Can a Disabled Child Inherit Money Without Losing SSI?
Yes, but an inheritance can affect Supplemental Security Income (SSI) if it is received directly and causes the beneficiary’s countable resources to exceed SSI limits.
Many families want to leave money to a loved one with disabilities but worry that doing so could disrupt important government benefits. This is a common and very important planning issue.
The short answer is that a person with disabilities can inherit money, but the way the inheritance is handled matters greatly if the person receives SSI.
Short Answer
If a child receiving SSI inherits money directly, that inheritance may count as a resource. If the total countable resources exceed the SSI limit, benefits may be reduced or lost unless proper planning steps are taken.
Why an Inheritance Can Affect SSI
SSI is a needs-based benefit program. To qualify, an individual generally must remain below strict resource limits. Cash, bank accounts, and many other assets count toward those limits.
If a person receiving SSI inherits money outright, those funds may become a countable resource. Even a modest inheritance can create eligibility problems if the money is placed directly in the beneficiary’s name.
Example
A parent leaves $25,000 directly to an adult child with disabilities who receives SSI. If the inheritance is paid directly to the child, it may place that child over the SSI resource limit and jeopardize benefits.
If proper planning had been done in advance, the funds might instead have been directed to a Special Needs Trust rather than to the child directly.
Common Planning Options Families Consider
Families in this situation often explore one or more of the following strategies:
1. Third-Party Special Needs Trust
When parents, grandparents, or other relatives want to leave money in the future, a third-party Special Needs Trust is often one of the most effective tools. The funds are left to the trust rather than directly to the beneficiary.
2. First-Party Special Needs Trust
If the person with disabilities already received the funds or legally owns them, families may consider a first-party Special Needs Trust. This type of trust is often used for inheritances already received or lawsuit settlements.
3. ABLE Account
An ABLE account may also be part of the solution for some families, depending on eligibility and the amount involved.
4. Spend-Down Planning
In some situations, families may consider spending funds on appropriate items or services for the beneficiary. This approach must be handled carefully.
Important Planning Point for Grandparents and Relatives
Relatives who want to help a loved one with disabilities should generally avoid leaving money directly to that person if SSI or Medicaid eligibility is a concern. Instead, they should consider coordinating beneficiary designations and estate plans with an appropriate Special Needs Trust.
What Families Should Do
- Review whether the beneficiary currently receives SSI or Medicaid
- Avoid direct inheritances when benefit preservation is important
- Coordinate wills, trusts, and beneficiary designations
- Consider whether a Special Needs Trust or ABLE account may help
- Get guidance before funds are distributed whenever possible
Have Questions About an Inheritance?
Ask Tom about SSI rules, inheritances, Special Needs Trusts, ABLE accounts, and planning options for loved ones with disabilities.
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Author: Tom Sannicandro, JD, PhD
Founder of SpecialNeedsTrustsOnline and Disability Resources for Families