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Does an inheritance affect SSDI?

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
March 22, 2022
Elderly couple walking down path

If you are set to receive an inheritance, you may be wondering, “does an inheritance affect Social Security disability benefits?”

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.

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 receiving additional worker’s compensation benefits would be evaluated when determining the monthly payments given by the SSDI program. 

Thus, 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 2022, this means no more than $841 a month as a beneficiary. 
  • For a couple in 2022, this increases to no more than $1,261 a month if both individuals are beneficiaries. 

An inheritance must be reported 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 penalties charged monthly by the SSA.

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.

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. 

 

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