sum rule, 106 C.M.R. § 204.250(DD), and are also not countable as an asset in the month of receipt or the following month. 106 C.M.R. § 204.140(X).

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