Personal Injury Settlements and Disability Benefits

If you are involved in an accident that was caused by another person, you may be able to file a lawsuit against them to recover financial compensation for your losses. In most cases, personal injury claims are resolved outside of court, such as through a settlement. If you are currently getting disability benefits, this may raise some concerns about whether this money will impact your eligibility for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

A personal injury settlement won’t affect your SSDI benefits, as this program is not based on your financial status. However, if you are currently receiving SSI — which is a needs-based program — then your eligibility may be negatively affected. A skilled New Jersey disability benefits lawyer can help you understand how a settlement may impact your benefits, and work with you on a strategy to reduce the likelihood that your SSI benefits will be reduced or eliminated.

At Bross & Frankel, we have significant experience handling all types of disability claims, including Social Security disability. We also represent clients in personal injury claims, giving us a unique ability to counsel accident victims on how a settlement or verdict at trial will affect their disability benefits. Reach out to our law offices today to learn more or to schedule a free claim review with a member of our legal team.

How Will a Personal Injury Settlement Affect My SSDI and/or SSI?

There are two different types of disability benefits offered by the Social Security Administration: SSDI and SSI. Both programs require that an applicant be unable to work due to a medical or mental health condition. However, there are a few big differences between the other requirements for SSDI and SSI. Learning these differences is key to understanding how a personal injury settlement will affect your disability benefits.

Generally, to qualify for SSDI, you must be unable to work due to a disability and you must also have paid into the system by working and paying taxes. If you don’t have enough “work credits,” then you won’t be eligible for SSDI — even if you cannot work due to a disability. There are no income or asset limits for SSDI.

By contrast, SSI does not consider work credits. However, you must meet strict asset and income limits to qualify. The formulas to determine which assets and income count for SSI purposes are a bit complicated, but you typically must have very few assets and very limited income to qualify. It is possible to receive both SSDI and SSI if you meet the requirements for each program.

Because the SSDI program does not have income and asset limits, a personal injury settlement will not affect your eligibility for SSDI. As long as you meet the work history and disability criteria, you will still get SSDI. However, because SSI is a needs-based program, a personal injury settlement could impact your eligibility.

When a person first applies for SSI, they have to prove that they meet the asset and income limits. Even after you are approved for SSI benefits, you will have to demonstrate that you still fall within these limits to maintain eligibility. A settlement from a personal injury case can increase the value of a person’s resources, which may result in reduced SSI benefits. Larger settlements can put an individual over the limit for SSI benefits, which may lead to their benefits being suspended or terminated.

Protecting Your Disability Benefits

If you accept a lump sum payment in a personal injury case, then it could affect your SSI eligibility. However, there are several strategies that a person can employ to avoid this outcome. A seasoned New Jersey disability benefits attorney can discuss your options for preserving your SSI benefits before you receive a personal injury settlement.

There are two primary options for protecting your SSI benefits after receiving a payout on a personal injury case: spending down the settlement and setting up a special needs trust. Both options require legal counsel, as there are complicated laws that govern the SSI program. If you don’t do it “right,” then you may still lose SSI eligibility even after spending down and/or creating a special trust.

Spending down refers to the process of using settlement proceeds to pay for resources that are exempt (or not countable) for SSI purposes. Doing this can help you keep you within the asset limit for SSI benefits. Usually, a person will spend down settlement funds during the same month that they received the payment on things like:

• Prepaid funeral expenses
• Paying off debt, such as student loans or credit cards
• Paying off the mortgage on your home
• Making modifications or renovations to your house to accommodate your disability (such as installing a wheelchair ramp or a stair lift or making your kitchen accessible)

The second option is setting up a special needs trust with the settlement proceeds. Money in a properly drafted special needs trust will not affect a person’s eligibility for SSI or related benefits like Medicaid, as long as the money is spent properly after being disbursed. This money can be used for expenses that aren’t covered by insurance or SSI, such as nursing home care.

Depending on your situation, you may want to use one or both of these options. A disability benefits lawyer can advise you on how you can best protect your eligibility for SSI benefits. You should not attempt to spend down your settlement or set up a special needs trust without consulting a lawyer.

Work with Bross & Frankel

The rules surrounding Social Security disability are complex, and it can be difficult to qualify for benefits. Once you are approved for benefits, you will want to be careful to not do anything that could jeopardize your eligibility. Carefully thinking through how to handle a personal injury settlement — with the advice of counsel — can help ensure that you don’t lose your SSI benefits.

Bross & Frankel represents people with disabilities in New Jersey and Pennsylvania as they seek to obtain or maintain their Social Security Disability benefits. We offer free initial consultations for all prospective clients. To learn more or to schedule a claim review with a New Jersey Social Security disability attorney, give us a call at 856–795–8880 or fill out our online contact form.