Estate Planning and Supplemental Social Security Income (SSI) vs. Social Security Disability Insurance (SSDI)

If you have a disabled beneficiary that is receiving either Supplemental Social Security Income (SSI) or Social Security Disability Insurance (SSDI) it could potentially impact your estate planning.

What Is SSI and SSDI?

Supplemental Social Security Income (SSI) is a benefit paid by the Social Security Administration to disabled adults and children who have limited income and resources. Social Security Disability Insurance (SSDI) pays benefits to adults and certain family members who have worked long enough and paid Social Security taxes. An adult child may qualify for benefits on your earnings records if he or she has a disability that started before age 22.

Who is Eligible to Receive SSI and SSDI?

According to the Social Security Administration, in order to receive SSI you have to fall into one of the three categories:

A.        Aged - An “aged” person is someone who is age 65 or older;

B.        Blind - A “blind” person is someone whose vision, with use of a correcting lens, is 20/200 or less in the better eye or who has tunnel vision of 20 degrees or less. There is no minimum age limit (for converted blind recipients, see §2172); OR

C.        Disabled

1. A “disabled” person age 18 or older is someone who meets the definition of disability for adults under Social Security law. He or she must be unable to engage in substantial gainful activity (SGA) due to a medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months.

2. A “disabled” person under the age of 18 is someone who meets the definition of disability for children under Social Security law. He or she must have a medically determinable physical or mental impairment that results in marked and severe functional limitation(s), and which can be expected to result in death, or has lasted or can be expected to last for a continuous period of not less than 12 months.


Additionally, you cannot have monthly countable income more than the current Federal benefit rate (FBR) which are set by law, and are subject to annual increases based on cost-of-living adjustment. For 2020, the monthly maximum Federal amounts are $783 for an eligible individual, $1,175 for an eligible individual with an eligible spouse, and $392 for an essential person.

According to the Social Security Administration, to qualify for SSDI, you must not be able to engage in any substantial gainful activity (SGA) because of a medically-determinable physical or mental impairment(s): That is expected to result in death, or that has lasted or is expected to last for a continuous period of at least 12 months.

How Could SSI and SSDI Affect Estate Planning?

The Social Security Administration defines income to include earned and unearned income. The SSA states that inheritance is a type of unearned income. Therefore, if you have a disabled child (minor or adult) or beneficiary receiving Social Security benefits there are a things that you should consider before having a will drafted. First, you need to know what type of Social Security benefits they are receiving. Is it SSI or SSDI? If the answer is SSI, then you may want to consider a Special Needs Trust. The reason a Special Needs Trust may be necessary is to protect a disabled beneficiary receiving SSI benefits from being impacted if they are to inherit from you. If they were to inherit from you outright, the inheritance would be counted as unearned income and impact their income level, thereby potentially disqualifying them from receiving SSI in the future, and disrupting their benefits.

What is a Special Needs Trust?

This is either a testamentary trust (created in a will) or an inter vivos trust (created and takes effect during the lifetime of the individual creating the trust). These trusts are created by friends or families of the individual with disabilities and funded with assets from any source but the individual with disabilities. The goal is to provide for the wellbeing of the individual with disabilities while preserving their eligibility for essential, government programs such as Medicaid, Waiver Programs, and SSI. These trusts can be complicated, and may contain strict limits on distributions so that the disabled person does not lose their government benefits, where they might if they just inherit outright.

There are certain restrictions on what the Special Needs Trust Funds can be used for, and there are prohibited uses. Funds in the trust may be used for supplemental (or special) needs, that is, for those goods and services not already provided by the beneficiary’s public or private benefits.  Examples of permissible uses are, home improvements and repairs, including modifications for accessibility, house cleaning, insurance, landscaping and lawn services, legal services, medical services and medications not covered by private or public health insurance. Examples of prohibited uses are housing, utilities, food, cash payments to the beneficiary.

 It is important to consult an attorney if you would like a special needs trust created, because the trust needs to be drafted in such a way to account for the beneficiary’s qualifications for governmental programs such as Social Security and Medicaid.

The Benefits of a Special Needs Trust

A Special Needs Trust can allow a disabled beneficiary who is receiving SSI to still inherit from you without having to lose their SSI benefits. The other option to protect that individual’s benefits would be to disinherit that person from your will. A mentioned previously, if they were to inherit from you outright, their government benefits could be disrupted and/or suspended. Furthermore, their inheritance could be targeted by the state and the Federal government to get reimbursed if they inherit and continue to receive SSI. If you are hesitant about disinheriting the individual, then a Special Needs Trust is a good alternative.  

The laws and regulations for estate planning vary from state to state so it is important to consult with an attorney before having documents created. To request and attorney consultation, contact the Fort Meade Legal Assistance Division: 301-677-9504/9536.