The impact of an inheritance
I will turn 66 this year and am considering claiming my Social Security. I have already applied for Medicare. My parents passed on several years ago, and the estate will probably settle this year. I would like to know if my inheritance money will have any effect on my social security benefits. If so, how? Signed: Wondering Heir
Dear Wondering: No, your inheritance money from your parents’ estate will not affect your gross Social Security benefit in any way. Your monthly SS benefit is based solely on your lifetime earnings record from working, and income from other sources is not counted when computing your Social Security benefit amount. But if you claim your benefits and have your Medicare Part B premium deducted from your Social Security payment, it’s possible your inheritance could affect your Medicare Part B premium amount, thus lowering your net Social Security payment.
Most Medicare beneficiaries pay a standard premium of $148.50 per month (2021 amount) for Part B, which is coverage for doctors and other outpatient services. But there is also a special provision known as “IRMAA” (Income Related Medicare Adjustment Amount) which adds a supplemental amount to the standard Part B premium if your “provisional income” from all sources exceeds certain levels. Your “provisional income” would include income from all sources, including any money you receive from an inheritance, any tax-advantage investment withdrawals, tax free interest, and half of the Social Security benefits you received during the
See RUSTY, page A15
Russell Gloor Social Security Matters RUSTY
From page A4
tax year. The name for this is your “Modified Adjusted Gross Income” (MAGI), and the clip levels which cause IRMAA to affect your Medicare premium are different depending on your IRS filing status.
If you file your income tax as “married/jointly” and your MAGI is over $176,000, then IRMAA will apply and you’ll pay a higher Medicare premium thus reducing your net Social Security payment (if you file as a single, the clip level is $88,000).
The other way your inheritance might affect you is through income taxes on your Social Security benefits.
If your MAGI exceeds $32,000 filing as married or jointly ($25,000 if single), then 50% of your Social Security benefits will become part of your taxable income. Or if your MAGI is more than $44,000 filing as married or jointly ($34,000 if single), then up to 85% of your Social Security benefits for the tax year will become part of your taxable income at your standard IRS tax rate. The bottom line is this: Your gross monthly Social Security benefit amount will not be affected by your inheritance, but if your inheritance increases your Medicare Part B premium your net SS benefit will be temporarily lower.
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