By Joanna Seidman Wynes, Esq.
Settlement Planner, The Settlement Alliance
When a disabled individual anticipates receiving 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? Is the type of disability benefit relevant? Keep reading to find out.
SSDI vs. SSI: What is the difference?
There tends to be some confusion surrounding Social Security Disability (SSD or SSDI) and Supplemental Security Income (SSI). It is 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 by being classified as disabled by the Social Security Administration’s standards. A personal injury settlement will not affect SSDI benefits; however, a workers’ compensation indemnity settlement may impact these benefits as discussed in further detail below.
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). 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.
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.
SSDI and Workers’ Compensation Benefits
It is important to note that if the injury or illness is work-related, workers may not be eligible to receive the full amount of SSDI benefits and their full workers’ compensation benefits simultaneously. Social Security will calculate the reduction of SSDI benefits, called an “offset,” based on a combination of factors that may vary by state. Diverting a portion or all of the settlement proceeds into a structured settlement annuity may help a workers’ compensation claimant minimize the impact of a reduction in SSDI benefits.
In Conclusion: Be Mindful of Timing
To help prevent the loss of benefit eligibility, the full scope of a claimant’s government benefit eligibility should be determined as early as possible in the settlement process. Furthermore, the earlier the claimant is presented with their various options for settlement, the better chance they have of making informed decisions that will help them preserve both their settlement and their government benefit eligibility.
Joanna Seidman Wynes, Esq. and The Settlement Alliance are proud Platinum Sponsors of Maryland Association for Justice. The Settlement Alliance provides comprehensive settlement planning services including structured settlements, trust planning, government benefit preservation, attorney fee deferrals, qualified settlement fund & claims administration, lien resolution, Medicare Set-Asides, non-qualified settlements, and bankruptcy & probate coordination. For more information, visit www.settlement-alliance.com or contact Joanna at firstname.lastname@example.org/443-326-2549.