Social Security and Estate Planning
How can social security help with estate planning? For high-net-worth individuals and families it’s complex and critical. Social Security benefits aren’t transferable like personal property or real estate but they can play a big role in estate planning when viewed the right way.
For those going through the estate planning process, Social Security is more than monthly checks, it’s strategic opportunities to support liquid assets, balance taxable and non-taxable income and create financial continuity for surviving spouses or certain family members. Whether you’re planning for your own retirement or for the care and support of children, minor children or disabled adults, understanding how Social Security benefits intersect with other retirement assets is key.
Estate planning is more than just a will. It’s the thoughtful coordination of legal structures, tax strategies and financial protections to preserve wealth, reduce estate and Social Security taxes and ensure your assets are distributed according to the law and your values. Social Security, when considered with other factors like retirement age, income sources and qualifying disability benefits becomes an important piece of that puzzle.
Social Security in Your Estate Plan
Predictable Retirement Income Through Social Security Benefits
At its core, Social Security provides a guaranteed, inflation-adjusted income stream, one of the few in retirement planning. This predictable cash flow reduces the need to draw down other liquid assets such as investment portfolios, trust funds, or real estate holdings too early. As a result, it preserves the longevity and growth potential of those assets for legacy planning.
When properly integrated into an income distribution strategy that includes IRAs, pensions, SSI benefits, and taxable brokerage accounts, Social Security can be a steady financial anchor. This becomes especially helpful when planning distributions for children, or when certain family members rely on those funds to cover education, basic needs, or medical care.
At Towerpoint Wealth, our fiduciary financial advisors design personalized strategies that factor in your retirement age, Social Security eligibility, and total portfolio of retirement assets. With proper planning, your benefits support not only your lifestyle but the future of your family.
Survivor and Spousal Benefits: Government Benefits with Legacy Impact
Social Security includes valuable government benefits such as survivor and spousal income that have long-term implications for your estate. These benefits, when planned correctly, provide protection for spouses and other dependents who may not have a strong work history or personal retirement savings of their own.
For example, a lower-earning spouse may receive up to 50% of the higher earner’s benefit while both are living. After the death of one spouse, the survivor may qualify to receive up to 100% of the deceased spouse’s benefit. These benefits can be critical when it comes to reducing reliance on estate distributions, preserving assets, and meeting basic needs.
In particular situations involving blended families, minor children, or dependents with a qualifying disability, these survivor benefits may serve as a bridge during the probate process. This underscores the importance of coordinating these government programs with trust documents, wills, and beneficiary designations.
Using Social Security to Fund Long-Term Planning Goals
Funding Long-Term Care with Social Security Income
Using Social Security income to pay for long-term care insurance or hybrid policies is a smart way to protect retirement assets meant for children or charity.
This strategy helps cover medical care like assisted living or nursing without selling property or draining trust funds.
It also eases the burden on family, ensures basic needs are met, and for disabled adults or SSI recipients, it may help preserve disability benefits and Supplemental Security Income.
Social Security Disability Insurance (SSDI) and Estate Planning
Social Security Disability Insurance (SSDI) provides income to people with a qualifying disability who can't work. While not part of the estate, SSDI must be considered when planning for disabled adults as heirs.
To protect disability benefits and other government benefits, estate plans often use special needs trusts, pooled trusts, or ABLE accounts. These tools help avoid issues with unearned income or liquid assets that could affect eligibility.
Working with a tax professional or financial advisor ensures proper planning that preserves benefits and avoids costly mistakes.
Representative Payee and Fiduciary Oversight
If a Social Security recipient can’t manage their finances, the Social Security Administration appoints a representative payee to oversee their benefits, often for minor children, those with cognitive decline, or disabled adults. When creating your estate plan, make sure your documents align with any Social Security Administration assignments to prevent conflicts, fraud, or confusion for your beneficiaries.
Tax and Advanced Estate Planning Strategies
When Social Security is Taxed
Up to 85% of your Social Security benefits may be taxable, depending on your income and unearned income levels, and some states tax them too. With the right tax advice and planning strategies like Roth conversions or income deferral, you can reduce your tax exposure and protect more wealth for your heirs.
Using Social Security to Fund Estate Liquidity
You can use Social Security income to pay life insurance premiums in an Irrevocable Life Insurance Trust (ILIT), creating a tax-free benefit for your heirs. This provides cash when it's needed most, without selling real estate, retirement accounts, or personal property, especially in estates with businesses or illiquid assets.
Working with Trusts and Beneficiary Designations
While Social Security benefits can’t be inherited, they provide stability that can influence when and how you transfer property into trusts. If benefits cover basic needs, you may move assets into irrevocable trusts earlier in the estate planning process.
Make sure beneficiary designations on IRAs, life insurance, and other accounts match your estate documents. Conflicts can lead to delays, taxes, or family disputes, keeping everything aligned is essential for proper planning.
Strategic Claiming: Timing Matters
Early vs. Delayed Claiming and Estate Outcomes
Claiming Social Security at 62 means lower monthly income for life, while waiting until 70 can boost benefits by up to 32%. The right timing depends on your needs, estate goals, and overall circumstances.
Delaying may grow your estate by preserving investments, but claiming early can help fund gifts to children, buy insurance, or support education. Work with a financial advisor to choose the best strategy for your particular situation.
Married and Divorced Clients: Claiming Scenarios
Married couples can use strategies like restricted applications, spousal benefits, and survivor options to boost their Social Security benefits. Divorced clients married at least 10 years may still qualify for benefits, even if their ex has remarried.
These options offer flexibility when planning for children, dependent spouses, or disabled adults. Reviewing your work history, marital status, and benefit estimates is key to maximizing income.
Estate Planning in 2025 with Policy and Tax Changes
2025 COLA and Social Security Benefits
Social Security benefits rose 2.5% in 2025 thanks to the annual Cost-of-Living Adjustment (COLA), giving retirees a bit more to cover basic needs without using retirement assets or trust funds.
Even small COLA increases add up over time, especially when used for fixed costs like insurance or long-term care.
Estate Tax Exemption Sunset and the Probate Process
The federal estate tax exemption is set to drop from $13.99 million to around $7 million in 2026, increasing the number of taxable estates.
More families will face the probate process and may need to sell assets quickly. Using Social Security income for insurance or gifting can reduce estate size and ease the financial burden.
Key Differences in Special Needs Estate Planning
ABLE Accounts vs. Special Needs Trusts
When planning for a loved one with special needs, families often consider ABLE accounts and Special Needs Trusts as tools to protect assets without affecting eligibility for programs like SSI or Medicaid.
Key differences include:
- ABLE accounts are tax-advantaged savings accounts that allow disabled individuals to manage their own money for qualified expenses. They have annual contribution limits and are best for those who can manage funds independently.
- Special Needs Trusts can hold unlimited assets, are usually funded by parents or grandparents, and must be managed by a trustee. These trusts are ideal when the beneficiary cannot manage the assets or when larger sums are involved.
In some cases, pooled trusts may be used when a trust created for a disabled adult is too costly to maintain independently. Each option must be evaluated based on the individual’s needs, the family’s resources, and the legal structure of the estate.
Who Benefits Most from Including Social Security in Estate Planning?
Social Security planning is valuable for all retirees, but most beneficial for:
- High-net-worth individuals looking to minimize estate taxes
- Retirees with multiple income sources and complex tax situations
- Married couples or blended families with dependent spouses or children
- Divorced individuals with spousal benefits or survivor eligibility
- Business owners transitioning out of business and into retirement
Each of these profiles presents a unique situation where personalized planning and attention to Social Security integration can significantly enhance estate outcomes.
Proactive Planning with a Fiduciary Advisor
Including Social Security in your estate plan requires more than general informational purposes, it demands a fiduciary mindset, proper planning, and guidance from a financial advisor who understands your particular situation.
At Towerpoint Wealth, we believe every dollar has a purpose and every decision has an impact. From determining the optimal time to claim benefits to coordinating them with your trust strategy, retirement income plan, and tax outlook, we help you bring clarity and structure to your wealth.
FAQs: Social Security and Estate Planning
Can I inherit Social Security like other assets?
No. Social Security benefits stop when you die, but survivor benefits may be available to a spouse or dependent children.
What happens to my Social Security when I die?
Benefits end, but eligible survivors may receive a one-time death benefit and monthly survivor benefits based on your record and work history.
Is Social Security income exempt from estate taxes?
Social Security benefits are not subject to estate taxes as they are not transferable. However, they can influence your broader estate planning strategy and liquidity.
How can I use Social Security to reduce my estate tax burden?
By using benefits to fund life insurance or gifting strategies, you can create tax-free liquidity outside of your taxable estate, reducing the need to sell off property or other assets.
Should I delay Social Security to benefit my heirs?
Delaying can increase survivor benefits and reduce the need to tap into your retirement assets. But the right answer depends on your health, lifestyle needs, and estate planning goals.
How can Social Security help with estate planning?
Social Security can help with estate planning by providing reliable income that preserves other assets and supports loved ones, including minor children, disabled adults, and certain family members. With proper planning, benefits like SSI, SSDI, and survivor income can reduce taxes, ease the probate process, and coordinate with tools like special needs trusts and ABLE accounts to protect long-term financial security.
Ready to make sure your Social Security and estate planning are aligned?
Whether you're evaluating how your children receive survivor benefits, planning for a loved one with a disability who cannot engage in substantial gainful activity, or navigating complex circumstances involving multiple heirs, we’re here to help.
Contact Towerpoint Wealth today to build a legacy that reflects your values and secures your family’s future.
