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:
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, 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 lose 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 loses 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 eligibility for SSI: a Special Needs Trust.
Special Needs Trusts occasionally pop up in personal injury cases where a person has been severely 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.
- 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: Colorado does not certify lawyers as specialists in any field.