Will an Inheritance Affect My Social Security Benefits? (2024)
Last Updated: February 05, 2023 • 5 min read
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If you are receiving federal Social Security Income (SSI) benefits and get an inheritance you could become ineligible for more benefits. In accordance with federal law, if you are a beneficiary of an inheritance you have to report that information to the Social Security Administration (SSA) within 10 days of the end of the month of when you received the news. It doesn’t matter if you refuse the inheritance or not, failing to report the inheritance can have financial penalties and stop your SSI payments for up to 36 months.
What is Social Security Disability Insurance (SSDI)?
Social Security Disability Insurance is a government program for individuals who qualify as disabled. The second qualifier is the disabled person must have paid into the Social Security trust fund through payroll contributions at their job.
SSDI is possible because of the federal payroll tax deduction labeled as FICA (Federal Insurance Contributions Act). You can be eligible for Social Security disability benefits by earning them through working and paying payroll taxes to the Social Security Administration (SSA). The last piece to mention is you could still qualify if your spouse or a family member has been making payments, and you were not.
The size of the payment is directly correlated to the lifetime average earnings of the disabled worker. Either you, your spouse, or your children can receive SSDI for the work that you had done. If you receive a worker’s compensation payment it could possibly affect your SSDI benefits.
Will an Inheritance Affect SSI?
To qualify for the federal Supplemental Security Income program your income and assets are in question to ensure you are eligible for this financial support. The limits are extremely strict to ensure that the Americans that need the SSI program benefit the most are receiving them. Here are the upper bounds for an individual SSI recipient.
- You cannot have more than $2,000 in countable resources (bank accounts, assets, etc)
- You cannot have an income higher than $841 a month
Now if you are a couple that is both receiving SSI, the limits are slightly different.
- The countable resource limit is $3,000
- The joint income limit is $1,261 a month
These limits act as a safeguard that those in financial need with limited income are the ones receiving the SSI monthly payments instead of those with substantial gainful activity.
What is a Special Needs Trust?
A special needs trust is a unique trust that was designed to ensure someone with chronic illness, or physical or mental disabilities can have financial help without affecting their eligibility for Medicaid benefits, Supplemental Security Income (SSI), or Social Security Disability Insurance benefits. The funds added to the trust can have many sources, inheritance, donations, lawsuit proceeds, or even life insurance policy payouts are a few to name. A trustee is in charge of dispersing the funds so that the beneficiary is fully taken care of.
Frequently Asked Questions
Will Inheritance Affect My Benefits?
Receiving an inheritance will not affect Social Security Disability benefits or Social Security. If you are earning income from any source outside of an inheritance it could affect SSDI and Social Security so consult with a financial advisor to be sure.
Does Inheritance Affect Disability Benefits?
An inheritance does not affect your Social Security Disability Insurance (SSDI) benefits. An inheritance may affect Supplemental Security Income (SSI) as it is a needs-based program, whereas SSDI benefits and typical Social Security benefits are not a needs-based system.
Do You Have to Report Inheritance to Social Security Disability?
If you are receiving SSI benefits you have to report an inheritance to the Social Security Administration (SSA), because it is classified as a change in resources. The inheritance has to be reported within the first 10 days of the month after the inheritance has been received.
Final Thoughts
In general, receiving an inheritance will not affect your Social Security benefits. If you are receiving SSI that is a different story as the SSI means test is strict. You have to have less than $2,000 in assets as an individual, or $3,000 as a couple which isn't much money.
Even denying an inheritance can cause an interruption of SSI payments so if you hear that you may be receiving inheritance money talk with the family member and have them set up a special needs trust. Then you won’t receive the inheritance but the trust can pay for many things for you.
This article is not financial advice or legal advice. If you have more questions please consult with an estate planning attorney or financial advisor.