Will My Personal Injury Settlement Affect My Disability Benefits?

man with leg brace and walker walking with woman
Aug 3, 2022 | Sara Khaki

Typically, personal injury settlements do not impact Social Security Disability Insurance (SSDI) benefits. However, they can lower Supplemental Security Income’s (SSI) standard disability payments. Understanding how and why this may happen can help you protect your financial security. Enlisting the help of a trusted disability attorney from The Khaki Law Firm can ensure you are aware of any requirements and processes.

Impacts of Settlement Awards on SSDI vs. SSI Benefits

The impact on Social Security Administration (SSA) benefits after receiving a lawsuit settlement will vary depending on the program you are currently enrolled in. The SSA determines SSDI benefits based on employment history rather than financial resources. A person is eligible for benefits as long as they have a qualifying disability and have accumulated enough work credits throughout their career. Therefore, a significant monetary award generally will not impact SSDI.

SSI, on the other hand, is needs-based and determined by income and asset limitations. To maintain benefit eligibility, a person must pass an asset test—including all income and payments they receive. Compensation after a personal injury lawsuit would be considered for this calculation and could reduce your benefit amount or make you ineligible.

How Do I Protect My Disability Benefits?

Lump sum payments are most likely to disrupt SSI eligibility. A skilled lawyer can help you navigate maintaining your benefits while receiving the compensation you deserve. One method is through “spending down,” which would involve a person spending settlement funds over the SSI asset maximum on exempt purchases. These purchases could include home modifications to accommodate their disability or prepaying funeral expenses. Paying off debt such as credit cards, student loans, or a home mortgage is also generally exempt. Typically, they must “spend down” within a month of receiving their compensation.

Another method to protect benefits and assets involves transferring the money to a special needs trust. The trust can set aside funds to cover expenses not covered by SSI, such as legal services, nursing home care, or other medical therapies. The process can be complicated, so consulting with an attorney is beneficial when creating or modifying a trust.

Enlist the Help of an Attorney to Manage Settlement Awards Alongside Disability Benefits

Within ten days of receiving a lawsuit settlement, you must report it to the SSA. However, disability benefits should not deter people from seeking financial compensation for injury damages. One of the knowledgeable attorneys from our team at The Khaki Law Firm, LLC can help you navigate your options to minimize your settlement’s impact on disability benefits. Contact us today for more information.

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