Learn How Inheritance May Affect SSDI Benefits

Understanding SSDI and How Inheritance Works

Social Security Disability Insurance (SSDI) is a federal program that provides monthly payments to people with disabilities who cannot work. Unlike Supplemental Security Income (SSI), SSDI is based on your work history and the Social Security taxes you or a family member paid. If you receive SSDI benefits, you may wonder how receiving an inheritance affects your payments.

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An inheritance is money or property that passes to you when someone dies, typically through a will or the state's intestacy laws. Inheritances can include bank accounts, real estate, vehicles, jewelry, or other valuable items. The key question for SSDI recipients is whether receiving an inheritance will reduce or stop your monthly benefits.

The answer depends on which Social Security program you receive benefits from. SSDI and SSI have different rules about how inheritances affect payments. SSDI has no resource limits, meaning the total value of what you own does not reduce your benefits. This is an important distinction from SSI, which does have strict resource limits. Understanding this difference is crucial because it affects how an inheritance impacts your situation.

The Social Security Administration (SSA) tracks both income and resources. Income includes money you earn or receive regularly, while resources are things you own that have value. For SSDI purposes, an inheritance is generally treated as a resource, not income. Since SSDI has no limits on how many resources you can have, receiving an inheritance typically does not reduce your monthly SSDI payment amount.

Practical Takeaway: If you receive SSDI benefits, an inheritance generally will not reduce your monthly payments because SSDI has no resource limits. However, if you also receive SSI benefits, the inheritance could affect your SSI payments, so understanding which program you receive is the first step in determining how an inheritance impacts your situation.

Key Differences Between SSDI and SSI Regarding Inheritances

Many people who receive Social Security benefits do not realize that SSDI and SSI operate under different rules. While both programs provide monthly payments to people who cannot work, they have very different resource and income limits. This difference is critical when considering how an inheritance affects your benefits.

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SSDI is based on your work history. You must have worked and paid Social Security taxes for a certain period to qualify for SSDI. Your monthly payment amount is based on your previous earnings record, not on your current financial situation. Because SSDI is based on your work history rather than financial need, there is no limit to how much money or property you can own. You can have $1 million in the bank, own multiple properties, or receive a substantial inheritance, and your SSDI payment will remain the same.

SSI, by contrast, is a needs-based program for people with low income and few resources. To receive SSI, you must have limited income and limited resources. As of 2024, the resource limit for an individual is $2,000, and for a couple it is $3,000. This means if your total resources exceed these amounts, you may lose SSI benefits. An inheritance that pushes your resources over this limit could result in a reduction or loss of SSI payments.

Some people receive both SSDI and SSI at the same time. This is sometimes called concurrent benefits. In these cases, the inheritance would not affect your SSDI payment, but it could affect your SSI payment if the inheritance value exceeds the resource limits. Additionally, some states provide state supplements to SSI, and these may also be affected by an inheritance.

Understanding which program or programs you receive is essential. Your Social Security Statement or the SSA website can tell you which benefits you receive. You can create a my Social Security account at ssa.gov to review your benefit information. Knowing the rules that apply to your specific situation helps you make informed decisions about inheritances and other financial matters.

Practical Takeaway: Determine which program you receive—SSDI, SSI, or both. This will tell you whether an inheritance affects your benefits. If you receive only SSDI, an inheritance will not reduce your payments. If you receive SSI or both programs, an inheritance may affect your SSI portion.

How SSDI Treats Inherited Money and Property

When you receive an inheritance as an SSDI beneficiary, the SSA generally does not count it as income that would reduce your monthly payment. This is because SSDI payments are based on your work record, not on your financial need or current assets. However, it is still important to understand how the SSA technically treats inheritances and what reporting responsibilities you may have.

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An inheritance is not considered income for SSDI purposes. Income, in Social Security terms, typically refers to money you earn from work or receive regularly, such as wages, self-employment income, pensions, or rental income. An inheritance is a one-time transfer of assets, not ongoing income. Because of this distinction, it does not reduce your SSDI monthly payment amount, regardless of how much money or property you inherit.

The inherited assets become part of your resources or assets. Since SSDI has no resource limits, owning these assets does not trigger a benefit reduction. You can own a house, a car, investments, or other property without affecting your SSDI payments. This flexibility allows SSDI beneficiaries to build financial security through inheritances or other means without losing their benefits.

However, what you do with the inherited money can affect your benefits in indirect ways. For example, if you inherit cash and use it to start a business, the business income could affect your benefits if you are working. If you inherit property and rent it out, the rental income would be counted as income and could reduce your SSDI payment. The inheritance itself does not reduce benefits, but income generated from the inherited assets might.

You are not required to report an inheritance to the SSA unless it generates income that you will receive regularly. If you simply inherit property or cash and hold it without using it to generate income, there is typically no reporting requirement for SSDI purposes. However, if the inheritance generates income, such as interest on inherited money or rental income from inherited property, you should report this income to the SSA.

Practical Takeaway: For SSDI recipients, an inheritance itself does not reduce monthly benefits. Keep inheritances separate from income-generating activities, as income from inherited assets could affect your payments. Report any income generated from inherited assets to the SSA to ensure your benefits are calculated correctly.

What Happens If You Receive Both SSDI and SSI

Some people receive both SSDI and SSI benefits simultaneously. This situation can occur when someone has a limited work history and receives SSDI based on that history, but the SSDI payment amount is so low that they also qualify for SSI. In these cases, an inheritance affects each benefit differently, and understanding how both programs treat the inheritance is important.

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As discussed, SSDI is not affected by an inheritance. Your SSDI payment will continue at the same amount. However, SSI is a needs-based program with resource limits. If you receive both programs and inherit money or property that pushes your total resources above $2,000 (for an individual) or $3,000 (for a couple), your SSI portion may be reduced or terminated.

Here is a practical example: Sarah receives $400 in SSDI monthly based on her late mother's work record and $300 in SSI because her SSDI payment is low. Her total monthly benefit is $700. Her uncle passes away and leaves her $5,000. The $5,000 inheritance does not affect her SSDI payment of $400. However, it does affect her SSI payment. After receiving the inheritance, her total resources exceed the $2,000 limit, so her SSI payment of $300 is terminated. Her monthly benefit drops to $400, even though she inherited $5,000. Once she spends enough of the inherited money to bring her resources below $2,000 again, her SSI portion could resume.

The SSA counts most inherited assets as resources. This includes cash, bank accounts, real estate, vehicles, and other property. There are some exceptions—for example, a primary residence and one vehicle are typically not counted as resources for SSI purposes, even if they are inherited. Additionally, some states have different rules about how they count inherited property.

If you receive both programs, it is important to plan ahead if you expect to receive an inheritance. You might consider how the inheritance will affect your benefits and whether there are strategies to minimize the impact on your SSI portion. Speaking with a benefits