SSI, Settlements/Inheritance, and Special Needs Trusts

By Tomasz Stasiuk on 10/01/2008 in Overpayment, Supplemental Security Income

Here is a popular question:

I’m on SSI, do I have to tell Social Security about an inheritance/settlement I am getting?

The answer is simple:

YES!

There is no point beating around the bush with this one. If you are on SSI and “come into money” whether it is a gift, inheritance or settlement (or through whatever means), you need to notify Social Security.

Supplemental Security Income (SSI) is a “needs-based” program. You only get it if you do not have money coming in from other sources. So, if you suddenly get some money, your benefits may be reduced or even cut off.

Even worse for some people is the potential loss of Medicaid. You have to be receiving at least $1.00 of SSI benefits to qualify for Medicaid benefits under Social Security. So if you lose your SSI, you may also loose your Medicaid (unless you qualify under another program).

Well, I don’t want my benefits cut off! And I can’t afford to have my Medicaid cut off!!!

I understand, and I sympathize. However, there are worse things that can happen than having your benefits suspended or terminated. If you fail to report this money to Social Security, you may face the following:

Overpayment. If it would be terrible to have your benefits stopped, imagine how bad it may be to have to pay back money that Social Security says you were not entitled to. See my articles about how difficult it is to fight an overpayment claim, and how hard it is to get an attorney to help. In my experience, it is easier to find an attorney to help you get your benefits back after SSA cuts them off rather than trying to find an attorney to help you fight an overpayment.
Prosecution. While rare, if Social Security thinks that you intentionally hid assets to keep getting SSI, that’s fraud. Social Security may turn over your case to the Attorney General’s office for prosecution.

Document communication with Social Security

Ok, so you have decided to do the right thing and let Social Security know about the gift / inheritance / settlement / pot of gold. Great! Now ask yourself. If Social Security comes back in two months or two years and you have to prove that you notified SSA about the money, do you have any proof?

TIP: Always document communication with Social Security.

It does not matter if you spoke to someone over the telephone or in person at the Social Security office with a hundred witnesses. If Social Security looses all record of your discussion, the ball is in your court to prove you provided notice.

Protect yourself. Assume that Social Security will not have proof of your communications. You have to keep that keep that proof yourself.

What kind of proof?

A certified, return receipt requested letter is always good.
If you meet with someone, follow up with a letter reviewing the communication.
A phone log and/or meeting log showing dates, times and who you met and spoke with at Social Security and a summary of what was said.

Keep in mind, none of this is bullet-proof evidence. However, it may show that you took steps to keep Social Security informed about your money situation, which may save you from a fraud charge.

This is especially important if you meet with Social Security, review your income/assets and Social Security tells you that you can go ahead and keep the Social Security benefit check. If you do not have proof of the discussion, what will you do if Social Security contacts you in two years and says you were not entitled to those benefits? Yes, this can happen!

If you are not entitled to benefits, it may not matter if Social Security told you to keep the money

Here is another kick in the head: even if Social Security tells you that you are entitled to keep the benefits, nothing stops Social Security from changing its mind down the road and demanding an overpayment. Crazy, but true.

Plus, if you read my overpayment article, you have seen that even if Social Security tells you that it is ok to keep the money, and you are without “fault,” that is only one of the two tests for determining if you have to pay the money back.

You may still have to pay the money back.

Special Needs Trusts

Since you stuck it out through this long article, I will let you in on one way to keep the gift / settlement / inheritance and still maintain elligibility for SSI: a Special Needs Trust.

Special Needs Trusts occaisionally pop up in personal injury cases where a person has been serverly injured and becomes disabled and then receives a settlement for the injury. If the person takes the settlement, will probably make them ineligible for SSI.

However, if the settlement is put into a “Special Needs Trust” which can only be accessed for very specific purposes, Social Security may not count the settlement as an asset.

How to set up a Special Needs Trust?

This requires a very special kind of legal voodoo. You will need to have a trust attorney help you, and not just any trust attorney can do this properly. You need a trust attorney who is familiar with special needs trusts. You want a specialist* for this.

If the trust fails for any reason, the settlement or other money may be counted as an asset and the person may lose SSI benefits and Medicaid.

How about windfalls and SSDI cases?

Social Security has different rules concerning non-work income for SSI vs SSDI. This post deals with SSI since it is a “needs based” program that considers other (non-work) sources of income: gifts, inheritance, etc, in determining eligibility.

Generally speaking:

When dealing with SSI benefits, SSA considers all sources of income.
When dealing with SSDI benefits, SSA considers compensation (basically, money for work).

Does that mean that there aren’t exceptions to this? No. The are just general principles.

I encourage anyone who is concerned about the effect of an inheritance, gift, proceeds from a sale, etc to speak to Social Security and speak to an attorney about their specific circumstances.

If the money is going to affect an individual’s benefits, isn’t it better to face that head on (while the money is still there), rather than dealing with a cessation, overpayment and possible prosecution later on?

Updated: 04/19/09

*Disclaimer: Colorado does not certify lawyers as specialists in any field.

=========================================================
Disclaimer: This is NOT legal advice. This site provides general information about Social Security disability cases in Colorado. To discuss your particular circumstances, please contact a lawyer in your area. Please review the full disclaimer .

About Tomasz Stasiuk

Tomasz Stasiuk is a Colorado Springs Social Security disability lawyer and the founding attorney of the Stasiuk Firm - a law firm specializing in Social Security disability cases in Colorado. Follow Tomasz Stasiuk on Google and Twitter

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Gifts, Inheritance, Overpayment-Repayment, Settlement, Special Needs Trust, Supplemental Security Income (SSI)

Social Security Disability Insurance Benefits vs SSI Supplemental Security Income

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http://www.disablognd.blogspot.com Terry

Great blog!
One thing, and you are right when it comes to unearned income, this statement: “You have to be receiving at least $1.00 of SSI benefits to qualify for Medicaid benefits under Social Security.” – doesn't apply to earned income…well, you know what I mean.
I just hear that $1 thing a lot – but 1619(b) is rarely touted.

Anyway – great site.
http://www.SocialSecurityInsider.com/ TomaszStasiuk

Hi Terry,

Great point!

My understanding is that people who have 1619(b) status do NOT receive an SSI payment because of their earned income, BUT they are still considered SSI recipients for Medicaid purposes and can still receive Medicaid.

That is a very nuanced observation. Thank you for contributing!
CJ

What if you inherit the family home that you've lived in all your life and plan to live in it the rest of your life? Have been on SSA/SSI all adult life. No other assets were inherited. Thanks!
http://www.SocialSecurityInsider.com/ TomaszStasiuk

Hi, CJ, I tried to contact you privately, but your email address went to the wrong person. Here is the message:

Hi CJ

Thanks for your comment!

You a very fact-specific question. The Social Security Insider site can only provide general information. I cannot perform case evaluations via email or comments.

Social Security should be able to tell you whether the home will affect your benefits or not.

If you want to get an idea of what the answer might be BEFORE contacting Social Security, Paul Niditch paul@paulnidich.com http://paulnidich.typepad.com/about.html might be able to help.

I wish you the very best.

Tomasz M. Stasiuk
http://www.SocialSecurityInsider.com

A Whole Mess of Legalese:
Information contained on the website and responses to comments and email is general information about the Social Security system and is not legal advice. The information on this site may not be appropriate for the specific circumstances of a particular case and should not be used without obtaining legal advice. For a review of the specific circumstances of your case, contact an attorney for a consultation. The Stasiuk Firm is available for consultations by telephone at (719) 630-1225 or (800) 407-016. No attorney-client relationship is formed via unsolicited communications with the website or office. No representation is provided without a validly executed fee agreement signed by the Stasiuk Firm and the client (or their representative). Phew!
Brenda

I am on social security disability. My 'real' father's estate has a small amount left for me and I don't know if it is 25,000.00 or a little more, but I want to know how it will effect me. I am on section8 and I am afraid it is really going to mess me up. Please email me as to what to do.
Sincerely,
Brenda
BSutton55@yahoo.com
http://www.disablognd.blogspot.com Terry

If you're on SSI….and this becomes your home/primary place of residence and you do not own any other home, then you have nothing to worry about. 1 home is an asset exclusion for SSI (along with a some other things).
You're good to go.

If you are already living somewhere and you inherit the property and do not intend to move there – then it could be considered an asset eventually. I'd recommend checking with your local WIPA.

A thought/way out of this would be if you inherited the property and were already living on another property that you owned…..you could rent one of them out. The rental income you receive would be considered self-employment and the house you are renting out now becomes Property Essential for Self Support (PESS) – which is an asset exclusion under SSI.
http://www.disablognd.blogspot.com Terry

Assuming you mean SSDI by “social security disability” – the $ will have no impact. It is considered “unearned” income which is not really counted for SSDI. Plus, there are no asset restrictions for SSDI, so you're good there too.

Section 8 is another story. I'd talk to your HUD worker about that. There may be some shelters for you to use. Ask them specifically about the Family Self Sufficiency (FSS) program. This may allow you (if they allow for the unearned income to be invested) to put money away into an escrow account to be used towards a house in the future. Your current section 8 arrangement staying the same.
http://www.SocialSecurityInsider.com/ TomaszStasiuk

I don't disagree that if you “come into money” it will not impact your Title 2, aka Retirement, Survivors & Disability Insurance, aka SSDI, aka Disability Insurance (DIB) benefits. The focus of the article was the impact on Title 16 Supplemental Security Income (SSI benefits).

I appreciate your point about Section 8 and the FSS program. That is good information to have!
http://www.SocialSecurityInsider.com/ TomaszStasiuk

I appreciate your input on this.

In the second example (renting out the property), wouldn't the *value* of the house/land still be a problem for SSI eligibility beyond the amount you receive as rent?
Dannie

Hello,
I currently receive SSI and I am going to be receiving monthly unearned income from a realtive that exceeds the SSI amount. I will be reporting the income next week, I prefer to get off SSI altogether, if they offer me the PASS and the trust fund, can I deny those options? I have heard too many horror stories of overpayments and these accounts not going well. I will also be getting help from my relative for medical expenses.

Thank you
Pat Duval

Is the State of Missouri under the same rules as Colorado?
http://www.SocialSecurityInsider.com/ TomaszStasiuk

Social Security is a national program with a national set of rules. However, court rulings from the District Court of Appeals only apply within that district, unless they are adopted by Social Security. Also, SSI interacts with state laws causing some differences among the states.

Helpful? Probably not.

Pat, I imagine you have *specific* question, which I would not be able to answer because I cannot provide legal advice through this site, only general information.

Call a local attorney, and ask him or her the real question on your mind. You may need to go in for a consultation (which is usually free). Attorneys want to help you; give them a chance.
JoAnn

Can I inherit money and still receive my disability
http://www.SocialSecurityInsider.com/ TomaszStasiuk

I can't think of any situation where an inheritance would affect eligibility for SSDI benefits. However, it *can* effect (even stop) SSI benefits. The above article discusses this.

I cannot answer the question in your case as I do not provide legal advice through this site. I encourage you to speak to a lawyer in your area to see how the inheritance will affect you.

All my best.
barbarapfeifer

if we set up a special needs trust for our daughter who draws ssi in the state of ca, how can the funds be distributed without her loosing ssi and medicaid. what can the money we leave her be used for. thanks
bp in arkansas
Name

Can you please tell me how long after a person dies and you are receiving a small inheritance do you have to let SSI know? Nothing has yet been done with the will. Thanks so much
http://www.StasiukFirm.com TomaszStasiuk

Hi,

Thanks for commenting! You have a good question.

Unfortunately, I don’t have an answer for you. You may want to call
your local Social Security office or a local Social Security attorney
in your area (of course you will probably have to pay to get your
question answered).

Tomasz Stasiuk – http://www.ColoradoSocialSecurityLaw.com

This communication is not legal advice does nor does it form an
attorney-client relationship. No representation is provided without a
validly executed fee agreement.
JS

Can you build a $500,000.00 house contribute $25,000.00 in a partnership if you are on full disability and collecting a check. Would that be fruad. All partnership money was put in the husband name.
JS

Can you build a $500,000.00 house contribute $25,000.00 in a partnership if you are on full disability and collecting a check. Would that be fruad. All partnership money was put in the husband name.
sutphin

i have a friend who had their SSI cut off, because they inherited money. being unable to work, this person has been living off of their inheritance and is now almost completely broke. will she need to prove how she spent her inheritance money, before they allow her to receive SSI again. thanks
Mystic

Same Question, SSID Inhertance approx 25,000 paper work came in, do I check one lump sum, a monthly payment. ugg do I need to call them and let them know? What about filing taxes I dont now? Afraid to lose my medcaid as my meds are expensive. Can I renounce my share and pass to brother. Any and all advice appreciated.
stowey

I am on SSDI. How will an inheritance effect this
Dotti

I am on disability. I am selling something worth 20,000.00. I have a farm on which I owe 60,000.00. Can I put the funds toward that debt without retribution from SSDI?
Dorothy

I have a similar situation, am on SSDI, owe 60,000.00 on my home, which I would like to put a 20,000.00 gift toward without retribution. How did your situation turn out?
http://www.ColoradoSocialSecurityLaw.com TomaszStasiuk

The general rule is that other sources of income (inheritance, dividends, money from the sale of real estate) which would affect SSI, do *not* effect SSDI. I can think of some tortured exceptions, but that is the general rule.

However, individual circumstances may change this general rule. It's a good idea to review each set of specific situation with SSA.
Injury Settlement Amounts

Average car accident settlement?
I was in a accident not at fault, had injuries to neck, back, leg and hand. lost two weeks from work, had physical treatment, saw doctors and chiropractors. What should i settle for?
Adeans1

This was very interesting, but I’m looking for information regarding inheritance and Social Security Disability/Medicare. Is the law the same for SSI and SSDI?
Adeans1

Did you ever get an answer?
http://www.Planet10Tech.com TomaszStasiuk

Social Security has different rules concerning non-work income for SSI vs SSDI. The article above deals with SSI since it is a “needs based” program that considers other (non-work) sources of income: gifts, inheritance, etc.

Generally speaking, when dealing with SSI benefits, SSA considers all sources of income; when dealing with SSDI benefits, SSA considers compensation (basically, money for work). Does that mean that there aren’t exceptions to this? No. The are just general principles.

I encourage anyone who is concerned about the effect of an inheritance, gift, proceeds from a sale, etc to speak to Social Security and speak to an attorney about their specific circumstances.

If the money is going to affect an individual’s benefits, isn’t it better to face that head on (while the money is still there), rather than dealing with a cessation, overpayment and possible prosecution later on?

Disclaimer: http://www.stasiukfirm.com/disclaimer/
Ddudleston

Do you deal with special needs trust funds I try to find a lawyer that can help me set one up I’m going to be getting a settlement soon and would like a majority of the money put directoly into a special needs trust fund instead of having that much money in my bank
http://www.Planet10Tech.com TomaszStasiuk

We do not do special needs trusts. However, I know several attorneys in Colorado who handle these. If you are in Colorado, I can refer you to someone.
andrea

I may in a few years inherite money, not sure. My daughter has Autism and is receiving SSI along with Medicaid. I am my daughter CNA and medicaid pays me for her care. Will my daughter loss ALL her benifits?
http://www.Planet10Tech.com TomaszStasiuk

It is possible. If the parent ,of a minor child on SSI, receives an inheritance, it may affect the household income and/or assets which might make the child no longer eligible for SSI.

At this point there are a lot of unanswered and unanswerable questions. Of course, no one can say when they may die. However, since an inheritance may impact your daughter’s SSI, it may be worth discussing the matter with the person who may be giving the bequest and their estate planner to set it up in such a way to preserve your daughter’s eligibility. This is outside of my area of practice so I cannot comment beyond suggesting that you investigate this further and obtain proper legal advice.
Maggie

I live in Oregon, I am on SSI and own my own home. I would like to move and sell my house on contract and use the money to buy my new residence, is this okay, will I be able to keep my SSI?Or can I rent out my house to buy another?
http://www.Planet10Tech.com TomaszStasiuk

Hi, Maggie.

To be able to receive SSI benefits, an individual has to maintain financial eligibility. This generally translates into having less than a certain amount of income per month or assets. The house a person lives in (and the land it is on) is usually not counted as an asset. http://www.socialsecurity.gov/pubs/11000.html

However, the income from renting a house (or even subletting a room) may count as income which may make an individual ineligible to receive SSI.

Additionally, the proceeds from the sale of the same home may count as income.

Now, you would think that there is some way of “rolling-over” the proceeds from the sale of a house, into the purchase of another house. And, if the purchase was done within a certain number of months of the sale, it would not endanger SSI eligibility. That would make sense wouldn’t it? Otherwise, if you are on SSI, you would be trapped in the same home, because any sale might threaten to make you ineligible for SSI.

Well, unfortunately, I cannot find anything that suggests SSA has a of roll over provision to handle the sale of a house while preserving SSI. I cannot say with certainty that there isn’t one — I simple cannot find one. This page talks about the ability to receive SSI benefits while trying to sell real property. However, it also indicates you may have to pay SSA back for any SSI benefits during the sales period, once the property is sold. http://www.socialsecurity.gov/ssi/spotlights/spot-sell-resources.htm

It may be possible to handle this through a special needs trust. However, that would involve the cost of creating the trust which may be several thousand dollars.

I will ask an trust attorney I know if he would be willing to do a guest article addressing his question.
http://www.Planet10Tech.com TomaszStasiuk

This post does not strictly answer your question, however it discussed paying for a home via a special needs trust: http://www.dvanarelli.com/blog/?p=7271

The attorney Donald Vanarelli, may be a good person to contact to get an answer.
cliff

my daughter is 19 y ear old special needs with mental disability.she gets 400 dollars a month from social security..im her dad who is her payee rep. she lives with me and her mom and her special needs brother.how do we count this social security on our taxes.and do we get tax credit.thanks for your knowledge and your time…cliff
cliff

my daughter is 19 y ear old special needs with mental disability.she gets 400 dollars a month from social security..im her dad who is her payee rep. she lives with me and her mom and her special needs brother.how do we count this social security on our taxes.and do we get tax credit.thanks for your knowledge and your time…cliff
http://www.Planet10Tech.com TomaszStasiuk

Hi Cliff. I can only encourage you to contact your tax preparer / CPA.
roberto

I receive SSI disabilty and got a divorce settlement which went into a Lawyers escrow account. From there, the lawyer paid off long term creditors of mine. I never touched the money, not one cent of it. Is this OK?
http://www.Planet10Tech.com TomaszStasiuk

I can’t answer this. Talk to your lawyer.
Robin

Is it true that if you are on SSI in California that you have to pay back everything you received after age 55 if you receive an inheiritance? Is there any way to keep medicaid or pay a monthly fee to stay on medicaid? If not is there any program I can put my brother on. He is 58 and no health insurance company will insure him due to his health issues. Thank you for any information you can give me.
http://www.Planet10Tech.com TomaszStasiuk

A special needs trust is one way of preserving SSI eligibility in the case of an inheritance. However, these are complicated devices and cost some money to set up. An attorney who handles trust matters or estate planning can go over whether this is an option (or the best option) based on the individuals specific circumstances.
Deb

Hello,

My husband was on SSI and Medicaid for approximately 20 years (during that time we were not married). He has been severely disabled with OCD and Depression.

Two years ago, we got married and stopped them both.

When setting up her will, his mother was told by her lawyer that she couldn’t will money directly to him. The lawyer said that if Social Security discovers you have money, they will want the SSI paid back (I don’t know about the Medicaid).

We asked if it was possible to find out how much money was given to him during that time but the lawyer said it was pretty much impossible.

Because of this, his mother has him set up with a Special Needs Trust. Neither of them like the situation but don’t know where to turn to get the answer.

Does this money, indeed, have to be paid back if he were to get his share of her will? If so, is there a way to find out how much it is?

I appreciate any help that you can give. Thank you for your time!
http://www.Planet10Tech.com TomaszStasiuk

I can’t address this. Lawyers handling estate planning (that is the general category) and particularly Special Needs Trust / Medicaid Eligibility / SSI preservation (that is the specialty) are the ones to ask.
Akumal123

My son is on SSI in florida and might inherate a home to live in from his grandma. How can he live in the home and not loose his benefits?
Akumal123

Can the home be put in a living trust so that it is not an asset that he could sell?
http://www.Planet10Tech.com TomaszStasiuk

I encourage you to discuss this with a lawyer who handles medicare planning and specifically “special needs trusts.” This is a specialized area. However you can often find lawyers who handle these matters by first contacting estate planning and elder law attorneys. There are many pitfalls for the unwary in this. Professional advice is critical.
http://pulse.yahoo.com/_MDNTDCFXU27I4VDDKCZGPFTTCY Anne H

SSI does not count the home as countable assests so he can live in the home…imo
Richard and Darla Jenkins

Hello. my wifwe and I get SSI here in California. She also gets SSA. We were both injured by a hit-and-run DUI driver. My car is totaled. I got a check for the inconvience of not having a car and a check for the replacement of the car. Plus we each get checks for pain and suffering. I have to pay out to Medical and Medicare and a chiropractor. We recieved the first two checks mentioned above and one of them cashed. The questions I have is: Do I owe the minium of 1 month of SSI/SSA back or the whole entire amount awarded from the settlement? The first 2 checks of which one (small 700.00) was cashed in the end of October 2011 and the other checks pending in November. Is my wife and I get a overpayment in November also? Please respond. Thank You

Richard and Darla in Eureka, CA
http://www.Planet10Tech.com TomaszStasiuk

I can’t answer your question. You can try Social Security Advice Online. They are a national company made up of former Social Security managers. Note: this is a private company not affiliated with the Social Security Administration. You can reach them at http://socialsecurityadviceonline.com and (513) 860-5924 , (513) 779-7439.
ICB

I have a daughter who has been getting SSI and Medicaid. Hypothetically, if she becomes normal and overcomes her disability and inherits some money, would she be asked to pay back everything she received from the government. If so, where is the incentive to get better? It is like penalizing a person working hard to get better.

What if the daughter while she is still disabled chooses not to receive any more benefits? Would she be asked to pay back everything? Looks like if you get into SSI/Medicaid you stay there and not get better or you die with the disability. Is this true? Is there a way to get out of the bondage equitably or is the disabled person doomed for life?

What if the daughter has a special needs trust created for her and later on becomes normal. Again can she get out of the special need trust and convert to a normal inheritance?
http://www.stasiukfirm.com/ TomaszStasiuk

For an individual to continue to receive SSI, they have to 1) continue to be disabled, and 2) meet financial requirements. If an individual’s condition improves or if they have too much in income or assets (such as from an inheritance), the benefits may stop.

However, a termination event does not usually require repayment of all *prior* benefits. In most cases, it simply stops ongoing eligibility from the termination point. If an individual is no longer eligible, the benefits stop.

To address your daughter’s specific issues, I encourage you to speak with a lawyer in your area (particularly one who handles special needs trust issues).
Cjantvold

I have a friend who is on SSI and is going to come into an inheritance. If she were to invest the money from the inheritance into a modest home, would that income still be counted against her?
Lacrimablu

I get SSI and I am about to get a settlement for pain and suffering which will be about 9000. But the money of the settlement I will not keep because I have to give back to my parents for the money they let me borrow so I can get medical treatment which was over 13,000 in medical bills througout all this time. The lawyer can only get so much money back because of the cheap insurance the guy had which is unfortuante how they can get away with causing all this pain and totaling the car I was driving (which was my parents). Basically having this accident which was not my fault ended up costing me more financially not considering the “pain and suffering” physically I am experieced and am experiencing still.

Now back to the question. When I recieve the money I have to give all of it to my parents for all their bills. Actually I still will be in debt to my parents because the settlement is not even enough. I can not afford to lose my ssi. Do I have to report this money to them even if I dont keep a cent. If I just endorse the check to my parents or however the money comes can they find out? It seems surviving this accident has been a curse. My medical bills have been outrageous, the cars where totaled. I cant sue the guy because according to the lawyer he is in jail for tax invasion and drugs. He has nothing to his name. Besides I dont even have money to sue. My parents let me borrow money to even get this lawyer to get something from his car insurance which was incredible that I got something.

What can I do? I need help.
Town

If you are to receive a large cash gift that you intend to keep, what kind of proof will SSI want when you report it? Will they just take your word for it?
gwen

Can an inheritance be given away in order to keep ssi?
george64

my dad died without a will. My sister is mentally disabled, receives SSI, lives in a group home, and is considered a ward of the state. what her entitlements and what is the state entitled to.

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SSI, Settlements/Inheritance, and Special Needs Trusts

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