How to Keep Your Disability Benefits If You Receive an Inheritance or Gift

Receiving an inheritance, gift, or lump sum of money can be a financial blessing, but if you’re on Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI), it can also put your benefits at risk. SSI has strict asset limits, and even SSDI recipients may need to consider tax and financial planning to avoid disruptions.

This guide explains how inheritances, cash gifts, and settlements impact SSI and SSDI, and what steps you can take to protect your benefits.

1. How an Inheritance or Gift Affects SSI Benefits

SSI is a needs-based program, meaning your eligibility depends on your income and resources. If you receive a large sum of money, SSA may count it as income in the month you receive it and as a resource in following months, potentially disqualifying you from SSI.

SSI Asset Limits (2025)

• $2,000 for individuals

• $3,000 for couples

• Any amount over these limits can suspend or terminate your benefits.

What Counts as Income for SSI?

• Cash gifts from family or friends

• Inheritance from a will or trust

• Lawsuit settlements or backpay lump sums

• Lottery winnings or unexpected windfalls

📌 Example: If you receive a $5,000 inheritance, SSA will count it as income for the month you receive it. If the money is still in your account the next month, it becomes a resource, pushing you over SSI’s $2,000 limit and potentially ending your benefits.

2. How an Inheritance or Gift Affects SSDI Benefits

Unlike SSI, SSDI is not needs-based, so an inheritance does not affect eligibility. However, it may impact:

• Medicare costs (if your total assets increase significantly)

• Tax liability if the inheritance is large

• Other income-based assistance programs you may be enrolled in

📌 Example: If you receive SSDI and inherit $50,000, your benefits will not stop, but you may owe taxes or lose access to Medicaid if you previously qualified through low-income status.

3. How to Protect Your Benefits from an Inheritance or Gift

If you’re on SSI, there are legal ways to accept money without losing benefits. Here are your best options:

A. Open an ABLE Account 🏦

• ABLE accounts allow you to save up to $18,000 per year (2025 limit) without affecting SSI eligibility.

• Funds can be used for housing, medical expenses, transportation, education, and more.

• Ideal for small to medium inheritances or cash gifts.

B. Use a Special Needs Trust (SNT) 🔒

• Third-Party SNT: Created by a family member to hold assets for you without affecting SSI.

• First-Party SNT: Used if you receive money in your own name but need to shield it from SSI.

• Trust funds must be used for approved expenses like healthcare, assistive technology, and personal needs.

C. Spend Down the Money in the Same Month 💸

• If you receive a lump sum, spend it before the end of the month so it doesn’t count as a resource.

• Approved expenses:

  • Medical bills

  • Rent or mortgage

  • Education or vocational training

  • Car purchase (one vehicle is exempt from SSI limits)

📌 Example: If you inherit $3,000 but pay off medical debt before the next month, you remain under the SSI asset limit.

4. What to Do If You Already Received an Inheritance or Gift

If you’ve already received money and it pushed you over SSI’s limit, take action immediately:

• Spend it down legally on necessary expenses.

• Transfer funds into an ABLE account or Special Needs Trust.

• Report changes to SSA ASAP to avoid overpayment issues.

• Request a waiver if your benefits are suspended due to the inheritance.

5. Stay on Top of SSI & SSDI Rules with Purple

Managing money while on disability benefits can be tricky, but Purple helps you track income, assets, and eligibility to avoid overpayments and benefit disruptions.

💜 Want to protect your benefits? Get started with Purple today and take control of your finances!