Medicare is a federal health insurance program for people aged 65 or older, some younger people with disabilities, or people with end-stage renal disease (ESRD). Original Medicare has two parts: Part A (hospital insurance) and Part B (medical insurance).

Your eligibility for Medicare depends on a few factors, and how much you pay in premiums depends on how much you worked and contributed to Medicare taxes (Part A), as well as your modified adjusted gross income (Part B). Getting an inheritance, such as a life insurance payment, will not affect your Medicare benefits or coverage, but it can affect your Medicare premiums.

Who is eligible for Medicare?

In general, you’re eligible for Medicare if you are:

• Age 65 or older, or
• Disabled, or
• Diagnosed with ESRD

You must also be a U.S. citizen or legal resident who has lived in the U.S. for five continuous years.

Who qualifies for premium-free Part A?

If you qualify for Social Security retirement benefits, you qualify for premium-free Part A.

Specifically, you qualify for premium-free Medicare Part A if you’re 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years. You also qualify if you receive Social Security or Railroad Retirement Board (RRB) benefits, or you’re eligible to receive those benefits but haven’t filed for them.

Are you automatically enrolled in Medicare?

Automatic enrollment varies according to whether you’ve been collected RRB or Social Security benefits for at least four months before turning 65. If you are, then yes, you will be automatically enrolled in Medicare. You should receive your Medicare card in the three-month window preceding your 65th birthday, with coverage beginning on the first day of the month of your birth.

For everyone else, Medicare enrollment is NOT automatic. Instead, you must sign up for Medicare through the Social Security Administration here.

Related reading: Medicare Online Enrollment: As Easy as 1, 2, 3

How inheritance will affect Part A

An inheritance will not affect Part A. Most beneficiaries are eligible for premium-free Part A coverage due to the taxes they paid while working. The only way you’d have a premium is if you or your spouse haven’t worked at least 40 quarters. And even then, there is no IRMAA surcharge for Part A; it only affects Part B and Part D (prescription drug coverage).

How inheritance will affect Part B

Most people pay the standard Part B monthly premium amount ($164.90 in 2023). However, if your modified adjusted gross income (MAGI) as reported on your IRS tax return from two years ago is greater than a certain amount, you’ll pay the standard Part B premium and an income-related monthly adjustment amount (IRMMA).

It’s important to note that less than 5% of Medicare beneficiaries owe the IRMAA surcharge.

In 2023, beneficiaries filing an individual tax return with a MAGI less than or equal to $97,000, or married couples filing a joint tax return with a MAGI less than or equal to $194,000, would qualify for the standard Part B premium of $164.90. However, if their MAGI is greater, they’d pay the standard premium plus an IRMAA, which is an amount added to their premium.

Inheriting money can affect your Medicare Part B premium amount. This is because you’d claim a greater MAGI, which would add an IRMAA to your premium.

In 2023, the most you’d pay for Part B is $560.50.

Does inheritance affect Medicaid?

Medicaid is a government program that helps provide financial assistance to those with reduced income and resources. Administered at the state level, eligibility and benefits vary depending on where you live. Additionally, some low-income seniors can be dual eligible, meaning they are enrolled in both Medicaid and Medicare.

If you receive an inheritance while receiving Medicaid, it can affect your eligibility for benefits. An inheritance would count as income in the month it’s received, and you’d have to tell Medicaid you received it. If the inheritance puts you over your state’s income eligibility limits, you’d lose your Medicaid eligibility for that month.

Note if you spend the entire inheritance in that month, you may regain eligibility in the next month. Otherwise, any remaining inheritance amount would be counted as assets against Medicaid eligibility.

For more information about your Medicaid benefits, contact your state’s Medicaid department.

Will inheritance affect Social Security benefits?

An inheritance does not necessarily affect your Social Security retirement benefits. This is because your benefits are calculated on your lifetime earnings record from your working years. However, note that if you have a higher Medicare Part B premium due to your MAGI, and the premium is deducted from your Social Security benefits, your payment will be lower, but this only temporary. For example, if you receive an inheritance in 2023, it will affect the premium you pay in 2025.

One way inheritance can affect your benefits is through income taxes, because the inheritance can influence how much of your Social Security retirement benefits are subjected to income tax.

Will inheritance affect supplemental security income (SSI)?

Supplemental security income is not based on your prior work, but instead financed by general funds of the U.S. Treasury. The SSI program provides monthly payments to adults and children with a disability or blindness who have income and resources below specific financial limits. It can also be paid to people ages 65 and older without disabilities but who meet the financial qualifications.

You can receive both SSI and Social Security retirement benefits.

SSI is also different from Social Security disability insurance (SSDI), which pays benefits based on disability and work credits.

If you get an inheritance paid directly to you, it can reduce your SSI benefit but only up to a certain limit. It will not affect your SSDI payments.

The alternative to having your SSI benefit affected by inheritance is to deposit it into a special needs trust (SNT). A special needs trust is a legal arrangement that allows a person who is physically or mentally disabled or chronically ill to receive income without reducing their eligibility to receive benefits like SSI or Medicaid. If money is paid through an SNT, you may continue to receive SSI benefits, though a trustee must oversee the funds.

Keep in mind you must report your inheritance; otherwise, it can result in financial penalties and cause your SSI payments to stop for up to three years.

Additional resources

• ClearMatch Medicare: Find a Medicare Plan
• Medicare.gov: Initial IRMAA Determination Notice