How Does Inheritance Affect Disability Benefits?

Does receiving an inheritance while collecting disability benefits jeopardize your monthly Social Security disability payments? The truth is that inheritances can affect different disability programs in very different ways. Knowing these distinctions will help protect your financial stability.

The Keener Law Firm has helped hundreds of beneficiaries understand how inherited assets interact with their disability benefits, and the firm’s attorneys know that the type of program you’re enrolled in makes all the difference. Let’s look at exactly what happens when you inherit money or property while receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

Does an Inheritance Affect SSDI Benefits?

Social Security Disability Insurance operates independently of your other personal financial resources. This program bases eligibility on your work history and the severity of your medical condition, not on how much money you have in the bank or what other financial assets you own.

When you inherit money or property while receiving SSDI, your monthly benefit amount stays exactly the same. You can inherit $10,000 or $1 million without losing a single dollar of your SSDI payments. The program doesn’t count inheritances, savings accounts, real estate, vehicles, or any other assets when determining your continued eligibility.

This means you can accept an inheritance without notifying the Social Security Administration about it. Your SSDI status remains secure regardless of your newly acquired wealth.

How Does an Inheritance Affect SSI Benefits?

Supplemental Security Income follows completely different rules. It’s a needs-based program designed for people with limited income and resources. SSI imposes strict asset limits that can make inheritances problematic.

As of 2025, single SSI recipients cannot exceed $2,000 in countable resources. Married recipients may have up to $3,000 in resources. These limits include cash, bank accounts, stocks, bonds, and most other assets. When you inherit money that pushes your total resources above these thresholds, you become ineligible for SSI benefits.

The consequences happen quickly. If you inherit $25,000 in cash and deposit it into your checking account, you’ll exceed the resource limit that same month. Your SSI payments will stop beginning the following month and won’t resume until your countable resources drop back below the limit.

What Counts as a Resource for SSI Purposes?

The Social Security Administration distinguishes between countable and non-countable resources. Here’s the difference:

• Countable resources include cash, checking and savings accounts, certificates of deposit, stocks, bonds, mutual funds, and property you don’t live in. If you inherit any of these assets, they count toward your $2,000 or $3,000 limit.
• Non-countable resources receive different treatment. Your primary residence doesn’t count regardless of its value, which means inheriting the family home won’t necessarily disqualify you from SSI. One vehicle is also excluded from counting. Household goods, personal effects, and life insurance policies with a combined face value of $1,500 or less are also exempt.

The Keener Law Firm’s attorneys have seen many clients worry unnecessarily about inheritances that turn out to be non-countable resources. Our firm’s experience can help you determine exactly where your inherited property falls.

Can You Spend Down an Inheritance to Keep SSI Benefits?

You can reduce your countable resources below the SSI limits by spending down an inheritance, but you must do so strategically. The Social Security Administration scrutinizes how you use inherited funds, and certain expenditures won’t help you maintain eligibility.

You can spend inherited money on non-countable resources like home repairs, vehicle replacement, or medical equipment. You can pay off debts, cover living expenses, or purchase items you genuinely need. These expenditures reduce your countable resources without triggering penalties.

However, you cannot simply give away inherited money to friends or family members to avoid the resource limit. Transferring assets for less than fair market value can result in a period during which your benefits are suspended. You also cannot temporarily hide the money and pretend it doesn’t exist; this constitutes fraud.

The spend-down must happen quickly. You have just one month after receiving the inheritance to reduce your resources below the limit. If you inherit money on January 15th, you will have to spend it down by January 31st to avoid losing February’s SSI payment.

Should You Consider a Special Needs Trust

A special needs trust is a legal way to inherit assets without losing SSI benefits. When someone leaves you an inheritance in this type of trust rather than giving it to you directly, the money doesn’t count as your resource. The trust is the legal owner of the asset, not you, even though you are the beneficiary.

The trust holds and manages the inherited assets for your benefit, but you don’t control them directly. A trustee makes decisions about distributions, ensuring the money supplements your SSI benefits rather than replacing them. The trust can pay for things SSI doesn’t cover, like entertainment, hobbies, vacations, or comfort items that improve your quality of life.

Your family members need to establish this trust before they die or become incapacitated. Once they’ve already left you a standard inheritance, converting it to a special needs trust becomes much more complicated and might not be possible depending on your state’s laws.

The Keener Law Firm works with clients to evaluate whether special needs trusts make sense for their specific situations, and we can explain how these tools interact with both SSI and SSDI benefits.

Do You Need to Report an Inheritance to Social Security?

Your reporting requirements depend on which program you receive. SSDI beneficiaries don’t need to report inheritances at all because assets don’t affect this program.

SSI recipients must report any inheritance within 10 days of receiving it. This includes money, property, or any other asset that comes your way. You can report changes online through your My Social Security account, by phone, or in person at your local Social Security office.

Failing to report an inheritance can constitute fraud and can result in overpayments that you’ll have to repay. You could also suffer penalties and potential criminal prosecution.

Getting Help with Inheritance and Disability Benefits Questions

Inheritances create complex planning challenges for disability beneficiaries. The rules differ dramatically between programs, the timelines for action are short, and mistakes can cost you months of benefits or create overpayment debts.

The Keener Law Firm understands these complexities and can help you make well informed decisions about inherited assets. Whether you need guidance on spending down resources, establishing a special needs trust, or understanding your reporting requirements, experienced legal counsel protects both your inheritance and your benefits.

Don’t risk your financial security by guessing about how inheritance rules apply to your situation. Professional legal guidance from experienced disability law attorneys ensures you handle inherited assets in a way that maximizes your resources while maintaining the disability benefits you depend on.