How Will A Sudden Windfall Affect Your Disability Income?

If you're currently receiving federal disability benefits, you may find yourself more apprehensive than ecstatic at the thought of a sudden windfall -- whether an inheritance, pension, or lottery win. When your sole source of income depends upon your inability to earn an income through paid work, the thought of these benefits being interrupted for a one-time windfall that will quickly be consumed by living expenses may cause you to panic. Fortunately, not all windfalls will affect your disability benefits, and there are several ways to manage the types of windfalls that will affect these benefits. Read on to learn more about how your benefits could be impacted by changes in income, as well as what you can do to ensure that you continue to receive the benefits to which you're entitled.

Will your disability income be affected by a sudden windfall or income source?

If you're receiving benefits under the Social Security Disability (SSD) program, you shouldn't need to worry about your benefits being interrupted or decreased. As long as the windfall or funding source isn't contingent on your ability to work for a living, it should have no impact on SSD benefits. A pension is also exempted from this calculation, despite being job-based, as it would have been calculated on credits earned during the time you were working. (However, earning a prize solely through your exertion of effort -- for example, winning $5,000 for coming in first place in a golf scramble -- may cause your benefits application to be looked over a bit more closely to determine whether you're able to perform certain types of work.)

If you're instead receiving disability benefits through the Supplemental Security Income (SSI) program, which employs an asset test, your windfall may cause a few issues. SSI is available to those who don't qualify for SSD due to inadequate work credits, and as a result generally provides only a subsistence-level income to those who aren't able to otherwise earn a living. In order to receive SSI, the total amount of assets available at your disposal (excluding a car, your home, and a few other types of belongings) must total $2,000 or less (or $3,000 if you're married).

Whenever the assets at your disposal rise above this asset limit, you risk having your benefits interrupted or cancelled until your assets have once again dropped below $2,000 to $3,000. Often, the process of having your benefits reinstated can be a lengthy one, and you may find yourself more financially strapped than you were before you received the windfall. As a result, if you're receiving SSI and suddenly come into some money, you may want to take steps to have this income made inaccessible to you so that you'll be able to continue to receive benefits.

How can you minimize the impact of a windfall on your SSI?

One method that is often employed by parents who wish to provide for a disabled adult child without jeopardizing SSI eligibility is the special needs trust. By creating this trust, you can funnel your windfall to the trust, ensuring that it no longer "belongs" to you for asset test purposes. You'll need to appoint a trustee for the funds who can provide income to you as needed or desired (and always allowing you to remain beneath the asset limits by not disbursing too much at a time).

To fund such a trust yourself, you'll want to talk to an experienced attorney who can help you structure the trust so that you receive the maximum benefit. After your death, any remaining trust funds will revert to the state to help compensate it for Medicaid expenses and other benefits afforded to you due to your low-income status. However, you'll be able to enjoy a somewhat higher standard of living during your life due to the prudent handling of these funds. Visit for more information.