Do You Have to Report Inheritance Money to Social Security?

Receiving an inheritance often raises questions about its effect on Social Security benefits. This article clarifies the distinction between different benefit types and outlines the necessary steps regarding inheritance, helping to prevent misunderstandings and ensure compliance.

Inheritance and Social Security Retirement or Disability Benefits

Social Security Retirement benefits and Social Security Disability Insurance (SSDI) are considered earned benefits. These programs base eligibility and benefit amounts on an individual’s work history and the Social Security taxes they have paid. The system operates on the principle that contributions made through payroll taxes entitle individuals to benefits upon retirement or disability.

Inheritance, whether received as cash, property, or other assets, is generally not considered income for these earned benefit programs. Therefore, receiving an inheritance typically does not affect or reduce the amount of Social Security Retirement or SSDI benefits an individual receives, regardless of the inherited amount. Recipients of Social Security Retirement or SSDI benefits usually do not need to report inheritance money to the Social Security Administration.

Inheritance and Supplemental Security Income (SSI)

Supplemental Security Income (SSI) is a federal program that provides financial assistance to aged, blind, or disabled individuals who have limited income and resources. Unlike Social Security Retirement or SSDI, SSI is a needs-based program. Eligibility and benefit amounts are directly dependent on an individual’s financial situation, including their income and available resources.

When an individual receives an inheritance, it is generally counted as a resource for SSI purposes. The Social Security Administration sets specific resource limits for SSI eligibility: $2,000 for an individual and $3,000 for a couple. If an inheritance causes a recipient’s total countable resources to exceed these limits, it can lead to a reduction, suspension, or even termination of their SSI benefits.

Certain resources are excluded from these limits, such as the home an individual lives in and typically one vehicle. However, an inheritance counts towards the resource limit unless immediately used to purchase an excluded asset. For example, if a recipient inherits cash, it is counted as a resource in the month it is received, even if spent quickly.

Reporting Requirements for Inheritance

Individuals who receive Supplemental Security Income (SSI) are required to report inheritance money to the Social Security Administration. This reporting is necessary because inheritance directly impacts their eligibility for a needs-based program. In contrast, those receiving only Social Security Retirement or Social Security Disability Insurance (SSDI) benefits generally do not need to report an inheritance, as it typically does not affect their earned benefits.

For SSI recipients, timely reporting of an inheritance is crucial. The Social Security Administration requires recipients to report changes in their income or resources, including an inheritance, within 10 days after the end of the month in which the change occurred. Reporting can be done by calling the Social Security Administration, visiting a local Social Security office, or sending information by mail. Provide accurate and complete details about the inheritance, such as the amount and the date received, is important during the reporting process.

Failing to report an inheritance can lead to serious consequences. If an overpayment occurs, the recipient must repay the excess benefits. The Social Security Administration may also impose penalties for untimely reporting. Continued failure to report can result in the suspension or termination of SSI benefits. Recipients should maintain thorough records of the inheritance, including the amount, the date it was received, and any communications with the Social Security Administration, to ensure proper documentation.