SSI and Inheritance: Special Needs Trust (2024)

FAQs

Will a special needs trust affect SSI? ›

An SNT provides for the needs of a person with a disability without losing or reducing their benefits such as Supplemental Security Income (SSI), Medi-Cal, In-Home Support Services (IHSS), and HUD housing assistance. And assets in an SNT won't be counted toward the SSI asset limit.

Trusts established with, or including, funds belonging to an SSI beneficiary may be counted as a resource and may affect SSI eligibility, unless certain criteria are met.

Options to Keep SSI: Use of trusts is the most effective way to ensure you remain eligible for SSI, even after receiving an inheritance. There are two options that you might employ: A first-party special needs trust is created by the disabled individual, a parent, or guardian.

That means that no matter how much money is included in an inheritance or how much the property you are set to inherit is worth, you will be able to continue receiving your normal SSDI benefits. There will be no interruptions or decreases in payments.

Cons of Special Needs Trusts

The trust must be maintained, and yearly management costs can be high. Depending on who manages the fund, there may be a minimum amount required to set up the trust. It may be financially difficult for the settlor to actually establish the trust, depending upon their circ*mstances.

One such rule is the resource allowance limit: A single SSI beneficiary may have only $2,000 of countable resources (for a couple, $3,000).

When trust beneficiaries receive distributions from the trust's principal balance, they don't have to pay taxes on this disbursem*nt. The Internal Revenue Service (IRS) assumes this money was taxed before being placed into the trust. Gains on the trust are taxable as income to the beneficiary or the trust.

For example, if someone pays an individual's medical bills, or offers free medical care, or if the individual receives money from a social services agency that is a repayment of an amount he/she previously spent, that value is not considered income to the individual.

If you don't have any ownership value in a car, it won't count toward your resource limit. However, someone giving you a car as a gift will count as income in the month you received it.

Can a person on SSI inherit a house? ›

Fortunately, there are two main ways SSI recipients can inherit homes without becoming ineligible. They can either live in the home as their primary residence. Or they can have it placed in a special needs trust.

We conduct up to 10 geographic searches per individual for each review. We use AFI to verify financial accounts during the SSI application process, as well as when we conduct periodic redeterminations of continued eligibility, thereby detecting excess resources and deterring reoccurrence.

In contrast, an SSDI program, as we mentioned earlier, doesn't affect an individual claiming their inheritance. This is because those who have paid into the SSA via their paychecks prior to becoming disabled have paid a type of 'insurance' and have access to it regardless of whether or not they claim an inheritance.

The first sanction period is a withholding of payments for six months. Subsequent sanction periods are for 12 months and then 24 months. If you intentionally withhold information to continue to receive payments, you may face criminal prosecution. Criminal penalties can include fines and imprisonment.

For example, proceeds from the sale, exchange or replacement of a resource (such as the sale of a car) are not income but are a resource.

A SNT can disburse up to the annual ABLE contribution limit directly into a beneficiary's ABLE account for these qualified disability expenses that exceed the monthly SSI benefit. SNT beneficiaries can use their trust and ABLE account together to minimize fees and grow funds tax-free through ABLE investment options.

The Social Security trust funds, managed by the Department of the Treasury, are the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds. Since the beginning of the Social Security program, all securities held by the trust funds have been issued by the Federal Government.

Regardless, once a trust becomes irrevocable, it is no longer in the hands of the individual who created it. An irrevocable trust is going to need a tax ID (also known as an employer identification number) because it can no longer use the SSN or ITIN of the individual (or individuals) who created it.

When a trust is established, a Social Security Number (SSN) or an Employer Identification Number (EIN) is needed as a tax identification number. The type of trust established determines if you use an EIN or SSN when funding trusts. When you are seeking expert advice on trusts in Florida, The Law Office of Amy B.