Can a Person on SSI Inherit a House

If you’re receiving Supplemental Security Income (SSI) payments, you might be wondering, “Can a person on SSI inherit a house?” Ordinarily, inheriting a home is a financial windfall. But for someone receiving SSI payments, it can present a problem, and potentially be a serious financial drawback. This is due to the fact that there is a cap on the financial resources SSI recipients can have. Inheriting a home can easily put an SSI recipient over that limit. That may mean an end to getting payments from SSI. However, there are ways around this that can allow an SSI recipient to inherit a home and still qualify for benefits. A financial advisor can help you sort through your options as you decide how to handle a residential inheritance.

What Is Supplemental Security Income (SSI)?

Supplemental Security Income (SSI) is a federal program that provides financial assistance to individuals who are aged, blind,or disabled, and have limited income and resources. Administered by the Social Security Administration (SSA), SSI is designed to help cover basic living expenses. This includes necessities such as food, shelter and clothing. While Social Security benefits are based on work history, SSI is need-based. This means it doesn’t require recipients to have a prior work record.

SSI Eligibility Requirements

Eligibility for SSI is determined by a combination of several different factors, including:

Age
Disability status
Income level
Value of assets owned

To qualify, an individual must have very limited income and resources. The limit is set at no more than $2,000 in assets for individuals or $3,000 for couples, excluding certain personal property like a home or car. SSI recipients may also be eligible for additional benefits, such as Medicaid and food assistance, depending on their circumstances and state of residence.

Can a Person on SSI Inherit a House?

Inheriting a home is not a problem for someone receiving Social Security retirement benefits. Someone who pays Social Security taxes while working is entitled to receive benefits after retiring no matter how many financial assets they own.

SSI is different. It’s a needs-based program. It doesn’t require someone to pay into the program, since benefits are funded by general tax revenues. But SSI recipients do need to be disabled. As part of meeting the eligibility requirements, they must only have limited financial resources, as we discussed above.

The SSI resource limit is $2,000 for individuals and $3,000 for couples. And those resources could be cash, bank accounts, stocks, mutual funds, life insurance, vehicles, personal property or real estate, such as land or a home. If the value of an inherited home puts an individual or couple over the limit, it could make them ineligible to receive any more benefits.

Fortunately, there are two main ways SSI recipients can inherit homes without becoming ineligible. They can either live in the home as their primary residence. Or they can have it placed in a special needs trust.

Home Exclusion

A woman on SSI fills out forms associated with inheriting a home.

SSI doesn’t count the home someone lives in as a resource for purposes of figuring eligibility. This is called the home exclusion. It means that if a benefits recipient moves into an inherited home and occupies it as their sole place of residence, the inheritance would not have to affect their ability to keep getting SSI payments.

There are a number of wrinkles to this seemingly straightforward solution. For instance, say the home sits on one tract of land. Suppose the SSI recipient inherits that house and the land under it, as well as another nearby but separate tract of land. The second tract would be considered a resource that could put the recipient over the limit.

Another complication could arise if the SSI recipient plans to use the inherited home as a second home. Ordinarily, if the SSI recipient isn’t using an inherited home as the primary, sole place of residence, it would be included as a resource. Thus it would likely make the recipient ineligible for more benefits. However, if the inherited home can’t be sold, perhaps because there are other joint owners who don’t want to sell it, then it could be excluded from resources just like the primary residence.

Special Needs Trusts

If a home inherited by a person receiving SSI benefits is transferred into a special needs trust, it can avoid putting the recipient over the resource limit. Using this technique also allows the person inheriting the home to get around rules against simply refusing the inheritance. And it allows the SSI recipient to still get some financial benefit from the inheritance.

A bank trust department can help set up a special needs trust to hold an inherited house. The specific type of special needs trust is a first-party special needs trust. This is one set up by the disabled person for their benefit. A third-party special needs trust is one set up by someone else, such as a parent, for the same purposes. Third-party trusts are usually funded when the person who set them up dies and provides for them in a will.

A special needs trust is an irrevocable trust, meaning that property placed in it cannot later be claimed by the beneficiary of the trust. The trust, in short, owns it permanently. Property in a revocable trust, that could someday be reclaimed by the beneficiary, will still count against the SSI resource limits.

The assets in the trust are administrated by a trustee who can disburse funds to help the disabled SSI recipient with some expenses. The expenses paid for by the trust can’t include food or shelter. But they can include things like medical care, utilities, entertainment and education.

Bottom Line

A couple moving in after inheriting a home.

Inheriting a home can cause an SSI recipient to become ineligible for future benefits. The good news is, that can be avoided. For example, if the home is used as the recipient’s primary residence or is placed in a special needs trust. This allows the person receiving SSI payments to accept the inheritance and get some financial benefit from it. All without losing eligibility for government benefits.

Tips on Inheritance and SSI Rules

If you are receiving SSI benefits and anticipate receiving a home as an inheritance, consider working with an experienced financial advisor to ensure that the inheritance doesn’t affect your eligibility for government payments. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
Knowing whether your government benefits plus your inherited residence will be enough to meet your retirement needs is important. You can get an estimate of what your Social Security benefits will be by using a Social Security calculator.