Receiving an inheritance or large gift can be a blessing—but if you're on SSI, it can also put your benefits at risk. Here's how to handle unexpected money while protecting your disability benefits.
In this article, we'll cover:
- How inheritances affect SSI vs SSDI
- What to do when you receive money
- Options to protect your benefits
- Special needs trusts explained
- ABLE accounts for inheritances
How Inheritances Affect SSI vs SSDI
SSDI recipients:
- Good news: Inheritances don't affect SSDI
- No resource limits for SSDI
- Keep the entire inheritance
- Benefits continue unchanged
- No action required
SSI recipients:
- Inheritance counts as a resource
- $2,000 limit ($3,000 for couples)
- Could immediately exceed limit
- Benefits can be suspended or terminated
- Quick action may be needed
What counts as inheritance:
- Cash
- Stocks and bonds
- Property
- Vehicles
- Any assets received
What to Do When You Receive Money
For SSDI recipients:
- Deposit it, save it, spend it—your choice
- No reporting required for assets
- Doesn't affect your benefits
For SSI recipients:
Immediately:
- Don't spend recklessly to get under limit (SSA may view as transfer of resources)
- Report the inheritance to SSA within 10 days
- Consider your options (below)
- Act quickly—time matters
Within first month:
- You have until the 1st of the following month
- Resources counted on the 1st
- Some spending down is allowed
- But strategic options are better
Options to Protect SSI Benefits
Option 1: Spend down on exempt items
- Pay off debt
- Buy or repair a vehicle (one is exempt)
- Home repairs/improvements
- Prepay funeral expenses
- Buy household items you need
Option 2: Special Needs Trust
- For larger inheritances
- Funds don't count as resources
- Must be set up properly
- Provides long-term protection
Option 3: ABLE Account
- If disabled before age 26
- Save up to $100,000 without affecting SSI
- More flexible than trust
- You control the account
Option 4: Pooled Trust
- Alternative to individual trust
- Managed by nonprofit organization
- Good for smaller amounts
- Easier to set up
What NOT to do:
- Don't give money away to stay eligible
- Don't hide the inheritance
- Don't refuse to accept it (counted anyway)
- Don't panic spend without a plan
Special Needs Trusts Explained
What is a Special Needs Trust?
- Legal arrangement to hold assets
- Assets don't count for SSI
- Managed by trustee for your benefit
- Provides supplemental support
Types of trusts:
First-party (self-settled):
- Funded with your own money
- Must have Medicaid payback provision
- For inheritances, settlements, back pay
- Must be under 65 to establish
Third-party:
- Funded by someone else's money
- No Medicaid payback required
- Parent or grandparent can set up
- Can receive inheritance this way
What trust funds can pay for:
- Supplemental needs beyond SSI
- Entertainment and recreation
- Electronics and equipment
- Travel
- Education
- Therapy and services
- Much more
What trust funds cannot pay for:
- Food and shelter (reduces SSI)
- Cash to beneficiary
- Must be for beneficiary's benefit
Setting up a trust:
- Need an attorney experienced in special needs
- Costs $2,000-5,000+ typically
- Must be done correctly
- Worth the investment for larger amounts
ABLE Accounts for Inheritances
What is an ABLE account?
- Tax-advantaged savings account
- For people disabled before age 26
- First $100,000 doesn't count for SSI
- You control the funds
Advantages over trusts:
- Lower cost to set up
- You manage the account
- Flexible spending
- No trustee needed
ABLE account limits:
- Annual contribution limit (2025: ~$18,000)
- Total limit varies by state (often $300,000+)
- Only first $100,000 exempt for SSI
- Above $100,000, SSI suspends (not terminates)
Using ABLE for inheritance:
- Can contribute up to annual limit
- May need multiple years to move large inheritance
- Remainder could go to trust or be spent
- Plan carefully
What ABLE funds can pay for:
- Housing and transportation
- Education and employment
- Health and wellness
- Assistive technology
- Financial management
- Much more (disability-related)
Pooled Special Needs Trusts
Good option for:
- Smaller inheritances
- When individual trust cost too high
- Those over 65 (some accept)
- Easier administration
How they work:
- Nonprofit manages the trust
- Your funds in sub-account
- Pooled for investment
- Individual spending for your benefit
Finding a pooled trust:
- Search "[your state] pooled special needs trust"
- Contact disability organizations
- Ask social workers
- State disability services may have lists
If You've Already Exceeded the Limit
What happens:
- SSI stops for months over limit
- You may owe overpayment
- Benefits resume when under limit
Steps to take:
- Report the situation to SSA
- Spend down to under $2,000 quickly
- Document your spending
- Request benefits resume
- Deal with any overpayment
For overpayments:
- Request waiver if not your fault
- Request repayment plan
- Appeal if you disagree
- Don't ignore it
How Purple Helps
Purple helps you manage your finances:
- See your balance clearly
- Track when you're approaching limits
- Get benefits early to pay expenses
- Simple account management
- No fees eating into your inheritance
With Purple, you can keep track of your resources and protect your SSI benefits.