Disabled claimants may run into benefit issues when accepting proceeds from a personal injury settlement. The acceptance of a lump sum may render an individual ineligible for needs-based government benefits, while entitlement benefits remain intact. When it comes to disability benefits, which is which—and how can a claimant protect their eligibility?
SSDI vs. SSI: What’s the difference?
While it’s easy to confuse SSDI vs. SSI, it is important to understand the differences between them because the manner in which they are treated in relation to a settlement is quite different.
Social Security Disability (SSDI) benefits are accessible to disabled individuals who have contributed to the Social Security trust fund via FICA tax, making SSDI an entitlement benefit. There are also some circumstances under which a disabled individual may receive SSDI benefits as the result of Social Security contributions from their parents or their spouse. SSDI does not have an income nor an asset test to determine eligibility.
Supplemental Security Income (SSI) is a needs-based government benefit. It is a federally funded supplemental income program providing financial assistance to disabled, blind, and aged individuals whose countable resources total no more than $2000 for an individual or $3000 if married.
How does a settlement affect each of these benefits?
Individuals receiving Social Security Disability (SSDI) have met eligibility requirements by paying into the social security system and by meeting the Social Security Administration’s standards for disability classification. Any additional income would not affect eligibility. A personal injury settlement will not impact SSDI benefits.
Conversely, since one of the main eligibility requirements for Supplemental Security Income (SSI) is an asset test, accepting a cash settlement would most likely disrupt eligibility for SSI.
Strategies for protecting SSI benefits
The loss of government benefit eligibility can be catastrophic, even for a claimant receiving a multi-million dollar settlement. Necessary expenditures such as surgical procedures, prescription medications, home modifications, and nursing support can wipe out settlement funds. Most disabled individuals cannot afford to lose access to needs-based government benefits.
That’s where the Traci Kaas team comes in—we frequently work with disabled individuals to help create settlement plans that maximize their settlements while preserving government benefit eligibility. Our approach often includes a special needs trust (SNT), which is a type of trust only available to disabled individuals. An SNT may allow a disabled individual to preserve their SSI benefits while paying for non-SSI covered costs out of the trust.
Contact our settlement planning team to learn more
To learn more about government benefit eligibility or special needs trusts, contact Traci Kaas today at 800-354-2258 or firstname.lastname@example.org.