How SSI or SSDI Taxes Are Affected by Inheritance and Other Assets

    

If you’re receiving Social Security, it can be challenging to determine how inheritance and other sudden increases in assets affect your benefits. 

Let’s say you receive windfall inheritance. On average, these can range in the tens of thousands of dollars. Suddenly you have a lot more in the bank than you did when you qualified for your benefits.

You may wonder, “Are my benefits for Social Security Disability Income (SSDI) taxable, based on this change in assets?” Or, “How do inheritance and other assets, such as a trust or estate, affect my Supplemental Security Income (SSI) benefits? Do these assets put me above the earnings threshold, and make me ineligible to receive SSI?”

The answers are not always straightforward. Since all cases are unique, it’s important that you consult with a qualified SSI attorney.

For a free case evaluation, contact Affleck & Gordon’s SSI attorneys.

This topic can be complex, but it’s worth exploring with your attorney so you’re prepared if the Social Security Administration determines that your benefits should be denied due to a sudden change in your income due to an inheritance. 

What Is SSI?

Supplemental Security Income is only granted to disabled people with extremely limited lifetime income, or to non-disabled adults over age 65 who meet the financial limits. Because the earning threshold is so low, SSI income is not taxed. 

Usually when you’ve paid Social Security taxes through your employer over a certain period of time and are “insured,” then you are eligible for SSDI, which is not needs-based like SSI. 

There are several other qualifications necessary for receiving SSI, aside from income, in order to be considered eligible. These qualifications require your proof of disability; status as a citizen, national, or certain categories of alien; age; and meeting other SSA requirements. 

Four main categories of income determine if you qualify for SSI:

  • Earned Income
  • Unearned Income
  • In-Kind Income 
  • Deemed Income

According to the Social Security Administration (SSA), The monthly maximum Federal amounts for 2020 are $783 for an eligible individual, $1,175 for an eligible individual with an eligible spouse, and $392 for an essential person.”

Learn more about how the SSA determines your income qualifications.

Inheritance, trusts, and estates you acquire can sometimes fall under a separate category of assets the SSA limits for you to continue qualifying for SSI each month--$2,000 if single or $3,000 if married.

If your gained assets count toward your total calculated income, it can cause your benefits to be decreased or, if it puts you above the SSA’s threshold, it can cause you to lose benefits altogether. 

A Social Security attorney can help determine exactly how your benefits will be affected.

How SSDI Taxable Benefits Differ from SSI

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Unlike SSI, SSDI is not a needs-based benefits program, so you cannot lose your benefits by going above a certain income threshold.

However, a portion of your SSDI benefits can in some instances become taxable. Roughly one third of SSDI recipients have a portion of their benefits taxed. This is because of their household or spouse’s income. 

Although any income or assets you inherit won’t affect your SSDI benefits, these changes may sometimes place you above the threshold and cause a portion of your benefits to become taxable.

Per the IRS, SSDI benefits will be taxed when you exceed certain income thresholds. The threshold depends on whether you file single or jointly, and includes half your SSDI benefits.

Depending on how much your income exceeds these totals, as well as your filing status, the taxable portion of your SSDI benefits can range from 50% up to 85%.

Learn more about how the IRS taxes your disability benefits here.

When you have trouble navigating how particular assets affect your SSDI taxable benefits, a qualified disabilities lawyer can help.

How Could an Inheritance Affect My SSI Benefits? 

An inheritance may cause unexpected changes to your SSI benefits. Also, many who qualify for SSI benefits also qualify for Medicaid or other benefits that may also be affected. However, this is a case-by-case scenario, and can be complicated depending on specific circumstances.

When you receive an inheritance, you have to report it to the SSA no later than ten days after the month in which you receive the inheritance.

There are different categories of inheritance with different effects, including:

  • Cash inheritance
  • Life insurance
  • Real estate, such as a family home
  • Investment income
  • Trusts
  • Annuities

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In some instances, you may be dealing with a special needs trust, which will further determine whether these assets affect your benefits.

A special needs trust is a legal arrangement which allows a disabled person to receive an income without it jeopardizing that person’s benefits, such as SSI, Medicaid or Medicare.

Since each case is unique, the best place to start is always by consulting a qualified SSI attorney. An attorney will be able to discuss with you the different options when it comes to special needs trusts, as well as how your specific situation impacts your benefits.

Where do I Find a Qualified SSI Attorney? 

Since issues of inheritance and how they affect Social Security benefits can be complicated and different for each beneficiary, the right SSI attorney can act as a crucial advocate for maintaining your rights.

Attorneys can guide you through an inheritance’s impact on your benefits, what your options are for safeguarding your benefits from being reduced, denied, or revoked, and how to appeal a negative outcome.

Experienced disability attorneys at Affleck & Gordon want to help empower you to handle these situations regarding your benefits.

An initial consultation with our qualified SSI attorneys is free.

If your Supplemental Security Income claim or your Social Security Disability Insurance claim have been denied, or you’re thinking about filing and don’t know where to start, Affleck & Gordon can help. We’ve been helping people in Georgia just like you for over 40 years. Sign up for a free case evaluation here, or call us (404) 795-7165.

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