Can You Receive Inheritance While on Social Security Disability?
It depends on what program you're getting benefits from. If it's Social Security Disability Income (SSDI), receiving inherited money or property won't affect benefits.
However, for Supplemental Security Income (SSI), assets are capped at $2,000 for an individual and $3,000 for a couple. And according to SSI rules, inheritances count as assets. So, if your inheritance puts you over these amounts, your benefits could be cut.
What is an Inheritance?
An inheritance is when somebody leaves you assets, such as cash, real estate, or personal belongings when they die. Who gets what is usually specified in a will.
How to Protect Your Monthly Benefits If You Receive an Inheritance
If you're on SSI and receive an inheritance, it could push your resources over the asset limits allowed by SSA rules, which are $2,000 for individuals and $3,000 for couples. This could lead to a reduction or even a suspension of your benefits. Here are three ways to prevent that from happening:
Do a Spend Down
If an inheritance puts you over the SSI resource limit, one option is to spend down until you no longer have too much money. You must do the spend down in the month you received the excess assets.
For example, let's say you're an unmarried disabled person who received an inheritance of $10,000 on October 12th. You'll need to spend down until your total resources are $2,000 or below by November 1st. Otherwise, you risk having your benefits cut.
SSI recipients can only use the excess money to improve their own lives, not someone else's. For instance, you can't use it to buy a laptop for a loved one, no matter how badly you want to express your generosity. Here are some examples of allowable purchases:
Travel expenses
Paying off a mortgage
Purchasing a home
Home repairs
Medical care not covered by Medicaid
Buying a car, including registration and insurance
College expenses
Paying off debts
Prepaid burial arrangements
Paying rent for the current calendar month
Household goods
Entertainment expenses
Estate planning
You must report changes in income and resources within 10 days after the month in which the change occurred to your local SSA office. You can do so via mail, by phone, or in person. Here's what to include:
Your name and Social Security number
Facts about the change, like an explanation of the spend down, receipts, and bank statements
When the change occurred
Because of the reporting requirement, keeping receipts for everything you buy is necessary. If you mail documents, make copies of them before sending them out. Also, send the documents by certified mail (requiring a signature confirmation) to ensure they're received.
Set Up a Special Needs Trust Fund
If you're an SSI beneficiary and someone wants to leave you their assets after they pass away, ask them to consider putting the inheritance in a special needs trust. The money and property in the trust aren't considered countable resources.
This means a trustee, such as a family member, can use the funds to pay for what you need without affecting your SSI eligibility. Just like with spend downs, the money must be used for expenses that improve the quality of your life. Consider getting legal advice when setting up the trust to ensure that it complies with all relevant requirements.
Open an ABLE (Achieving a Better Life Experience) Account
ABLE accounts are tax-advantaged savings accounts that help individuals with disabilities save money. Tax-advantaged means that money in the account grows tax-free, and withdrawals for qualified disability expenses aren't taxed.
ABLE accounts allow you to save money without affecting your eligibility for SSI and other government benefits. The first $100,000 in an ABLE account isn't counted toward SSI's $2,000 resource limit.
To qualify for an ABLE account, the onset of your disability must have happened before you were 26. If you meet this rule and receive SSI benefits, you automatically qualify for an ABLE account.
If you're not receiving these benefits but meet the age criteria and have a qualifying disability, you can still open an account by providing certification from a physician. As with the other two options, you must use the account for qualified disability expenses.
If your account balance exceeds $100,000, your SSI payments will be suspended but not terminated. Once the balance goes below $100,000, SSI payments will resume.
An ABLE account doesn't affect Medicaid eligibility, regardless of its balance. Family members, friends, and the account holder can contribute to the ABLE account, but annual contributions are capped at $18,000.
If you need help setting up an ABLE account for you or a family member, consult with a disability law firm.
How to Report Inheritance to the Social Security Administration
If you inherit money as an SSI recipient, report your changed status to the Social Security Administration (SSA) as soon as possible to avoid penalties. Here's how to do it:
Gather Your Documents: Ensure that you have the documents showing that you've received an inheritance, such as a will, bank accounts, financial statements, or property deeds.
Notify the SSA: Contact your local Social Security office or call the SSA at 1-800-772-1213 to inform them about the inheritance. You can also visit the office in person.
Provide Proof: Submit the documentation showing the value and type of inheritance you've received.
Follow-up: Double-check that the SSA has processed the documents.
The Best Way to Protect Your Social Security Disability Benefits
You can receive inheritance money without having your Social Security benefits slashed if you adhere to the SSA's rules. However, because these rules can be tricky and challenging to navigate on your own, it's best to have a disability lawyer on your side with years of experience fighting for the rights of disabled individuals.
Whether you receive SSI or SSDI benefits, a disability attorney can guide you through the treacherous waters of Social Security disability law, helping you avoid costly mistakes. Contact us today for a free case evaluation.