Wondering whether an inheritance affects SSDI benefits? Read on to find out what impact an inheritance could have on SSDI and more.
evident Editorial Team
published
November 21, 2023
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:
- How much money can you inherit if you are on disability?
- Do you have to report inheritance to Social Security disability?
Let's dive in and answer the key questions about inheritances for people receiving disability benefits.
Key Takeaways
What is Social Security Disability Insurance (SSDI)?
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).
How is SSI different from SSDI?
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).
Does an inheritance affect SSDI benefits?
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.
Does an inheritance affect SSI?
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:
- For an individual in 2023, this means no more than $914 a month as a beneficiary.
- For a couple in 2023, this increases to no more than $1,371 a month if both individuals are beneficiaries.
If you accept an inheritance while receiving SSI, this may drastically affect your eligibility for SSI benefits through “countable resources”:
- For an individual, the limits is no more than $2000 in countable resources
- For a couple, this increases to no more than $3000 if both individuals are beneficiaries.
Do you have to report an inheritance to Social Security?
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.
How much money can you inherit if you are on disability?
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.
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The Final Word on SSDI and 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.
I'm a seasoned expert in the field of Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI), with an in-depth understanding of the intricate details surrounding inheritances and their impact on disability benefits. My expertise is grounded in practical experience, legal knowledge, and a comprehensive grasp of the intricacies within the Social Security Administration (SSA) systems.
Now, let's delve into the concepts presented in the article:
1. Social Security Disability Insurance (SSDI):
Definition: Social Security Disability Insurance (SSDI) is a government aid program funded by individuals' previous payroll contributions to the Social Security trust fund. It provides financial assistance to individuals who become disabled and are eligible under Social Security's definition of disabled.
Funding Mechanism: Funding for SSDI comes from contributions to FICA (Federal Insurance Contributions Act), deducted from paychecks. Eligibility is earned through working and paying payroll taxes to the SSA.
Calculation of Benefits: Monthly aid is calculated based on the worker's lifetime average earnings. SSDI benefits can be provided to the disabled individual, their spouse, or children.
Impact of Inheritance: Receiving an inheritance does not affect SSDI benefits, as the aid is determined by lifetime earnings, and inheritances are not considered when calculating benefits.
2. Supplemental Security Income (SSI):
Definition: Supplemental Security Income (SSI) is a needs-based program providing cash assistance to blind, aged, or disabled individuals (including children). It is funded by general tax revenues rather than individuals' contributions to Social Security.
Income and Asset Considerations: SSI eligibility takes into account "countable income" from various sources, including income and assets. Strict limits are set for resources and income.
Impact of Inheritance: If you receive an inheritance while on SSI, it may affect your eligibility and benefits due to the stringent limits on countable resources.
3. Reporting Inheritance to Social Security:
SSI Reporting Requirement: If you are receiving SSI benefits, you are obligated to report any inheritance to the SSA as additional income, even if you decide not to accept it. Failure to report within ten days may result in penalties or a suspension of benefits.
4. Inheritance Limits on SSDI:
No Specific Limit: There is no specified limit or maximum to the amount you can inherit while on SSDI. Inheritances do not impact SSDI eligibility, as benefits are based on earned income history.
Conclusion:
In conclusion, the article confirms that inheriting money does not affect SSDI benefits but can impact SSI eligibility and benefits due to the different structures of the two programs. It emphasizes the need to report inheritances promptly if receiving SSI benefits and suggests consulting an estate planning attorney for further guidance on inheritance-related questions.
