Will a Settlement Affect Disability Benefits?

Posted in Social Security Disability on February 11, 2019

Many Americans rely on public assistance programs and disability benefits of various types to cover the cost of basic living expenses, medical treatment, and ongoing therapy. A disabled individual likely has countless benefits-related concerns at any given time, and a sudden personal injury can present a host of new challenges. Some may wonder whether receiving a settlement from a personal injury lawsuit will influence their eligibility for disability benefits. Reach out to a Nashville social security disability attorney for a free case consultation.

Important Differences Between SSI and SSDI

Two main types of Social Security benefits are available to disabled individuals. Social Security Disability Income (SSDI) benefits provide relief to disabled individuals who have paid into the Social Security trust fund through income contributions. Most employers arrange for a percentage of employees’ paychecks to automatically contribute to Social Security. SSDI is an entitlement benefit as those who receive it contributed toward it.

Supplemental Security Income (SSI) is a needs-based benefit. This federally funded supplemental income program offers economic relief to low-income individuals with disabilities and older adults who need financial assistance to cover necessities. Unlike SSDI, SSI requires meeting certain income requirements. The sudden windfall of a personal injury lawsuit settlement may not interfere with entitlement benefits for the most part, but it is possible to affect the recipient’s SSI.

While an individual who receives SSDI may not need to worry about benefit eligibility after receiving a personal injury settlement, a sudden cash influx of as little as two to three thousand dollars may be enough to interrupt an individual’s SSI eligibility. Individuals in this situation often find the loss of SSI benefits catastrophic; whatever settlement or case award they receive will quickly diminish as they pay for what SSI previously covered. This is not a tenable situation for someone who must rely on SSI. Fortunately, an SSI recipient can take steps to protect his or her SSI eligibility after receiving a personal injury settlement.

Other Concerns With SSDI and Medicaid Benefits

SSDI recipients rarely encounter any issues with their eligibility unless they receive some other type of public assistance benefits like workers’ compensation. In such an event, the total income of SSDI combined with the other public assistance benefit may not exceed 80% of the income earned prior to the injury. If the combined total exceeds 80%, SSDI benefits reduce to keep the total income under 80% of the recipient’s previous income.

A lump sum from a personal injury settlement may also interrupt Medicaid payments. Anyone who receives SSDI and Medicaid benefits should report any personal injury lump sum settlement to his or her Social Security caseworker within ten days of receipt.

Protecting SSI Eligibility with a Special Needs Trust

The primary method of protecting SSI eligibility after receiving a personal injury settlement is to create a Special Needs Trust (SNT). This allows the recipient to access the proceeds of his or her settlement without interrupting SSI benefits eligibility. The individual’s attorney should make the necessary arrangements for an SNT for any personal injury settlement.

An SNT names a trustee to manage the contents of the trust on behalf of the beneficiary. An individual receiving SSI would be the beneficiary, and the attorney can help determine the most appropriate trustee to manage the SNT on behalf of the SSI recipient. Since the SSI recipient does not have direct control over his or her SNT, the government cannot consider it income or refer to it for any eligibility-related determinations.

Another benefit to having an SNT is that the beneficiary would not have to worry about losing the contents of the SNT in the event of a lawsuit from another party. The SSI recipient does not have direct access to the contents of the SNT so it would be immune from seizure in a judgment. Ultimately, several benefits exist to starting an SNT for an SSI recipient after a personal injury settlement, but most importantly doing so preserves his or her SSI eligibility for the future.

Contact a Nashville Injury Lawyer

If you have additional questions, reach out to our Nashville personal injury lawyers.