Index

1. Understanding SSDI & SSI
2. How A Personal Injury Settlement Affects SSDI & SSI
3. Strategies to Protect Disability Benefits
4. Protecting Your Future

Personal injury settlements can provide critical financial relief after an accident. However, for individuals receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), it’s essential to understand the nuances of how a settlement might affect these benefits.

This guide will explore how personal injury settlements interact with disability benefits and provide strategies to protect these crucial resources.

Learn more about our Personal Injury legal services.

Understanding SSDI & SSI

Social Security Disability Insurance (SSDI) benefits are available to individuals who have worked and paid into the Social Security system but are now unable to work due to a disability. The amount received is based on the recipient’s work history and earnings. SSDI is not means-tested, meaning the benefits are not directly affected by your income or assets, including a personal injury settlement.

Supplemental Security Income (SSI), in contrast, is a needs-based program designed for low-income individuals who are elderly, blind, or disabled. Because it is means-tested, both income and assets are evaluated to determine eligibility. A personal injury settlement could significantly impact SSI eligibility, as it may exceed the program’s resource limits. If you have been injured in an accident and are receiving SSI, it’s important to speak with your injury attorney about the potential impact a settlement or jury verdict could have on your benefits.

How Personal Injury Settlement Affects SSDI & SSI

SSDI benefits are not income-based, so receiving a personal injury settlement will not reduce or terminate these payments. However, there are a few critical considerations:

1. Tax Implications: While personal injury settlements are generally not subject to income tax, portions of your settlement designated for lost wages may be subject to taxation. This could indirectly affect your financial situation if not planned for.
2. Medicare Eligibility: SSDI recipients typically become eligible for Medicare after two years. When there is recovery on a third-party injury claim, it’s important that Medicare subrogation rules are followed and that Medicare’s interests are properly considered in the settlement.

SSI benefits are directly impacted by income and assets:

1. Income Limits: Lump-sum settlements are generally considered income in the month received, which can make you ineligible for SSI during that period.
2. Resource Limits: After the month of receipt, any remaining portion of the settlement is treated as a resource. Typically, if the total exceeds $2,000 for an individual or $3,000 for a couple, you may lose SSI eligibility until there has been a paydown or resources fall below the requisite thresholds.
3. Impact on Medicaid: Because Medicaid eligibility is often tied to SSI, losing SSI benefits may also jeopardize your Medicaid coverage. This is particularly concerning for individuals with significant healthcare needs.

Strategies to Protect Disability Benefits

To prevent a personal injury settlement from jeopardizing your SSDI or SSI, careful planning is essential. Here are several strategies to consider:

1. Work with an Experienced Attorney

Engage an attorney experienced in personal injury and disability law. Your attorney can make you aware of the possible impact on your public assistance benefits before it occurs, as well as help plan to minimize, or avoid, any loss. Oftentimes, your settlement can be structured in a way to minimize its impact on your benefits and ensure compliance with legal and regulatory requirements.

2. Establish a Special Needs Trust (SNT)

A Special Needs Trust is an essential tool for SSI recipients. Funds placed into a properly structured SNT do not count as income or resources, thus preserving your eligibility for SSI, Medicaid, and other public assistance benefits. However, SNT’s are subject to strict rules and can greatly limit a recipient’s access to settlement proceeds.

3. Spend Down the Settlement

If the settlement amount is modest, you can spend it on exempt resources within the month it is received. Examples of exempt resources include:

• Purchasing a primary residence
• Paying off debt
• Buying a vehicle (if it’s used for transportation)
• Purchasing household goods or personal items

4. Create an ABLE Account

Achieving a Better Life Experience (ABLE) accounts allow individuals with disabilities to save money without jeopardizing SSI or Medicaid. These accounts have an annual contribution limit and a total asset cap, but funds can be used for qualifying disability-related expenses such as education, housing, and healthcare.

5. Structured Settlements

A structured settlement disperses settlement funds over time rather than as a lump sum. This approach if often used in conjunction with a special needs trust and may help manage any impact on benefits by keeping monthly income below SSI thresholds. However, consult with an attorney to ensure the use of a structured settlement aligns with your specific needs.

6. Medicare Set-Aside (MSA)

An MSA allocates a portion of your settlement specifically for medical expenses related to the injury. These funds must be spent before Medicare will cover related costs. While often clearly necessary in the work comp context, MSA’s are somewhat controversial when dealing with third-party negligence claims. Regardless, with any settlement where Medicare is involved, it’s important to consider Medicare’s interests and speak with your attorney about any potential issues that need to be addressed.

How to Protect Your Future

A personal injury settlement can be a double-edged sword for individuals receiving disability. While a settlement or verdict can provide much-needed financial relief, it may also pose risks to your benefits if not handled correctly. By working with experienced professionals, utilizing tools like Special Needs Trusts, and carefully planning the allocation and use of your settlement, you can safeguard your disability benefits while improving your financial security.

Remember, every case is unique. Seek personalized advice to ensure your settlement aligns with your long-term needs and legal obligations. Taking the time to plan appropriately can make a significant difference in preserving both your financial and medical resources.

Schedule a Free Consultation with Chandler | Conway

All Chandler|Conway attorneys are incredibly experienced and knowledgeable in trial cases. Our attorneys will determine the best strategy for you and your family based on the specific circumstances of your situation and, when necessary, represent those interests in court.

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Related Pages

Your Guide to Motor Vehicle Injury Settlements

How Injury Settlement Affects Future Health Insurance

12 Steps to Protect Yourself After an Auto/Pedestrian Accident

Understanding Insurance Settlements & When to Settle

9 Steps in a Car Accident Personal Injury Timeline