How Does an Inheritance Affect my Social Security Disability Benefits?

How Does an Inheritance Affect my Social Security Disability Benefits?

If you are currently receiving SSDI and have received an inheritance–whether that inheritance consists of cash, assets or both–that inheritance will not affect your monthly benefits. The SSA considered inheritances of any kind as unearned income.

Social Security Disability Insurance (SSDI) is meant for individuals who are disabled and have accumulated enough work credits to qualify for benefits. SSDI is a federal program supported by the payroll taxes of employed U.S. citizens. In addition to work credits, people eligible for SSDI must be between the ages of 18 and 64 with a disability severe enough to prevent them from working.

What is Substantial Gainful Activity and How Can It Affect SSDI Payments?

Substantial Gainful Activity (SGA) is defined by the Social Security Administration as income earned by an SSDI recipient that exceeds $1260 per month. SSDI recipients who are statutorily blind can earn up to $2110 before payments are impacted. Depending on how much a person earns over the 2020 income limit determines how much the SSA will reduce monthly benefit payments.

The SSA also offers a “trial work period” where SSDI recipients who are trying to return to work may temporarily earn over the income limit without reduction of their benefits. If you are receiving SSDI and want to attempt a trial work period, contact the SSA to learn more about the program.

Will an Inheritance Affect My Supplemental Security Income (SSI) Benefits?

SSI recipients should know that inheriting funds could possibly affect their monthly benefit amount. SSI is meant for people who have not accumulated enough work credits to qualify for SSDI. Unlike SSDI, which is paid for with payroll taxes, SSI is completely funded by the federal government.

Since SSI is based on financial need, recipients of SSI benefits must report any changes to their financial resources, assets or income within 10 days of availability of such assets or income. Other examples of income that must be reported to the SSA if you receive SSI benefits include money given to you by family members or money given to family members who live with someone receiving SSI.

Upon receiving money from an inheritance, SSI recipients will need to mail a copy of the award letter stating how much money they inherited to the SSA. Failure to inform the SSA of an inheritance–whether it is only $500 or an antique worth $5000–could result in the SSA inadvertently sending overpayments that they later demand be repaid by the recipient.

If you receive SSI, you do not need to report the first $20 you earn or receive in one month, tax refunds, SNAP benefits or money provided to you for work expenses associated with your disability (transportation, for example, that requires special accommodations for wheelchair-bound or blind individuals).

Is There Any Way to Prevent an Inheritance from Disrupting SSI Payments?

SSI recipients who know ahead of time they are going to receive an inheritance could protect their benefits by placing inherited property and/or funds into a special needs trust. A type of fiduciary relationship drawn up by a Tacoma disability lawyer that legally permits a disabled individual to receive income from an inheritance, a special needs trust will also prevent changes to a disabled person’s Medicaid or Medicare. When you put an inheritance in a special needs trust, you appoint someone to act on your behalf when it comes to managing the inheritance. For more information about a special needs trust, contact our disability law office today.

Can I Use an ABLE Account If I Inherited Money or Assets?

Achieving a Better Life Experience (ABLE) accounts are designed to allow non-disabled adults to place up to $15,000 annually in the account for beneficiaries who became disabled before the age of 26. For example, if you have a 23 year old daughter receiving SSI and you receive an inheritance, you can put some or all of that inheritance in your daughter’s ABLE account. ABLE savings accounts will not affect your daughter’s SSI payments.

The current limit of $15,000 is adjustable to account for rising or falling inflation rates. In addition, “gifting” up to $15,000 to a disabled individual’s ABLE account does not have to be reported to the Internal Revenue Service. However, each state has a limit to how much in total you can put in an ABLE account. Some states offering ABLE accounts may also file a claim to some or all of the funds in the event the beneficiary dies. Called “Medicaid payback” claims, it is meant to recoup any expenses paid by Medicaid to the beneficiary at the time their ABLE account was opened.


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