Can a Person on SSI Inherit a House

Someone receiving Supplemental Security Income (SSI) can inherit a house and keep benefits, but it takes planning. SSI limits countable resources to $2,000 for an individual or $3,000 for a couple, and an inherited home can push you over that cap. Two options generally keep benefits intact: live in the home as your main residence, which the SSI home exclusion doesn’t count, or place it in a special needs trust. Here’s how each works and what to watch for.

A financial advisor can help you sort through your options as you decide how to handle an inheritance.

What Is Supplemental Security Income (SSI)?

SSI is a federal program that provides financial assistance to individuals who are at least 65, blind or disabled, and have limited income and resources. Administered by the Social Security Administration (SSA), SSI is designed to help cover basic living expenses. This includes necessities such as food, shelter and clothing. While Social Security benefits are based on work history, SSI is need-based. This means it doesn’t require recipients to have a prior work record.

SSI Eligibility Requirements

Eligibility for SSI is determined by a combination of several different factors, including:

Age 65 or older
Disability status
Income level
Value of assets owned

To qualify, an individual must have very limited income and resources. The limit is set at no more than $2,000 in assets for individuals or $3,000 for couples, excluding certain personal property like a home or car. SSI recipients may also be eligible for additional benefits, such as Medicaid and food assistance, depending on their circumstances and state of residence.

Can a Person on SSI Inherit a House?

Yes, someone receiving SSI can inherit a house, but doing so may affect their eligibility for benefits. If the recipient uses the inherited property as their primary residence, its value generally won’t count toward SSI’s resource limit. However, inheriting a house they don’t live in could put their benefits at risk.

SSI is a needs-based program that limits how much recipients can own in countable financial resources. Individuals generally cannot have more than $2,000 in countable resources, while couples are limited to $3,000. Countable resources can include cash, bank accounts, stocks, mutual funds and real estate that doesn’t qualify for an exclusion. Unlike Social Security retirement benefits, SSI eligibility depends in part on the value of an individual’s assets.

There are ways to inherit a home without exceeding SSI’s resource limits. One is to use the property as a primary residence, which generally qualifies for an exclusion. Another possibility is for the home to pass into a properly structured special needs trust, although eligibility depends on how the trust is established and funded.

Even if an inherited home qualifies for the primary residence exclusion, it may still count as income in the month it is received and temporarily affect SSI payments. Recipients should report the inheritance to the Social Security Administration and consider seeking professional guidance before making decisions about the property.

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SSI Home Exclusion

A woman on SSI fills out forms associated with inheriting a home.

SSI doesn’t count the home someone lives in as a resource for purposes of determining eligibility. This is called the home exclusion. It means that if a benefits recipient moves into an inherited home and occupies it as their sole place of residence, the inheritance would not have to affect their ability to keep getting SSI payments.

There are a number of wrinkles to this seemingly straightforward solution. For instance, say the home sits on one tract of land. Suppose the SSI recipient inherits that house and the land under it, as well as another nearby but separate tract of land. The second tract would be considered a resource that could put the recipient over the limit.

Another complication could arise if the SSI recipient plans to use the inherited home as a second home. Ordinarily, if the SSI recipient isn’t using an inherited home as the primary, sole place of residence, it would be included as a resource. Thus it would likely make the recipient ineligible for more benefits. However, if the inherited home can’t be sold, perhaps because there are other joint owners who don’t want to sell it, then it could be excluded from resources just like the primary residence.

Special Needs Trusts

If a home inherited by a person receiving SSI benefits is transferred into a special needs trust, it can avoid putting the recipient over the resource limit. Using this technique also allows the person inheriting the home to get around rules against simply refusing the inheritance. And it allows the SSI recipient to still get some financial benefit from the inheritance.

A bank trust department can help set up a special needs trust to hold an inherited house. The specific type of special needs trust is a first-party special needs trust. This is one set up by the disabled person for their benefit. A third-party special needs trust is one set up by someone else, such as a parent, for the same purposes. Third-party trusts are usually funded when the person who set them up dies and provides for them in a will.

A special needs trust is an irrevocable trust, meaning that property placed in it cannot later be claimed by the beneficiary of the trust. The trust, in short, owns it permanently. Property in a revocable trust, that could someday be reclaimed by the beneficiary, will still count against the SSI resource limits.

The assets in the trust are administered by a trustee who can disburse funds to help the disabled SSI recipient with some expenses. The expenses paid for by the trust can’t include food or shelter. But they can include things like medical care, utilities, entertainment and education.

Bottom Line

A couple moving in after inheriting a home.

Inheriting a home can cause an SSI recipient to become ineligible for future benefits. The good news is that can be avoided. For example, if the home is used as the recipient’s primary residence or is placed in a special needs trust. This allows the person receiving SSI payments to accept the inheritance and get some financial benefit from it. All without losing eligibility for government benefits.

Tips on Inheritance and SSI Rules

If you are receiving SSI benefits and anticipate receiving a home as an inheritance, consider working with an experienced financial advisor to ensure that the inheritance doesn’t affect your eligibility for government payments. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
Knowing whether your government benefits plus your inherited residence will be enough to meet your retirement needs is important. You can get an estimate of what your Social Security benefits will be by using a Social Security calculator.