An inheritance could be an unexpected financial windfall. However, if you are receiving disability benefits, you might be wondering how an inheritance will impact your monthly payments. Unfortunately, in some cases, you could potentially lose them. However, the answer does depend on your circumstances and the type of benefits you are receiving. Ken Kieklak, a Fayetteville Social Security Disability lawyer, represents individuals applying for or appealing Social Security claims. Below, he examines some of the ways an inheritance could impact a person’s disability benefits.
Social Security Disability Insurance Benefits and Inheriting Money in Arkansas
The Social Security Administration (SSA) offers two significantly different programs to individuals who have suffered a physical or mental impairment. The medical requirements for both programs are exactly the same. A claimant must have a disability that impairs their ability to earn a living, lasts for at least twelve months, or will result in death. However, the other requirements and purposes of each program are drastically different.
Social Security Disability Insurance (SSDI) benefits function in the same manner as the name implies. An individual will pay into the program through a payroll tax whether they are employed by a company or self-employed. If the individual has earned enough work credits, they are eligible to file a disability claim if they suffer from a physical or mental impairment. While there is an income threshold that a claimant cannot exceed to receive benefits, it is based on the inability to work. The SSA is not factoring in any other assets or property when determining if a claimant qualifies for benefits. Therefore, an inheritance will not result in a loss of SSDI benefits.
However, there are situations where a portion of an individual’s SSDI benefits are taxable. This is usually because of their household income, including their spouse’s. Therefore, though your benefits will not be affected, the inheritance could place you above the income threshold, resulting in a portion of your benefits becoming taxable. The actual threshold depends on whether you decide to file as a single return or jointly. If you have any questions or concerns regarding an inheritance and its potential tax consequences, contact our experienced Arkansas disability benefits attorney.
Supplement Security Income and Inherited Money
The other program administered by the SSA is Supplement Security Income or SSI. SSI benefits are available for disabled children and adults, blind individuals, and people over the age of 65 who have limited resources and income. Unlike SSDI, SSI is funded through the general tax fund and does not require a claimant to have paid into the program. However, because SSI is based on a person’s income and resources, an inheritance could cause someone to lose their benefits.
To qualify for SSI, you must have an eligible physical or mental impairment and have a limited income. In 2021, an individual’s income could not exceed $794 and a couple’s income must be below $1,191. Additionally, an individual’s resources and assets must not exceed $2,000, while a couple is limited to $3,000.
For SSI purposes, income includes earned income, for instance, a salary from a job. It also includes unearned income, for example, a contribution from a family member. An inheritance is a form of unearned income and must be reported to the SSA. This additional income could result in the loss of benefits.
Protecting Your SSI Benefits and Your Inherited Money in Arkansas
There are some things you can do if you believe you will be inheriting money to protect your SSI benefits. One thing you could do, but is not advised by our Arkansas Disability lawyer, is disclaiming your inheritance. This means that you simply refuse to accept it. However, the SSA will still consider the inheritance income even if you never take possession. By rejecting it, all you are legally doing is giving up control. According to the SSA, this is the same as transferring the resource and could result in you losing your benefits for three years.
It is possible to work with your potential benefactor and set up a special needs trusts. Our Arkansas disability case referrals attorney is available to assist with this process. Under a trust, the proceeds of your inheritance will be managed by a trustee. These funds are not in your control and are not considered a resource by the SSA. The special needs trust could be set up to provide for housing, medical care, or education. Because you do not have control over the funds, they will be paid directly to the entities providing the services of goods.
Another option is putting your inheritance into an Achieving a Better Life Experience or ABLE account. This type of account was developed to provide a means for disabled individuals to save money without affecting their SSI benefits. It is important to note that there are limits to the amount of money allowed to be deposited each year. Under the current law, an individual can save up to $14,000 yearly in an ABLE account. Therefore, if you inherit $14,000 or less, you could protect the funds and your benefits by opening an ABLE account.
Contact Our Arkansas Social Security Attorney to Review Your Benefits and Your Inheritance
Many individuals rely on Social Security Disability benefits to make ends meet every month. When these same individuals receive an inheritance from a beloved relative or friend that wanted to help secure their future, the very benefits they rely on could be in jeopardy. Ken Kieklak, Attorney at Law, has helped people navigate the complex rules and regulations that govern Social Security Disability benefits for decades. If you have any questions regarding your disability benefits and a potential inheritance, call our Arkansas Social Security Disability lawyer at (479) 316-0438 to schedule a free consultation.