It is well-established that mental health follows similar patterns across generations. However, little is known how structural factors, such as those related to social security reforms, may impact this relationship. Our aim was to quantify the strength of association in mental health between parents and their adolescent children, and to explore how much of this correlation is explained by decreases in benefits. We used data from U.K. Household Longitudinal Study (2009–2019) from which we matched youth data to their parents, and split the sample into single- and dual-parent households. To estimate the intergenerational correlations, we estimated a series of unit- and rank-based regression models of standardized and time-averaged mental health measures for adolescents and their parents. Our findings suggest that there are statistically significant intergenerational associations in mental health between parents and children for both single- and dual-parent households, with the relationship being stronger for single-mother households. Benefit losses explain a small proportion of this association, for both single-mother and dual-parent households. Nevertheless, they are negatively associated with the mental health of adolescents in dual-parent households—independently of both adolescent and parental characteristics. Such negative effects should be considered when designing and evaluating future social security benefit policies.