Federal law requires you to report to the Social Security Administration if you are the beneficiary of an inheritance – even if you refuse to accept the inheritance. Failing to report an inheritance can result in financial penalties. It could also cause your SSI payments to stop for up to three years.
Immediately after receiving an inheritance, you should notify your local Social Security office. If your inheritance exceeds $963, you'll be ineligible for benefits for at least one month. You'll remain ineligible as long as your resources are more than $2,000.
Social Security will take into consideration the amount of your assets, because it is a needs-based program. To be eligible for SSI, your assets must be less than $2,000 for an individual and less than $3,000 for a married couple. However, not all assets count towards the resource limits.
The inheritance should not affect survivor's benefits, since receipt of that benefit is determined by age & relationship to the deceased wage earner, not income, resources or disability.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income. Example: You inherit and deposit cash that earns interest income. Include only the interest earned in your gross income, not the inherited cash.
If your total savings (including the inheritance) exceed certain thresholds, you may lose eligibility for means-tested benefits.
For example, if someone pays an individual's medical bills, or offers free medical care, or if the individual receives money from a social services agency that is a repayment of an amount he/she previously spent, that value is not considered income to the individual.
Luckily, there is a way to protect your SSI benefits and still accept your inheritance. If you deposit your inheritance into a special needs trust, you may continue to receive SSI benefits while also enjoying the advantages of the inheritance. A trustee must oversee the funds within the special needs trust.
The SSA uses an automated Access to Financial Institutions (AFI) system to verify provided bank details and uncover unreported accounts. This tool allows for efficient checks based on search criteria like location and account balances, helping to identify discrepancies or resources above the cap.
Although an inheritance won't affect your Medicare benefits, it could raise your premiums in the short-term. Medicare is a federal health insurance program for people aged 65 or older, some younger people with disabilities, or people with end-stage renal disease (ESRD).
Without a trust, the inheritance you receive may count as extra income or assets that either disqualifies you from receiving government benefits, or results in you getting fewer benefits.
The effect of inheritance on your Social Security disability benefits will ultimately boil down to the type of benefits you receive. If you're an SSDI beneficiary, inheritance won't affect your benefits because the program's funded through payroll taxes you've already paid based on your work history.
Within a family, a child can receive up to half of the parent's full retirement or disability benefits. If a child receives survivors benefits, they can get up to 75% of the deceased parent's basic Social Security benefit. There is a limit, however, to the amount of money we can pay to a family.
In general, any inheritance you receive does not need to be reported to the IRS. You typically don't need to report inheritance money to the IRS because inheritances aren't considered taxable income by the federal government. That said, earnings made off of the inheritance may need to be reported.
Social Security might count a gift as income - depending on what the gift is. If you receive cash, that's typically counted as income.
Therefore, inheritances do not impact eligibility, and no reporting requirements exist for inheritances or assets received. Before assuming an inheritance will forfeit your benefits, check which program you receive—SSI or SSDI.
The limit for countable resources is $2,000 for an individual and $3,000 for a couple.
Federal tax laws do not consider most inherited assets to be taxable income.
When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you're self-employed. We include bonuses, commissions, and vacation pay.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
Current beneficiaries who exceed the limits are suspended and then terminated from program participation if their savings remain above the limits, and they must repay any benefits paid while they are over the limit. SSI beneficiaries are limited to only $2,000 in assets of any kind.
Any tax due will normally be taken out of the deceased's estate, and the executor will usually take care of it. This means you won't need to declare inheritance money to HMRC – an inheritance isn't classed as income, and therefore isn't taxable.
While receiving inheritance money might seem positive, consider that statistics show nearly one in three Americans who inherit money lose it within two years. With an experienced Wealth Advisor's help, you can avoid the same fate and put a solid strategy into place on what to do with inheritance money.
Disability Living Allowance (DLA) and Personal Independence Payments (PIP) are not affected by income or savings. For more information on how savings and investments are calculated, contact the Department for Work and Pensions or the Citizens Advice Bureau.