Does an Inheritance Affect My SSDI?
Many people who are dependent on SSDI are concerned that an inheritance may leave them ineligible for benefits. Some even ask whether they may have to pay back disability benefits if they inherit money or property. The short answer is “no.” If you’re receiving Social Security disability benefits and you inherit money or property from a friend or family member, it should have no impact on your SSDI payments. That’s true no matter how much you receive in an inheritance.
Why Doesn’t an Inheritance Impact SSDI Eligibility?
In determining your eligibility for Social Security disability benefits, the Social Security Administration (SSA) looks at your ability to earn a living. Eligibility isn’t based on financial need. You could be a millionaire and still receive SSDI if you had sufficient work credits and the SSA found that you were unable to engage in substantial gainful activity.
Unearned income–whether from an inheritance, a trust, investments, a friend or relative, lottery winnings, or something else–won’t impact your eligibility. Neither will assets.
What Types of Income Will Affect My Social Security Disability?
If you earn more than the substantial gainful activity (SGA) threshold, you won’t qualify for SSDI benefits. But, that won’t be because you have too much money. It will be because the SSA doesn’t consider you disabled if you’re able to engage in SGA.
This includes income you receive from a job, and also self-employment income. But, even if you do earn income from work that’s above the SGA cut-off, you won’t instantly lose your benefits. The SSA offers a trial work program that allows SSDI recipients to test their ability to work without losing benefits.
In 2023, the SGA cut-off is $1,470/month, unless the applicant is blind. For applicants who are statutorily blind, the SGA threshold is much higher–$2,460/month.
Will an Inheritance Affect My Other Benefits?
An inheritance or other increase in income or assets will typically impact any need-based benefits. Income and asset limits differ from program to program, so you’ll have to check the specific eligibility requirements for each type of benefit you are receiving.
SSDI recipients become eligible for Medicare after two years. Like SSDI, access to Medicare coverage is not need-based. That means inheriting money or property will not affect eligibility. Increased income may affect your Medicare premiums, but an inheritance is typically not considered income.
However, your inheritance may impact other types of medical coverage, particularly during the two-year waiting period for Medicare coverage.
Marketplace subsidies are based on income, not assets. Most inheritances aren’t taxable income, and so won’t be counted as income for calculating Marketplace subsidies. However, there is one way in which an inheritance might impact your federal healthcare subsidies: if the inheritance generates income. For example, if you inherit an investment account, receiving the principal balance typically won’t affect your eligibility. But, if you maintain the investment account or reinvest the funds and generate interest income or dividends, those proceeds will be counted as income in determining your eligibility for subsidies. Similarly, if you inherit a house and decide to rent it out, the value of the house won’t be counted against you, but the rental profits will.
Medicaid is a need-based program. Standards vary somewhat from state to state, but generally, a Medicaid eligibility determination is based on both income and assets, and the asset cap is fairly low. In many states, you will not be eligible for Medicaid if you have more than $2,000 in assets. So, an inheritance may disqualify you from Medicaid coverage.
Many states have provisions for a special type of trust that allows a family member to set aside money to help a disabled person with certain costs without disqualifying them from benefits like Medicaid.
Supplemental Security Income (SSI)
SSI is similar to Social Security disability in many ways, but there is one very important distinction: SSI is need-based. The program provides supplemental income to elderly or disabled people with very limited resources.
The eligibility cut-off is $2,000 for an individual and $3,000 for a married couple. However, it’s important to know that not all resources are counted. For example, if you own a home and live in it, the value of your home won’t be counted as an asset. Similarly, if you own a vehicle that you or someone in your household uses as transportation, it doesn’t count.
As you can see, these distinctions may determine whether or not an inheritance disqualifies you from receiving SSI.
Planning Can Protect Your Benefits
You won’t always have input into when or how you receive an inheritance. But, if you know that a friend or relative is planning to leave you money or property and you are dependent on benefits other than SSDI and Medicare, it’s worth exploring whether there is a way to insulate you from the impact of that inheritance. One option may be a special trust. Another may be passing property that isn’t countable as an asset. Of course, the details will depend on the type and extent of the inheritance and on the benefits you receive or hope to receive.
The impact of inheritance, work, passive income, and other income and assets on SSDI and other related benefits is just one example of how complicated navigating the Social Security disability and/or Supplemental Security Income application process and benefit maintenance can be.
Disability Help Group was formed to help people in need of disability income put together complete, effective applications, and to help fight for your benefits every step of the way. Whether you’re just embarking on the application process and want to make sure you avoid missteps and omissions that could hurt your application or delay your benefits or are preparing to appeal a denial, we can help.
To learn more about our services and how we can help, 937-222-2222 or fill out the contact form on this site.