Open Accessibility Menu

Will a Settlement Affect Disability Benefits?

Will a Settlement Affect Disability Benefits?
Sage Settlement Consulting

When a disabled individual is about to receive a recovery in a personal injury settlement, questions often arise about existing disability benefits. Will accepting money from an injury settlement affect a claimant’s disability benefits? Does the type of disability benefit matter? Keep reading to find out.

SSDI vs. SSI: What’s the difference?

There tends to be some confusion surrounding Social Security Disability (SSD or SSDI) and Supplemental Security Income (SSI). It’s important to distinguish between the two, because not only does each have unique eligibility requirements, but the manner in which they are viewed when it comes to settlement is vastly different.

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

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

How does a settlement affect each of these benefits?

Individuals who receive Social Security Disability (SSDI) have essentially met eligibility requirements by paying into the social security system and being classified as disabled by the Social Security Administration’s standards. A personal injury settlement will not affect SSDI benefits.

On the other hand, one of the main eligibility requirements for Supplemental Security Income (SSI) is an asset test. In fact, assets as low as $2000 can disqualify an individual from receiving SSI benefits ($3000 if married)1. Accepting a cash settlement would likely disrupt SSI eligibility.

Strategies for protecting SSI benefits

Many disabled individuals who are involved in personal injury settlements find the loss of government benefit eligibility catastrophic. Necessary expenditures such as surgical procedures, prescription medications, therapy, home modifications, and skilled nurses can quickly eat up settlement proceeds. Most simply cannot afford to lose access to their needs-based government benefits. Luckily, our team frequently works with disabled individuals to create comprehensive settlement plans that often include a special needs trust.

A special needs trust (SNT) is a type of trust specifically reserved for disabled individuals that allows them to access their settlement proceeds within the trust to pay for their needs. At the same time, by placing settlement proceeds into an SNT, a disabled person may be able to preserve their eligibility for SSI benefits.

Contact our government benefit experts to learn more

To learn more about government benefit eligibility or special needs trusts, contact our comprehensive settlement planning team today at (855) 288-7243.

1 As of July 1, 2022, California raised its Medi-Cal asset limits. More information can be found here.

Categories:
  • Corporate Headquarters:

    11044 Research Blvd.
    Suite B-415
    Austin, TX 78759

    [Map & Directions]