Do inheritance assets affect Social Security survivor benefits for kids with surviving parent? Worried about earnings test
My brother passed away last year, and his children (my niece and nephew, ages 8 and 11) receive survivor benefits. Their mom (my SIL) also gets the "child-in-care" benefit. My brother unfortunately didn't have a will, but his children are inheriting about $215,000 from his retirement accounts and life insurance. They're also inheriting his house, which my SIL is planning to sell (probably worth around $380k). I'm trying to figure out if this inheritance will affect their survivor benefits. Does SSA consider inheritance as income for the earnings test? What about when they sell the house - does that profit count against their benefits? My SIL is really worried because she's heard about the earnings limit for Social Security and doesn't want to lose the kids' benefits. Any help would be so appreciated!
18 comments
Join the conversation
Owen Devar
Inheritance is NOT counted as income for Social Security survivor benefits! This is actually one of the most common misunderstandings I see. The SSA earnings test only applies to EARNED income (wages from working). Neither the $215k from retirement/insurance nor the proceeds from selling the house will affect the children's survivor benefits or your sister-in-law's mother/father with child-in-care benefits. These are considered unearned income or resources. However, if the children receive interest income from the inherited money after it's invested, that interest income is still not considered earned income for the earnings test. Just to clarify though - if your SIL starts working and earning wages above the annual exempt amount (which is around $22,320 for 2025 for those under FRA), that WOULD affect her mother-with-child-in-care benefits, but not the children's benefits.
0 coins
Brooklyn Knight
•That's such a relief! My SIL was so stressed about this. If she does start working part-time later this year, is there some specific amount she needs to stay under to keep her benefit? Does she need to report to SSA when she starts working?
0 coins
Daniel Rivera
The previous response is correct about inheritance, but WATCH OUT about the sale of the house!!! While inheritance itself isn't earned income, there might be CAPITAL GAINS tax implications when selling the house that could indirectly affect benefits through taxation. If the house appreciated a lot since your brother bought it, there could be significant tax consequences. Not directly related to survivor benefits, but something to consider!!!
0 coins
Sophie Footman
•This is completely wrong! The house gets a stepped-up basis at death so there won't be capital gains except if it appreciates between death and sale. And even if there were capital gains, that's still not earned income for the earnings test. Please don't spread misinformation - I went through this exact situation when my husband passed.
0 coins
Connor Rupert
my kids got survivor benfits when their dad passed and we also got an inheritance. the money doesn't affect the SS at all but if your sister in law starts working she needs to be careful. the SSA cuts her benefit (not the kids) by $1 for every $2 she earns over the limit. Kids benefits are fine regardless. Also be careful cause some banks dont know how to handle kids survivor benefits and the inheritance. make sure to keep them seperate accounts.
0 coins
Molly Hansen
•That happened to my sister too - the bank was super confused about having accounts for the kids' survivor benefits. She ended up having to go to the branch manager to sort it all out. What a headache on top of everything else!
0 coins
Brady Clean
When my wife died, I spent WEEKS trying to get someone at Social Security to answer this exact question. Kept getting busy signals or disconnected. Finally gave up and just assumed we'd lose benefits because the estate was significant. Ended up quitting my job to stay under the limit. TURNS OUT I DIDN'T NEED TO! Inheritance doesn't count! Wasted a year of my career for nothing because SSA couldn't answer a simple question. The whole system is broken.
0 coins
Skylar Neal
•Sorry you went through that frustration! Next time you need to reach Social Security quickly, try Claimyr (claimyr.com). I was also getting nowhere with busy signals until I found their service. They called SSA for me and connected me directly to an agent within 20 minutes. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU Saved me days of stress when I had questions about my widow benefits that weren't being processed correctly. The peace of mind was totally worth it for me since I couldn't afford to take more days off work just to sit on hold.
0 coins
Molly Hansen
I'm confused. My neighbor told me any money over $2000 in a child's name makes them ineligible for benefits? Is that wrong?
0 coins
Owen Devar
•Your neighbor is confusing Social Security survivor benefits with SSI (Supplemental Security Income). SSI has strict asset limits (generally $2,000 for an individual) because it's a needs-based program. Social Security survivor benefits are NOT needs-based - they're based on the deceased parent's work record and paid to eligible dependents regardless of assets or resources. There are no asset limits for regular Social Security benefits including survivor benefits.
0 coins
Daniel Rivera
The only thing I'd add is that while inheritance doesn't affect SS survivor benefits, you should be very careful about how the inheritance is handled if the children are listed as the beneficiaries. There may need to be a custodial account or trust depending on your state laws. This doesn't affect the SS benefits but is important for properly managing the inheritance.
0 coins
Brooklyn Knight
•That's a good point. My SIL is talking to an estate attorney about setting up the right kind of accounts. I'm relieved to hear the benefits won't be affected though!
0 coins
Brady Clean
what about the unearned income rules tho? i think theres something about unearned income affecting benefits but i cant remember what
0 coins
Owen Devar
•You're thinking of SSI again, not Social Security survivor benefits. For SSI (Supplemental Security Income), both earned AND unearned income can reduce benefits because it's a needs-based program. For regular Social Security benefits (including survivors), only earned income above the annual exempt amount affects benefits, and only until Full Retirement Age. Unearned income like inheritance, investment income, rental income, etc. has no impact on regular Social Security benefits.
0 coins
Sophie Footman
The original poster should also know that the surviving parent needs to report her own earned income to Social Security if she's receiving the mother/father with child-in-care benefit. For 2025, if she earns over approximately $22,320, her benefit (not the children's) will be reduced by $1 for every $2 she earns above that limit. The children's benefits are safe regardless of the parent's income.
0 coins
Brooklyn Knight
•Thank you for the specific limit number! That helps a lot. My SIL is thinking about working part-time, but now she can plan to stay under that threshold if possible. It's good to know the kids' benefits won't be affected either way.
0 coins
Connor Rupert
my heart goes out to you and your family during this difficult time. losing a loved one is hard enough without having to figure out all these complicated financial issues. sending hugs to you and those kiddos.
0 coins
Brooklyn Knight
•Thank you for the kind words. It's been a tough year for all of us, especially the kids. I'm just trying to help my SIL navigate everything.
0 coins