Hello and thank you for contacting us. This is Dwayne B. and I’m an expert here and looking forward to assisting you today. If at any point any of my answers aren’t clear please don’t hesitate to ask for clarification. Also, I can only answer the questions you specifically ask and based on the facts that you give so please be sure that you ask the questions you want to ask and provide all necessary facts.
As a general rule, inheritance is not reported to the IRS. However, there are exceptions (many, many exceptions) and it depends on so many factors that the tax accountant would have to answer that.
If you are asking if it has to be reported on the IRS form because you want to know whether it will affect his government benefits, then that really is a separate issue because it can affect his government benefits whether it is reported on the tax return or not.
It is very likely that an income of $25k would prevent him from being able to draw SSDI, for a while at least, since that is a needs based program. Some government health care is needs based as well so the money could also prevent him from having that care.
There are ways to prevent this though. I'd suggest you talk to a local lawyer about drafting what is known as a Special Needs Trust (SNT). A SNT doesn't count as income or assets for purposes of government programs and the money can be spent on essential needs of your ex. There are some restrictions on what it can be used for but generally there is always a work around if something is needed.
The only real disadvantage to a Special Needs Trust is that when the beneficiary passes away then any of the funds which still remain go to the government and cannot be left to anyone else. However, usually there are very few funds remaining if the proceeds have been used correctly.
Please ask any follow up questions in this thread.