Wondering whether an inheritance affects SSDI benefits? Read on to find out what impact an inheritance could have on SSDI and more.
If you are set to receive an inheritance, you may be wondering, “does an inheritance affect SSDI?”
The short answer is no, receiving an inheritance will not affect your Social Security Disability Insurance (SSDI) benefits, but it can affect your Supplemental Security Income (SSI). This is because SSDI and SSI are structured differently, so it’s important to distinguish between the two programs.
This article will discuss the difference between SSDI and SSI and the impact receiving an inheritance can have on each.
We'll also cover related questions including:
Let's dive in and answer the key questions about inheritances for people receiving disability benefits.
Social Security Disability Insurance, or SSDI, is government aid paid to an individual who becomes disabled that is funded by their previous payroll contributions to the Social Security trust fund. To receive SSDI, one must be eligible under Social Security’s definition of disabled.
This “insurance” is made possible through contributions to FICA, either by yourself, a spouse, or a family member. (FICA stands for the Federal Insurance Contributions Act; it is a U.S. federal payroll tax deducted from each paycheck). In other words, if you are eligible for Social Security disability benefits, you have earned those benefits by working and paying payroll taxes to the Social Security Administration (SSA).
The aid provided monthly is calculated through the worker’s lifetime average earnings by the SSA. SSDI can be given directly to you, or to your spouse or children.
SSDI benefits could be reduced if you receive worker’s compensation benefits, but not necessarily for other sources of income or revenue (more on this below).
The difference between the SSDI and SSI programs, or the Supplemental Security Income program, is that SSI is a cash assistance program for blind, aged, or disabled persons (including children) based on general tax revenues, rather than one’s contributions to Social Security. (More details on SSI below).
No, receiving an inheritance does not affect a person’s Social Security disability benefits.
As noted, Social Security Disability Insurance is funded based on one’s contributions to worker programs, which means that the aid given by the SSA does not decrease if an individual inherits money. Income or additional revenue are not considered when determining the average lifetime earnings, which is the relevant metric for determining a person’s SSDI benefits.
Only limited items like receiving additional worker’s compensation benefits would be evaluated when determining the monthly payments given by the SSDI program.
So, can you receive inheritance while on Social Security disability? Yes, you can receive inheritance while on SSDI and receiving an inheritance does not impact your eligibility for SSDI or your benefits under that program.
Yes, you have to report an inheritance if you receive SSDI benefits.
As Riley Beam, Managing Attorney of Douglas R. Beam, P.A., explains: "Reporting the inheritance promptly is a proactive step to ensure you stay in compliance with SSA regulations. This ensures that your benefits are accurately adjusted based on any changes in your financial situation. Failing to report the inheritance can lead to overpayments, which you may have to pay back. To report the inheritance, contact your local Social Security office or give them a call. Be prepared to provide details about the inheritance amount, assets received, and any changes in your financial circumstances. The goal is to maintain transparency and avoid complications with your SSDI benefits."
The Supplemental Security Income program is a needs-based program, meaning that one’s income and assets are considered “countable income” when determining SSI eligibility. The upper limit for resources and income are very strict:
If you accept an inheritance while receiving SSI, this may drastically affect your eligibility for SSI benefits through “countable resources”:
Yes, if you are receiving SSI benefits you must report an inheritance to the SSA as additional income, even if you do not plan on accepting the inheritance. Failure to report an inheritance within ten days could result in monetary penalties charged monthly by the SSA or a suspension of your benefits.
There is no particular limit or maximum to the amount you can inherit while on SSDI.
Because Social Security disability benefits are based on your earned income history, an inheritance does not affect your SSDI eligibility.
As noted, an inheritance could affect your SSI eligibility and benefits if you receive Supplemental Security Income. But an inheritance will not affect your SSDI benefits, regardless of the value of the inheritance.
So, does an inheritance affect SSDI? No, an inheritance does not affect your SSDI benefits, but it can affect your SSI benefits because of the differences in how the two programs are structured.
It may be worth consulting an estate planning attorney if you have other questions about inheritances and the impacts they can have.
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