Are you on disability and receiving inheritance? Do you expect to receive an inheritance?
You may wonder if your inheritance funds will affect your disability payments. Our Arizona disability lawyers at Pekas Smith Disability Attorneys explain.
Does Inheritance Money Affect Your Disability Payments?
Whether inheritance money affects your disability payments depends on the type of disability you receive.
Because Social Security Disability Insurance (SSDI) payments are based on earned income, inheritance money doesn’t affect your payments. However, Supplemental Security Income (SSI) is based on assets, and an inheritance may impact your eligibility for benefits.
Understanding Inheritance, Disability, SSDI and SSI
An inheritance may be money, financial assets, real estate, personal property, or a right. It is received as the result of someone’s death.
An inheritance is a gift that someone receives when someone else passes. Some inheritances are conditional – for example, “I leave my inheritance to my daughter if she graduates from college.” With or without conditions, an inheritance is something that is given, not earned.
While it is not earned, an inheritance is an asset. The distinction is critical for determining how an inheritance impacts disability payments.
SSDI Inheritance Rules
SSDI is not a means-tested program. Eligibility is based on ability to work and years of work history. It doesn’t matter what assets a person has saved before they receive benefits. They don’t have to deplete their assets before receiving benefits.
If a person earns income through substantial gainful activity, they lose SSDI eligibility. The threshold for substantial gainful activity is only $1,470 for most people and $2,460 for people who are blind.
However, SSDI is based on earned income. An inheritance is not earned. It is given.
Earned income includes wages, payments for services, tips, bonuses, and self-employment earnings. (20 CFR § 416.1110).
Because SSDI is based on earned income, and inheritance is not earned income, rest assured that receiving an inheritance won’t impact your eligibility for SSDI benefits.
How does an inheritance affect my Social Security Disability payments?
An inheritance will not affect your Social Security Disability payments. You earn eligibility for Social Security Disability payments through work history. Then, you qualify if you become disabled.
Your assets and monetary resources are not considered when determining SSDI eligibility, so an inheritance will not affect your payments.
SSI Inheritance Rules
If you receive an inheritance, you may become ineligible for SSI payments. The asset threshold for receiving SSI is low – only $2,000 for a single person and $3,000 for a couple.
While several things don’t count as assets, like a home or one vehicle used for transportation, any cash inheritance over the threshold amount may make the recipient ineligible for SSI payments. (20 CFR § 416.1205).
SSI is means-tested. A person doesn’t qualify based on work history. Instead, they qualify based on disability and a lack of assets to meet their basic needs.
For SSI, income is anything a person receives in cash or in-kind that can be used to meet their basic needs (food and shelter). It includes items that can be sold or converted to cover food and shelter. This is unlike the SSDI system, which uses earned income to determine eligibility. In the SSI system, income is any asset that may be used for basic needs unless it is specifically excluded, regardless of whether it is earned or gifted.
There are several exclusions, including a home, one vehicle if used for transportation, household goods, personal effects, life insurance, burial funds, and funds set aside for PASS (Plan to Achieve Self-Support) and ABLE (Achieving a Better Life Experience) programs.
Unless it is placed into a trust or otherwise exempt, an inheritance that pushes the SSI recipient’s assets over their respective asset limit may make them ineligible for benefits. Even with a trust benefiting the SSI recipient, the funds must be distributed correctly to preserve eligibility.
Do you have to report an inheritance to SSI?
Yes. Inheritance must be reported to SSI by the 10th day after the month it is received. For example, if the person receives the inheritance on March 20, they must report it to SSI by April 10.
What happens when you report an inheritance to SSI?
When you report an inheritance to SSI, your benefits will be recalculated. You may lose eligibility for benefits.
What is the transfer of resources for inheritance and SSI eligibility?
If you expect to receive an inheritance, it can be tempting to give it to someone else to maintain your eligibility for benefits. Doing so is called a transfer of resources. Transferring resources can make you ineligible to receive SSI for up to 36 months.
What if an inheritance has no value?
An inheritance is not a resource until the first month that it has value and can be used. (See SI 00810.005).
How can I protect my SSI if I am receiving an inheritance?
It is possible to benefit from an inheritance while receiving SSI. By creating a trust managed by a third party, the assets can benefit the disabled individual along with continuing benefits. This may be done by a parent, guardian, grandparent, or court. (SI 01120.203 – Medicaid Trust Exceptions, SI 01120.200 – Introduction to Trusts).
Money paid from a trust directly to the recipient may reduce benefits. However, funds paid to provide food or shelter are capped in how much they reduce benefits. A trust can provide for things not covered by public benefits like special equipment, uncovered medical expenses, entertainment, and burial expenses.
How Our Disability Lawyers Can Help
A person can continue to receive SSI and benefit from an inheritance when the funds are structured correctly. Once a trust is created, it’s critical to manage it correctly.
At Pekas Smith Disability Attorneys, we can help answer other questions related to disability payments and your family structure.
If you have questions about disability benefits in Arizona, we invite you to contact us now.