Learning that a family member has left you an inheritance can bring complicated emotions—grief mixed with gratitude. But if you receive SSI, there's another layer of complexity: that inheritance could affect your benefits. Many people fear they'll have to choose between accepting a family gift and keeping their SSI. Fortunately, with proper planning, you can often protect your benefits while still receiving the inheritance. Here's what you need to know.
In this article, we'll cover:
- How Social Security treats inherited money and property
- The immediate impact on your SSI eligibility
- Options for spending down an inheritance
- How special needs trusts can protect your benefits
- Using ABLE accounts to shelter inherited funds
- What to do if you've already received an inheritance
How SSI Views Inherited Assets
When you inherit money or property, Social Security counts it as a resource starting the month after you receive it.
Cash inheritance:
- If it pushes your total resources above $2,000 ($3,000 for couples), you'll lose SSI eligibility
- Ineligibility continues as long as you're over the limit
Inherited property:
- Counted as a resource at current market value
- Inherited home that becomes your primary residence might be excluded
- Vacation property or second vehicle would generally count
Timing matters:
- In the month you receive the inheritance, it's counted as income (may reduce SSI payment)
- Starting the first of the following month, whatever remains becomes a resource
- Limited window to address the situation before ongoing problems
Immediate Options: Spending Down
If you need to act quickly to protect your SSI:
Appropriate expenses:
- Paying off existing debts
- Prepaying rent or utilities
- Purchasing needed household items
- Making home repairs or modifications
- Buying medical equipment or supplies
- Prepaying funeral and burial expenses
Important rules:
- Spend on legitimate expenses for your own benefit
- Don't give money away or hide it (can result in penalties)
- Purchases should be things you actually need and will use
- Keep detailed records of how you spend inherited funds
Special Needs Trusts: Planning Ahead
The most effective way to receive an inheritance without losing SSI is through a special needs trust (also called a supplemental needs trust).
How it works:
- Inherited funds are held in trust for your benefit
- Managed by a trustee rather than given directly to you
- Because you don't own the trust assets, they don't count as your resources
Third-party special needs trust:
- Set up by the person leaving you the inheritance (while still alive)
- Created in their will
- When they pass, funds go to the trust, not directly to you
What trust funds can pay for:
- Vacations and entertainment
- Personal care items
- Vehicle expenses
- Many things SSI doesn't cover
- Cannot pay directly for food or shelter (with some exceptions)
Using ABLE Accounts for Inheritances
If you have or can quickly open an ABLE account, you can transfer inherited funds there.
Benefits:
- Funds won't count toward SSI's resource limit (up to $100,000)
- Much simpler option than a special needs trust
Limitations:
- Annual contribution limit of $18,000 (2025)
- If you inherit a larger amount, can't move it all at once
- Could transfer maximum each year, but might not be fast enough to avoid losing SSI
Best for:
- Smaller inheritances ($15,000 or less)
- Deposit into ABLE account, immediately stops counting as resource
- Use funds over time for qualified disability expenses
What If You've Already Received It?
If you've already received an inheritance without knowing it would affect SSI:
Don't panic, but act quickly:
- You have nine months from date of receipt to transfer to a first-party special needs trust
- Also called d(4)(A) trust or payback trust
- Unlike third-party trusts, you can set this up yourself with inherited funds
First-party trust difference:
- When you pass away, remaining funds must reimburse Medicaid for benefits received
- Only after Medicaid is repaid does anything go to heirs
- Despite this limitation, often worth it to preserve SSI and Medicaid
Report the inheritance:
- You're required to report changes in resources to Social Security
- Explain your situation and plan for addressing excess resources
- Being proactive is far better than SSA discovering it later
Working with Professionals
Estate planning around SSI eligibility involves complex legal and financial considerations.
Before major decisions, consider consulting:
- Elder law attorney
- Special needs planning attorney
- Can help set up the right kind of trust
- Ensure proper documentation
- Avoid common mistakes
If a family member is considering leaving you an inheritance:
- Encourage them to speak with an estate planning attorney
- Setting up a third-party special needs trust protects assets from ever threatening benefits
Other resources:
- Benefits counselors
- Disability rights organizations
- Can explain how different scenarios affect your SSI
- Point you toward appropriate professional help
How Purple Helps
An inheritance doesn't have to mean losing your benefits. Purple can help you:
- Understand your financial situation
- Make informed decisions about managing unexpected resources
- Stay compliant with SSI rules
- Track your resources in real time
- Get benefits up to 4 days early