Two Options For Leaving Money To Someone Receiving SSI

Supplemental Security Income (SSI) is a public benefits program that provides people with low incomes a source of cash they can use to purchase necessities, such as housing and food. Since it is an income-based program, people can lose their benefits if they receive too much money from loved ones who pass away. Here are two ways you can structure your heir's inheritance to reduce the negative impact to the person's SSI payments.

Leave Money in a Trust for Specific Purposes

Although it's a bit more complex than this, the Social Security Administration (SSA) basically counts any money a person receives that can be used to purchase food, clothing, and housing to be income. For instance, if you leave someone a $1,000 in cash, the SSA will consider that income because the person can pay their rent and get groceries with it. If the amount puts the person above the maximum income limit for the program (which is currently set at $750 per month), the person may not receive benefits for that month or be kicked off altogether.

However, the agency doesn't count money obtained and used for other purposes as income. For example, if someone pays the person's medical bills, SSA would not include those payments as part of the individual's income calculations.

Thus, one way to leave money to a loved one is to put it in a trust designed to pay for expenses unrelated to food and shelter. For instance, the trust could be set up to pay certain expenses for the person, such as utilities, medical care, auto insurance, or tuition. Since this money cannot be used to purchase housing, food, or clothing, it won't be counted against the beneficiary and he or she will be able to receive the cash you want to leave the person.

Place It Into an ABLE Account

If the individual is disabled, you can create and place money into what's called an ABLE savings account without it affecting the person's eligibility for SSI. An ABLE account is a bank account designed specifically for people with disabilities who receive SSI. Using this account, the person can place up to $15,000 cash in it per year and still qualify for benefits.

Unlike other sources of money, withdrawals from ABLE accounts for food, shelter, and clothing aren't counted as income. Thus, you can structure your heir's cash inheritance so that up to $1,250 per month is placed into the savings account that the person can then use for basic living expenses.

Be aware, though, that the state will typically take possession of any money in the account when the person who owns it dies. So, you need to account for this when setting the trust.

For help determining the best way to leave money to an SSI recipient, contact an estate planning attorney.