Receiving an inheritance can be a bittersweet experience when you're on SSI. On one hand, a loved one wanted to leave you something. On the other, that gift could put your Supplemental Security Income benefits at risk. The short answer is yes — an inheritance can absolutely affect your SSI. But how much it affects you and what you can do about it depends on the details, and there are legitimate options to protect your benefits.
In this article, we'll cover:
- How Social Security treats inheritance for SSI purposes
- The difference between income and resources when it comes to inheritance
- What happens if an inheritance pushes you over the resource limit
- Strategies for handling an inheritance without losing benefits
- How ABLE accounts and special needs trusts can help
- What to do if you're expecting an inheritance
How Social Security Views Inheritance
For SSI purposes, Social Security considers an inheritance as unearned income in the month you receive it. After that first month, whatever you haven't spent becomes a countable resource. This is an important distinction because income and resources are treated differently under SSI rules.
In the month you receive the inheritance, your SSI payment may be reduced or eliminated entirely depending on the size of the inheritance. SSI reduces your payment based on unearned income after a $20 general exclusion. So if you receive a $5,000 inheritance, your SSI payment for that month would be reduced by $4,980 — effectively wiping it out.
Starting the following month, any remaining inheritance funds count toward your $2,000 resource limit ($3,000 for couples). If the inheritance pushes your total countable resources above that threshold, your SSI payments will be suspended until your resources drop back below the limit.
Cash vs. Non-Cash Inheritance
Not all inheritances are cash. You might inherit a house, a car, jewelry, or other property. Social Security treats non-cash inheritances as resources valued at their current market value. If you inherit a second vehicle, for example, its value would generally count toward your resource limit. If you inherit a home and move into it as your primary residence, it would be excluded from countable resources — but if you inherit a home you don't live in, its value counts.
The type of asset matters enormously. Some inherited items are excludable under SSI rules, while others push you over the limit immediately. It's worth understanding what you're inheriting and how Social Security will classify it before making any decisions.
What Happens If You Go Over the Limit
If your inheritance pushes your countable resources above $2,000, your SSI benefits will be suspended. You won't receive payments for any month in which your resources exceed the limit on the first day of that month. If your resources stay above the limit for 12 consecutive months, your SSI case will be terminated, and you'd need to reapply.
Social Security may also issue an overpayment notice if they determine you received SSI payments during months when your resources were over the limit. You'd be asked to repay those funds, though you can request a waiver if repayment would cause hardship and the overpayment wasn't your fault.
Strategies for Protecting Your Benefits
If you receive a small inheritance, you may be able to spend it down on allowable expenses before it becomes a resource. Spending on rent, utilities, food, clothing, medical expenses, home repairs, and other necessities is generally fine. The key is to spend the money in the month you receive it or shortly after, before the next first-of-the-month resource count.
For larger inheritances, two tools are particularly valuable.
An ABLE account allows eligible individuals with disabilities to save up to $100,000 without affecting SSI eligibility. You can contribute up to $20,000 per year to an ABLE account, and the funds can be used for qualified disability expenses including housing, education, transportation, and health care. If you receive a modest inheritance, depositing it into an ABLE account is one of the best ways to protect it while keeping your benefits intact.
A special needs trust (also called a supplemental needs trust) is a legal arrangement where inheritance funds are held in a trust for your benefit without counting as your resource. A properly structured special needs trust won't affect your SSI eligibility, and a trustee manages the funds on your behalf. This is often the right solution for larger inheritances, but it requires legal assistance to set up correctly.
If You're Expecting an Inheritance
If you know a family member plans to leave you an inheritance, it's worth having a conversation now about how to structure it. Many families don't realize that a well-intentioned gift can actually harm the recipient's benefits. A loved one can leave funds directly to a special needs trust rather than to you personally, which avoids the income-and-resource problem entirely.
If that's not possible, knowing what's coming gives you time to set up an ABLE account, consult with an attorney about trust options, or simply prepare a plan for spending down quickly if the amount is small enough.
The most important thing is to report the inheritance to Social Security promptly. Failing to report can lead to larger overpayments and more complicated situations down the road. Proactive reporting shows good faith and gives you more control over how the situation is handled.
Receiving an inheritance on SSI can feel overwhelming, but you have options. Purple's checking account is designed for SSI recipients, with tools to help you track your resources and stay within your limits — even when your financial situation changes.