Receiving an inheritance while collecting federal Supplemental Security Income (SSI) benefits can make a recipient ineligible for continued payments. Federal law requires beneficiaries to report any inheritance to the Social Security Administration, even if they choose to refuse it. Failure to report an inheritance may lead to financial penalties and a suspension of SSI payments for up to three years. However, certain legal strategies can allow individuals to retain the value of an inheritance while remaining eligible for SSI benefits.
If you have questions about the specifics of your situation, consider speaking with a financial advisor.
SSI vs. Social Security: What’s the Difference?
SSI pays benefits to U.S. citizens who are over 65, blind, or disabled, and have limited income and resources. The Social Security Administration (SSA) runs the program, and general federal tax revenues support it
SSI is different from Social Security and Social Security Disability Insurance (SSDI). Social Security and SSDI are contribution-based programs that aren’t means-tested. If you pay into these programs, you are eligible to receive benefits. Income from working at a job or other source could affect Social Security and SSDI benefits. However, receiving an inheritance won’t affect Social Security and SSDI benefits.
Rather than being contribution-based, SSI is means-based. It is specifically intended to help people with limited resources and income. That means a change in your income or assets could reduce or eliminate your SSI benefits. An inheritance could also affect eligibility for other federal benefits, such as the Medicaid healthcare insurance program.
Qualifying for SSI
Applicants must be U.S. citizens or certain eligible non-citizens and reside in one of the 50 states, the District of Columbia or the Northern Mariana Islands.
In addition, they must meet one of three qualifying categories: age 65 or older, legally blind, or disabled according to Social Security’s definition, which includes a long-term physical or mental impairment that significantly limits daily activities.
The SSI means test is strict. To be financially eligible for SSI, an individual must have no more than $2,000 in assets. A couple can have no more than $3,000. To make this determination, the Social Security Administration considers both income and available resources, which it calls countable resources. The figure includes cash, bank accounts, vehicles and real estate. However, it excludes your home, one vehicle, household goods and personal effects.
Reporting an Inheritance
Since these countable resource limits are so low, even a modest inheritance could put an SSI recipient over the threshold and cause benefits to be reduced or ended. No matter how small the inheritance is, SSI recipients are required to report it to Social Security within 10 days after the end of the month in which it was received.
The inheritance has to be reported even if the person named as the beneficiary refuses to accept it. Social Security regards a rejected inheritance as a transfer of assets
Failing to report an inheritance, transferred or not, carries a potential penalty of a $25 to $100 cut in benefits for each failure to report or late report. Knowingly failing to report an inheritance or other important change can result in a suspension of payments for six months. If it happens repeatedly, payments could be suspended for up to three years.
How to Keep Your SSI When Receiving an Inheritance
To keep your SSI after receiving an inheritance, the key is to avoid direct ownership of the assets. Timing also matters. If you receive the inheritance and deposit it into your personal bank account, it will be counted as a resource and could make you ineligible for SSI. To prevent this, you may consider having the inheritance transferred directly into a trust or ABLE account.
Using a Special Needs Trust
A special needs trust holds assets for someone with a disability while keeping their eligibility for programs like SSI intact. Instead of giving an inheritance directly to the individual, the money is transferred into the trust and managed by a trustee. he trustee spends the funds on the beneficiary’s behalf, covering expenses such as personal care, therapy, education or transportation—items not typically paid for by government benefits.
There are multiple types of special needs trusts. Some trusts are funded by others, while others use the beneficiary’s own money, such as an inheritance or legal award. In either case, the trust must follow specific rules to avoid jeopardizing SSI eligibility.
Typically, the trust must be irrevocable, and the beneficiary cannot have direct control over how the money is used. When structured correctly, the assets in the trust do not count toward SSI’s asset limits, allowing the individual to continue receiving benefits while also having access to additional support.
ABLE Accounts
ABLE accounts are tax-advantaged savings accounts created under the Achieving a Better Life Experience Act. To qualify, the beneficiary must have become disabled before age 26, and the account owner must meet the SSA’s definition of disability. Contributions can be made by the beneficiary, family members or others, up to $19,000 annually in 2025. If the beneficiary is employed and not enrolled in a retirement plan, additional contributions may be allowed.
ABLE account funds can cover disability-related expenses like education, housing, healthcare, transportation and basic living costs. The first $100,000 in an ABLE account does not count toward SSI’s $2,000 asset limit, preserving eligibility even as savings grow. Qualified withdrawals don’t affect federal benefits
Bottom Line
If you want to leave an inheritance or a big gift to someone getting SSI benefits, discuss it with that person. A generous gift could unintentionally disqualify the beneficiary from receiving benefits. That’s because getting an inheritance can cause the Social Security Administration to reduce or stop SSI benefits.
Also, not reporting an inheritance can lead to penalties and a benefit suspension of up to three years. However, by depositing the inheritance into a special needs trust, the beneficiary can keep getting SSI payments. The inherited funds can then be used to pay for medical and other special needs.
Tips on Handling an Inheritance
- If you’re getting SSI benefits and anticipate receiving an inheritance, consider talking it over with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- A Social Security benefit calculator is a quick and easy way to get a solid estimate of what you’re going to be entitled to when you retire.
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