How Does My Inheritance or Lawsuit Settlement Affect My Benefits?
1. How will the money or assets I receive from my settlement or an inheritance affect my benefits?
The money you receive from your settlement may or may not affect your
government benefits. There are three types of programs that are available that provide income and medical benefits.
The first program is Social Security. If you are receiving Social Security because you are retired and over age 62 or over you are likely receiving a monthly check and you will receive Medicare benefits at age 65 or over. Social Security is not a means tested program. Your eligibility for this program is not affected by any change in your assets or your income. What this means is that any money you receive from a settlement in a lawsuit or by an inheritance will not affect your benefits.
The second program is Social Security Disability (SSD). If you are receiving Social Security Disability no matter what your age you are most likely also receiving Medicare benefits. Social Security Disability is not a means tested program. Your eligibility for this program is not affected by any change in your assets or your income. What this means is that any money you receive from a settlement in a lawsuit or by an inheritance will not affect your benefits. The third program is called Supplemental Security Income (SSI). If you are receiving SSI you are most likely also receiving Medicaid benefits as well. There are some individuals that are receiving both SSI and SSD or Social
Security. (Dually eligible individuals) SSI is a means tested program. If there are changes in your assets (what you own) or changes in your income your SSI benefits will most likely be affected. The questions and answers below describe in further detail how an inheritance or the receipt of money from a lawsuit
settlement will affect your SSI and what your responsibilities are if you receive either of these things.
2. What should I do if I am going to receive money from an inheritance or from the settlement of a lawsuit?
The first thing you must do is report the receipt of the money as a “change in assets” to the SSI program. You must report the change within 10 days after the end of the month in which you receive the money or assets.
How To Report A Change
You can report a change simply by calling Social Security at 1-800-772-1213. You also can visit any office or mail in the reporting form you received when you applied for benefits. If you send a report by mail, be sure to include:
Your name and, if different, the name and Social Security claim number of the person on whose account you get benefits;
Name of person(s) about whom the report is made; Your Social Security claim number;
What new information is being reported; Date of the change; and
Your signature, address, phone number and date.
If you need help in completing a report, the people at any Social Security office will be glad to help you. Or, you can call our toll-free number—1-800-772-1213. Be sure to have your Social Security number handy. If you are getting benefits on somebody else’s record (a spouse, for example), you will need his or her Social Security number, too.
3. How will the money or assets I receive affect my SSI benefits?
Money or assets received from an inheritance or lawsuit can affect your SSI benefits in two ways. SSI eligibility is based on both your monthly income and the assets you own. If you have a change in either then your SSI eligibility or the amount you receive from SSI could be affected.
4. How will changes in the assets I own Affect my eligibility?
What are countable resources for SSI purposes?
The month you receive something of value, it is called “income” which is described in paragraph 5. If you do not spend it the month of receipt, the next month, and every month thereafter that you still have it, it will count as a “resource”, which is explained in this paragraph.
A resource is money as well as things that you own and can turn into cash. Examples of resources are property, stocks, bonds, and bank accounts.
Countable resources are the things you own that count toward the resource limit. Many things you own do not count.
What things do not count toward the resource limit?
The following things generally do not count toward the resource limit––no matter how much they are worth:
the house you live in as well as household furnishings and supplies;
your car, if it is equipped for use by a handicapped person, or if you need it for certain daily activities, or to go to work, or to get regular medical treatment. If a car cannot be excluded for any one of these reasons, then only the part of the current market value that is over $4,500 counts as a resource;
life insurance policies you own with a face value of $1,500 or less per person; burial plots or spaces for you or your immediate family;
a burial fund of up to $1,500 each for you and your spouse's burial expenses or a prepaid burial contract ;
property you or your spouse use in a trade or business, or on your job if you work for someone else; and
if you are disabled or blind, money or property you have set aside under a Plan for Achieving Self–Support (PASS).
Your eligibility for SSI is based on the countable assets you own on the first day of the month. If you have assets above the limit and properly dispose of those assets before the first day of the next month then they will not count as countable assets in the next month.
There are other things you own that may not count as resources for SSI.
5. How does a change in my income affect my SSI eligibility?
The amount of your income determines your eligibility for SSI and the amount of your benefit. Generally, the more income you receive the lower your SSI benefit. If you have too much income, you are not eligible for SSI benefits. However, not everything you get is considered income and not all income counts in
determining your eligibility. SSI considers money or assets from the settlement of a lawsuit or an inheritance to be income in the month you receive it. If you receive money or assets that are countable as income, such as cash from a lawsuit settlement, then if the amount you receive is more than you monthly SSI benefit check then you will most likely lose your SSI benefit for the month you receive your settlement.
EXAMPLE: Coleton receives an SSI check for $564.00 a month. In the month of March Coleton gets a check for $1,000.00 from his attorney as his part of a recovery in a lawsuit. The $1,000.00 will be considered income by the SSI program and after he reports the receipt of the check to SSI (see number 2 above) sometime later the SSI program will send him a notice of what is called an overpayment. This means that he was ineligible for SSI for the month he received the money from the lawsuit and he was disqualified from receiving his SSI check of $564.00 that month. As a result, the SSI program will ask him to repay the money he received from them in the month of March. Coleton will not receive this notice of overpayment and request for repayment until several months after he reports the receipt of the $1,000.00 from his attorney. 6. What happens if I put the money in my bank account or just cash the check and put the cash in my purse or wallet?
It does not matter what you do with the money. The fact that you received it as income is what disqualifies you. However, if you put the money in a bank account or in your purse or wallet and do not spend it before the first day of the next month it then can become a countable resource (see number 4 above) and if it pushes your countable resources above the resource limit it can disqualify you in the next month or for as long as the money remains a countable resource. 7.What can I do with the money so that it will not be considered a countable resource in the month after I get it to restore my benefits if I am disqualified because it was
considered income in the month I received my inheritance or lawsuit settlement? There are lots of opportunities to use the money in the month you receive it so that it will not disqualify you in the next month. Exactly what action you should take is dependent on your specific living situation and the amount assets you have when you receive the money. If the money does not push you over the asset limit for SSI eligibility, you do not have to do anything. You can spend the money on items that are not considered countable resources by the SSI
purchased such as a haircut or trip to the beauty parlor. There are many other possibilities and you should consult with your SSI worker or an attorney to determine what items you can spend the money on so that it will not affect your SSI benefits in the money after you receive the money.
If your lawsuit settlement or inheritance exceeds $25,000.00 and you prefer not to spend it in the month you receive it then you should consult with an attorney to determine if it makes sense for you to place the money in Special Needs Trust. This type of trust allows you to keep the money but prevents it from being
considered a countable resource by the SSI program. To find an attorney in your state that is knowledgeable about these types of trust you can contact the
Special Needs Alliance at 1-877-572-8472 or check out their website at www.specialneedsalliance.com.
8.What if I just refuse to take the money from the lawsuit settlement or inheritance or what if I just give the money away as soon as I get it?
One of the other things besides having too much income or assets that can make you ineligible for SSI is making what is called a transfer. If you give away money or other countable resources, the SSI program refers to the gift as a “transfer of resources”. The number of months of ineligibility that results from the gift
