Becoming the beneficiary of an inheritance can be an extremely helpful financial asset. Whether an inheritance will affect your Social Security Disability benefits depends on which kind of benefits you receive. Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), disability programs run by the Social Security Administration (SSA), each handle inheritances very differently.
Does an Inheritance Affect SSDI?
Those with physical disabilities or mental health disabilities who qualify for SSDI can receive an inheritance without fear of losing out on any benefits. That means that no matter how much money is included in an inheritance or how much the property you are set to inherit is worth, you will be able to continue receiving your normal SSDI benefits. There will be no interruptions or decreases in payments.
Does SSDI Have Asset Limits?
SSDI does not have asset limits, though other programs like SSI do. SSDI benefits are based on your work record before becoming disabled and do not depend on how much money, assets, or resources you have at any given time. Those eligible for SSDI benefits are unable to engage in substantial gainful activity, meaning their ability to work and earn income is significantly limited by their disability. While traditional earned income through wages, salaries, and tips is limited, “passive” income is not. Since an inheritance—whether it be a sum of money or a piece of property—is considered to be passive income since the funds generated do not involve significant effort or active involvement, it will have no bearing on your benefit payments.
Do You Have to Report Inheritance to Social Security Disability?
Even though SSDI payments are not impacted by inheritance, it’s still a good idea to provide this information to the SSA. If you receive SSI payments, whether the benefits are concurrent with SSDI or standalone, you must declare your inheritance.
Does an Inheritance Affect SSI?
The SSA requires you to meet extremely strict limitations on income, assets, and resources to qualify for SSI benefits. Any change to your income, assets, or resources, no matter how big or small, may have a dramatic effect on your continued eligibility. Since SSI assets are capped at $2,000 for an individual and $3,000 for a couple, earning an inheritance is very likely to make you ineligible to continue receiving benefits. This is because SSI is a means-tested program designed to protect the most vulnerable Americans.
In the month you receive an inheritance, that money is considered income. If you do not spend it all during the month you receive it, the remaining funds will be considered a resource the following month, which may potentially push you over the income threshold and disqualify you from future benefits.
Should You Refuse Your Inheritance If You Collect SSI?
You may be tempted to disclaim or refuse your inheritance in the hopes that the SSA won’t find out about it. However, federal law requires you to report any changes in income to the SSA. You have up to 10 days following the end of the month in which the change occurred to report income shifts to the agency. Even if you do not intend to accept the inheritance, you still must tell the SSA you are the beneficiary of one. Failure to report an inheritance, regardless of whether you accept it or not, can result in financial penalties of $25 to $100 per failure or late report. Repeated violations can result in suspension of your benefits for up to three years.
The SSA considers even a disclaimed inheritance a transfer of resources because, instead of going to you, money or other assets will be passed onto someone else. If you transfer a resource instead of using it for food, shelter, or other necessities, the SSA can penalize you because you might not otherwise need SSI benefits if you keep your inheritance.
How to Keep an Inheritance Without Losing SSI
If someone you know intends to make you the beneficiary of an inheritance, encourage them to talk to an estate planner who can establish a special needs trust. This will serve as an exception to typical SSI limitations. Placing funds into a special needs trust means those funds are not under your control, so they are not considered a resource for SSI eligibility. A trustee, such as a parent or other family member, will control the funds in your special needs trust and use them to pay providers directly for any of your medical expenses, personal care needs, and education, among other things. Through this method, you will remain entitled to your SSI benefits, but your inheritance funds can be used to pay for future needs as they arise.