Getting an inheritance should feel like a weight off your shoulders, but if you’re on means-tested disability benefits like Supplemental Security Income (SSI) or Medicaid, a financial windfall like this can feel like a trap. Now that your dad has left you $220,000 in their will, you suddenly find yourself at risk of losing the benefits you've grown to rely on. What can you do?
Understanding How Inheritance Affects Disability Benefits
If you’re on SSI or Medicaid, you’re most likely well aware that these programs have strict income and asset limits. As of 2025, having more than $2,000 in countable assets can make you ineligible. This means that if you accept a large inheritance in cash, property, or investments, you could no longer be eligible for either your monthly check or your health coverage.
Don’t Try To “Spend It Quickly”
You may be thinking, “Maybe I can just accept the money and spend it down quickly on things I need.” That might seem like a simple solution, but it’s risky. You could lose your benefits for months, or even longer, while you spend it; then there’s no guarantee you’ll be reapproved afterward. Also, spending on non-allowable items like gifts or vacations could bring penalties or even permanent disqualification.
Look Into A Special Needs Trust (SNT)
One of the safest and most effective options is a Special Needs Trust (SNT). This type of trust lets you transfer your inheritance into a protected account managed by a trustee. The money doesn’t count against your asset limit and you can use it to pay for things like physio, home modifications, transportation, education, or other quality-of-life improvements. The trust has to follow specific Social Security and IRS rules, so be sure to work with a qualified attorney.
Consider An ABLE Account
Another possible tool is an ABLE account (Achieving a Better Life Experience). If your disability started before you turned 26, you can contribute up to $18,000 a year to an ABLE account without it affecting your SSI or Medicaid. These funds can grow tax-free and be used for many different disability-related expenses. You can’t shelter the full $220,000 this way, but using an ABLE account in combination with a trust could be one way to go.
Talk To A Professional
Don’t try to handle all this on your own. Talk to an estate planning attorney who understands disability law. They’ll help you figure out what works best for you, whether it’s an SNT, an ABLE account, or both, and make sure you don’t lose your benefits. A financial planner specializing in public benefits will help you get things set up properly.
Don’t Accept the Inheritance Yet
Before you accept any of the inheritance, stop and take stock. If you take control of the money, either by transferring it to your own account or using it, you could be considered as receiving the funds; this could cause you to be immediately disqualified. Keep the money in the estate or held by the executor until you have a legal plan in place.
Protecting Your Benefits And Your Future
With some planning, you don’t have to choose between your inheritance and your disability benefits. Tools like a Special Needs Trust and ABLE account can let you use the money to improve your life without jeopardizing the support you depend on. Take some time to do it right. By doing so, you’ll protect your financial future and your current stability.
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