If you or a loved one is collecting disability benefits from the federal government, it’s important to understand how an inheritance can affect these benefits. Whether you are someone who is considering an individual with a disability in your estate planning efforts or a disability benefits recipient who has been named a beneficiary of an inheritance, government disability benefits may or may not be affected by an inheritance depending on the type of disability benefit being received.

What is the Difference Between Government Disability Programs?

There are two disability benefits programs administered by the Social Security Administration. SSDI, or Social Security Disability Insurance, is funded by payroll tax deductions (FICA) that individuals make during their careers. SSI, or Supplemental Security Income, is funded through the U.S. Treasury Department for low-income individuals who are disabled, blind, or elderly. These are two distinct programs that have different rules for eligibility and maintaining benefits. 

How is SSDI Affected by Inheritance?

SSDI is a Social Security-administered disability insurance paid to individuals who have suffered a disability and have paid into the program via payroll tax contributions. 

To receive SSDI, you must qualify for benefits and meet the defined list of disabilities covered. The amount of benefits you receive will depend on the level of your disability and your work history. While some circumstances may affect the amount of SSDI monthly payments, an inheritance is not one of them. If you have been named as a beneficiary of an inheritance, it should not affect your SSDI benefits. 

How is SSI Affected by Inheritance?

Supplemental Security Income is another program administered by Social Security. This program is considered a “needs-based” program specifically designed for individuals who are over the age of 65, blind, or disabled and have limited income and financial resources. Consequently, there are stringent requirements regarding how much a recipient can make in wages and how many financial resources they have access to qualify for these benefits. 

If you are an SSI recipient who is working, receiving funds from other sources, or has other financial resources that are considered “countable income” by Social Security, a portion of that income will be deducted from your benefits. If you accept an inheritance, it is considered countable income and will be deducted from that month’s benefits and possibly disqualify you from future benefits. 

Does an SSI Recipient Have to Report an Inheritance?

By federal law, an SSI recipient must report an inheritance within ten days after the end of the month in which it is received, even if you decide not to accept it. Failure to report an inheritance can result in fines and other penalties, including a suspension of your benefits. Even if you decide not to accept the inheritance, Social Security considers it a transfer of assets because it will go to someone else instead of you.

What Can You Do as an SSI Recipient?

If you are an SSI recipient, these government disability benefits are critical for helping pay your bills and get the care you need. There are ways, however, that you can benefit from both Social Security disability and an inheritance.

If you know that someone will be naming you as a beneficiary of an inheritance, encourage them to establish a special needs trust instead. Funds in the trust will not be under your control, but a trustee’s who can pay your providers directly from the trust. Assets held by the trust will not be considered a resource for SSI eligibility purposes. 

Getting Legal Assistance

Experienced Social Security disability attorneys at Silver & Silver can assist you if you have questions about the impact of an inheritance on your benefits or if you have been denied benefits due to an inheritance. Call us at (610) 638-7255 or schedule a complimentary consultation through our website contact form.

Disclosure:

This website is designed to provide only general information. The information presented on this website is not formal legal advice. You should not rely on any general information from any source for making legal decisions. Each legal matter is unique and requires specific attention from a qualified and experienced attorney. Unless a representation agreement has been signed with the Law Offices of Silver and Silver, we are not your legal representatives.