A personal injury settlement can affect disability claims differently depending on the situation as well as where you live.
SSDI and SSI
Social Security programs like Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) have different eligibility requirements for different purposes. Personal injury settlements will uniquely affect the two programs. SSDI is an earned benefit through tax contributions, while the SSI program is needs-based, where income must fall within a defined poverty range.
Given the complex nature of personal injury settlements and disability claims, consider consulting with your disability attorney. They can provide specific advice regarding your circumstances and the laws governing your state.
An attorney with expertise in special needs planning personal injury law can help in evaluating the following:
Income and Asset Limitations
Disability benefits such as SSDI or SSI often have income and asset limitations. A personal injury settlement may effectively increase your income or assets. If those increases rise beyond threshold limits, this could potentially affect whether you are eligible for SSDI or SSI. You should carefully review the rules and regulations with a qualified attorney to understand your settlement’s potential impact.
Impact on Medical Evidence
Disability claims require medical evidence to support your disability status. Receiving money for injuries may give the impression that you are no longer disabled. This is because the compensation may suggest that you are improving. Such contradictions can, in turn, weaken your case.
You may need to provide additional evidence to establish the ongoing nature and severity of your disability. A special needs planning attorney can assist you on this front as well.
Coordination of Benefits
Some disability programs require coordination of benefits, meaning they consider other sources of compensation or financial assistance you receive. A program like SSI may consider a settlement as income or a resource. This may then factor into your disability benefits calculation.
Insurance Offsets
If your personal injury settlement involves insurance claims, certain disability programs may have provisions that offset or reduce your disability benefits based on the amount you receive from insurance coverage. This accounting prevents duplicate compensation for the same injury or disability.
Legal Solutions to Avoid Losses
Legal solutions are available that can help you avoid the loss of SSI benefits. For example, with the help of an attorney, you may be able to transfer personal injury settlement funds into a special needs trust (SNT). A first-party SNT is a legal arrangement that can hold your settlement funds for your benefit. This legal arrangement then allows you to qualify for government benefits such as SSI or Medicaid.
How an SNT Works
Disability programs like SSI have strict asset limitations. As mentioned above, you may be able to place your settlement funds in a first-party SNT. This can prevent those funds from counting as a resource that could disqualify you from receiving public benefits. The funds in this type of special needs trust do not count as personal assets.
Although a first-party SNT can help with asset limitations, distribution for the trust may affect your income eligibility for SSI or other means-tested benefits. Income that the trust generates may still be countable income, which could affect the benefits you receive.
Trust administration of an SNT also must comply with laws and regulations. The trust must be irrevocable and establish you as its sole beneficiary. Generally, a trustee then manages the funds and distributes them according to trust agreement guidelines.
The rules and regulations regarding first-party SNTs and their impact on disability benefits can vary by jurisdiction. Be sure to consult with a disability attorney who specializes in special needs trusts. They can provide guidance specific to your situation. With their help, you can better protect your settlement funds and reduce any negative impact on your disability benefits.
However, while a special needs trust can provide a workaround, some settlements aren’t large enough to warrant the creation of an SNT.
Supplemental Security Income
SSI benefits are more often affected by a personal injury settlement than SSDI.
When receiving a personal injury settlement, you must report it to the Social Security Administration (SSA) within 10 days. A personal injury settlement typically causes either a reduction or termination of your monthly SSI benefits. A personal injury settlement may also affect your disability status. The SSA may require current medical records and evidence to review your claim further.
Social Security Disability Benefits
Normally, you don’t need to report a personal injury settlement if you receive SSDI. This is because the SSDI program does not base your benefits on your income.
You may already receive significant SSDI benefits. If so, it may not be worth it to pursue a small personal injury claim. However, substantial settlement negotiations for personal injury cases can include monetary compensation for economic damages and other losses not covered by SSDI. These may include the following:
- Medical expenses and future medical costs
- Nursing home care or skilled at-home care
- Pain and suffering
- Mental anguish
- Lost wages and future earnings
- Changes to quality of life
The Role of a Disability Attorney
The many rules for SSDI and SSI programs can be confusing. If you are receiving extra income from a personal injury lawsuit settlement, these rules can seem even more complex. Consult a special needs planning lawyer for help. They can:
- explain how an injury settlement may affect your disability claims
- assist you in developing a strategic plan
- ensure that the relevant agencies receive the information they need about your settlement
- make any necessary offsets or adjustments to comply with the regulations of various disability programs
- assist if you have to demonstrate the ongoing nature and severity of your disability
- handle the paperwork if you have an appeal or dispute
- gather more evidence if necessary and present your case to judges or hearing officers
If negotiations involve an insurance company or the responsible party, a disability attorney can advocate on your behalf, securing a fair and favorable outcome.
Failing to plan properly with a personal injury settlement can mean losing your disability benefits or seeing them decrease. It also can mean you have to face restructuring processes to regain any lost benefits. Meet with a qualified special needs planning attorney before pursuing a personal injury claim. They can help ensure it meets your needs and doesn’t interfere with your existing disability benefits.