Will a Settlement Affect Disability Benefits?

If you or somebody you care about has sustained an injury caused by the careless or negligent actions of another person, you may be entitled to various types of compensation. However, while it may seem like a good thing that you could receive a settlement from the at-fault party, the reality is that a personal injury settlement could affect your disability benefits. Here, our team wants to discuss how personal injury settlements could affect your SSDI or SSI benefits. There is a difference between how settlements affect these two government benefits programs.

The difference between SSDI and SSI

There is often confusion around how SSDI and SSI differ from one another. Both of these benefits come from the government, and they both revolve around a person receiving them due to a disability. However, the eligibility requirements for these two benefits programs are different, and this affects how a personal injury settlement could play a role.

  • Social Security Disability (SSD/SSDI). These benefits are available to individuals who are disabled but have worked and contributed to the Social Security trust fund during their lifetime by paying the FICA tax. In some cases, individuals are eligible for SSDI benefits because of the Social Security contributions of their parents or spouse. SSDI is considered an “entitlement benefit” from the US government.
  • Supplemental Security Income (SSI). This federally funded supplemental income program provides financial assistance to low-income disabled, blind, or aged individuals. SSI is considered a needs-based program, not an entitlement program.

How will a personal injury settlement affect your benefits?

Any person receiving SSDI benefits will have met the government requirements for the benefits by paying into the program and then being classified as disabled based on the Social Security Administration “disability standards.” A person who is receiving SSDI benefits will not have to worry about a personal injury settlement affecting their benefits at all.

However, this is not the case for those receiving SSI benefits. The eligibility of a person receiving SSI revolves around an asset test. Generally, even making just a little bit of money disqualifies a person from receiving SSI, and a personal injury settlement will likely affect a person’s ability to receive these benefits.

Working to protect SSI benefits if a personal injury settlement is coming

Receiving a personal injury settlement after sustaining an injury caused by someone else should be a positive outcome, but the reality is that this could be a disaster for those receiving SSI. We need to point out that most personal injury settlements are not the blockbuster deals that you hear about in the news.

Suppose, for a moment, that a person sustains a slip and fall injury at a grocery store and is ultimately awarded $20,000 in a settlement. This $20,000 will likely be enough to affect a person’s SSI eligibility, at least for some time. That personal injury award settlement of $20,000 will quickly eaten up by doctor visit bills, physical therapy and rehabilitation, any prescription medications that are needed, mobility devices, etc. After that settlement is gone, and if a person is no longer receiving SSI benefits, this could lead to a disastrous financial situation.

It may be possible to set up a special needs trust in an effort to allow a person access to their settlement proceeds so long as they are used for certain expenditures. This special needs trust could allow a disabled person to preserve their eligibility for SSI benefits, as the assets in the special needs trust may be shielded from the SSI asset test.