The answer to how personal injury settlements affect Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits depends on your specific situation. However, there is a general answer:
- SSDI – No, your settlement does not affect SSDI benefit payments.
- SSI – Yes, in general, a personal injury settlement negatively affects SSI benefits.
The Social Security Administration (SSA) administers the SSDI program as well as the SSI program. Personal injury settlements uniquely affect these two SSA programs in part because each program follows different requirements to qualify. In addition, SSDI and SSI fit different purposes.
To qualify for SSDI benefits, a person must fit the federal government's strict definition of disability. They also must have paid into the Social Security system for a certain amount of time.
SSI is a needs-based program for individuals whose income and assets fall within a defined poverty range. Each benefit receives payments out of a different federal coffer.
Personal Injury Settlements and SSI
A personal injury settlement can negatively impact SSI benefits for people with a disability and special financial needs. Before you move forward with this kind of settlement, be sure to work with a qualified attorney. Attorneys who specialize in knowing how to qualify and apply for these types of benefits are essential.
Each year, the SSA announces the maximum SSI payouts for individuals, spouses, and essential persons.
Exceeding these amounts will disqualify you for SSI because financial hardship no longer exists. Note, too, that to qualify for Medicaid benefits, you must have limited resources. With a settlement, you may be at risk of seeing your coverage reduced or losing it altogether.
These two circumstances can lead to catastrophic loss of benefits. If you don't have access to private health care insurance or Medicare, you may find yourself having to cover the costs of medical treatment, hospitalizations, and prescription drugs.
Special Needs or Supplemental Needs Trusts
Some legal solutions are available to help avoid the loss of SSI benefits. For instance, you may transfer the personal injury settlement funds into a special needs trust or supplemental needs trust.
A special needs trust can protect needs-based benefits for an individual living with disabilities. This is because a trustee manages the trust contents and pays expenses on their behalf.
The individual doesn’t have direct control over the trust. As a result, the SSA doesn’t consider the personal injury settlement compensation countable when determining the person's ability to qualify for SSI. There are strict compliance measures regarding these trusts and the disbursements of their assets, so it’s essential to consult an experienced attorney to create your special needs trust.
Consulting a Disability Attorney
A qualified special needs or disability attorney can also help you understand your personal injury case’s potential worth and how the two program forms, SSDI and SSI, may interact. Your attorney can determine a monthly calculation for a potential personal injury settlement and compare that to the Social Security monthly benefit amount to see where you stand financially.
You must report all personal injury settlements to SSI and Medicaid. This is because your income and assets determine your program benefits. The SSA therefore must know how much settlement money you receive. Under current rules, you should report your settlement amount to the SSA within 10 days of receiving it.
If You Receive SSDI Benefits
- Your personal injury settlement will not affect your SSDI benefits
- You do not have to report your SSDI settlement to the SSA
- Existing SSDI benefits may limit the terms of a personal injury settlement
- Settlement negotiations for personal injury cases could include compensation for losses and damages that SSDI can’t cover
If You Receive SSI Benefits
- Your personal injury settlement will cause either a reduction or termination of your SSI monthly benefits through the SSA
- You must report any personal injury settlement amount to the SSA
- A special needs trust may be able to protect your personal injury settlement without affecting your SSI benefits
Extensive rules govern how one can qualify for SSI and SSDI benefits. It can be difficult to know what to do when facing additional income stemming from a personal injury settlement. An experienced special needs planning attorney can help you navigate the rules. Work with a professional to protect your benefits and receive the full and fair compensation you deserve from a personal injury settlement.