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Will a Settlement Affect Disability Benefits?

By Butler Prather LLP on November 25, 2020

If you or somebody you care about has been injured due to the careless or negligent actions of another individual or entity, you may be entitled to various types of compensation. However, if you receive disability benefits and are expecting a personal injury settlement, you may wonder how this settlement could affect your benefits moving forward. Here, we want to discuss how personal injury settlements intersect with disability benefits as well as whether it matters what type of benefit you are receiving.

SSDI and SSI – What is the difference between the two?

There is often significant confusion around the difference between SSDI and SSI. While these two benefits come from the same place, they serve different purposes. We have to distinguish between the two because each of them has unique eligibility requirements and how they are viewed in terms of a settlement is going to be different.

Social Security Disability (SSD/SSDI). These benefits are available to disabled individuals who have worked and contributed to the Social Security trust fund throughout their lives through the FICA tax. In some cases, a disabled individual may receive SSDI benefits as a result of the Social Security contributions of their spouse or parents. SSDI is considered an entitlement benefit from the US government.

Supplemental Security Income (SSI). This is a federally funded supplemental income program that provides financial assistance to low-income aged, disabled, or blind individuals. SSI is considered a needs-based governmental benefit program.

How will a settlement affect these benefits?

Those who are receiving SSDI have met eligibility requirements by paying into the program and subsequently being classified as disabled by the Social Security Administration standards. A personal injury settlement will not affect a person’s SSDI benefits.

However, most of the requirements for eligibility for SSI revolve around an asset test. Generally, it does not take earning very much for a person to be considered ineligible for SSI benefits. Thus, a personal injury award settlement will likely affect a person’s ability to receive SSI benefits.

Protecting SSI benefits if a settlement is inevitable

At first glance, it may seem like receiving a personal injury settlement would be a benefit to any person who receives supplemental security income. However, those who are disabled and rely on SSI often find the loss of their government benefits catastrophic.

First, it is important to point out that many personal injury settlements are not significant. The multi-million dollar personal injury settlements that you see in the news do not happen to every single person who receives a settlement check. In these cases, even a small personal injury settlement of a few thousand dollars could disrupt a person’s SSI benefits. The necessary expenditures after sustaining a personal injury, such as prescription medications, therapy, home modifications, surgical procedures, and skilled nurses, could quickly eat up any award settlement. After the settlement is spent, the disabled victim may need to rely on their SSI benefits once again.

It may be necessary to set up a special needs trust in an effort to specifically allow a person to access their settlement proceeds while also placing a limit on the proceeds inside the trust. This could allow a disabled person to preserve their eligibility for SSI benefits at the same time as being able to use their settlement for specific injury needs.

Posted in: Personal Injury

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