How to keep both SSI benefits & inheritance

Estate planning and dealing with inheritances can be challenging—especially for people who receive supplemental security income (SSI) benefits. SSI is a needs-based program administered by the Social Security Administration to support disabled individuals and those older than 65 who have limited incomes or assets.

While receiving an inheritance can be a blessing, it also can interrupt your benefits at the same time you're grieving the loss of a loved one. But with careful planning and professional guidance, you may be able to keep both SSI benefits and inheritance assets—and enjoy a more secure financial future.

An inheritance can affect SSI benefits in two ways: exceeding the income limit and exceeding the resource limit. Here's what you need to know about both ways.

• Income limits vary by state. Unearned income, such as inheritances, is treated differently than earned income.
  
• Your income must be under certain limits to qualify for SSI benefits. In 2024:
  
  • An individual must have less than $963 a month unearned income to qualify for SSI benefits.
  • A couple must have less than $1,435 in unearned income to qualify for SSI benefits.

• Lump-sum inheritance payments: If you receive a lump-sum inheritance of more than the limit, you'll be ineligible for SSI based on income for a single month.
  
• Ongoing inheritance payments: If your inheritance is structured to provide ongoing payments of $963 a month or more, you'll remain ineligible as long as payments continue.

A resource limit is the maximum amount of assets (resources) you can have while receiving SSI benefits. An inheritance can make you ineligible for SSI benefits if you are over the resource limit of $2,000 for individuals or $3,000 for couples. If this happens, you may need to spend down your resources strategically or convert countable resources into excluded resources.

SSI excludes the following resources from the limit:

• Your primary residence
• One vehicle used for transportation
• Household and personal items
• Life insurance policies up to $1,500
• Burial plots
• Burial funds of up to $1,500
• Money or property set aside under a Plan to Achieve Self-Support (PASS)
• Achieving a Better Life Experience (ABLE) account funds up to $100,000
• Property required for work

Yes, the SSA might discover unreported inheritances through public records or reviews. They regularly monitor public records and conduct regular reviews of SSI eligibility. In fact, as a condition of receiving benefits, you've given the SSA permission to request your records from any financial institution.

While you might be tempted not to report an inheritance that could affect your benefits, you'll be breaking the law if you don't report any changes in your income, resources or living arrangements within 10 days of the end of the month. You'll have to repay benefits you weren't eligible for, and you could have future payments withheld for six, 12 or 24 months.

Immediately after receiving an inheritance, you should notify your local Social Security office. If your inheritance exceeds $963, you'll be ineligible for benefits for at least one month. You'll remain ineligible as long as your resources are more than $2,000.

Also contact other benefit programs you may be on, including Medicaid and the Supplemental Nutrition Assistance Program (SNAP). Ask how you'll be affected and whether you can be reinstated or will need to reapply if you become eligible again.

The SSA typically considers an inheritance that you refuse to be "constructively received." This is an accounting term, but it means that the money has been credited to you, even if you haven't physically received it. So if you then refused the inheritance, the SSA may consider that to be "transferring the resource," which could make you ineligible for SSI benefits for up to three years. The SSA also will notify Medicaid of the transfer, which could affect your Medicaid benefits.

In limited circumstances, when you can prove that you didn't refuse the inheritance to preserve SSI benefits, the transfer may not affect your eligibility.

It may be best to accept your inheritance and use the strategies described in the next section to minimize its impact on your countable resources.

The best way to limit SSI ineligibility depends on the size of the inheritance and your circumstances. For disabled individuals with extensive medical needs, a disruption in means-tested benefits such as Medicaid, home health care and subsidized housing can be more devastating than losing SSI payments. Inheritance planning can help avoid this benefits cliff, too. Here are some ideas to help reduce the size of your estate:

For smaller inheritances, consider spending on essentials to get below the resource limit within a month. You might purchase or upgrade a vehicle, stock up on groceries and medicine or prepay rent, insurance and utility bills.

If you're a homeowner receiving a larger inheritance, consider renovations that improve accessibility or paying down mortgage principal.

If you have a disability that began before age 26, you're likely eligible to open an ABLE account that anyone can contribute to on your behalf. (Starting in 2026, the onset of disability age increases to 46.)

The account can be worth up to $100,000 without hurting your SSI. The annual contribution limit equals the annual gift exclusion amount, which is $18,000 in 2024 (higher contributions may be allowed if you're working). You can use the money for a wide variety of qualified disability expenses.

If the giver has more assets than they'll need during their lifetime, ask about receiving your inheritance gradually while they're alive. They could:

• Contribute to your ABLE account
• Buy you a vehicle
• Give you a down payment
• Buy you an apartment in a care facility
  

A special needs trust could allow you to receive a larger inheritance without affecting SSI and related benefits.

Suppose your mom wants to leave you a $1 million life insurance death benefit. She could make your special needs trust the beneficiary to avoid disqualifying you. The SSI allows such arrangements because this trust can only be used for certain expenses, such as medical bills or living costs, and the trustee—not you—controls its assets and distributions.

Yes, inheriting a primary residence doesn’t count toward the resource limit. However, inheriting a second property may affect eligibility due to the equity and propel you above the limit.