Can My Personal Injury Settlement Affect My SSI Benefits?

Receiving a settlement from a personal injury case can be a life-changing event, providing the funds you need to cover medical expenses, lost wages, and other costs related to your injury. However, for individuals receiving Supplemental Security Income (SSI) benefits, it’s essential to understand how a settlement may impact these benefits. Unlike Social Security Disability Insurance (SSDI), SSI is a needs-based program, meaning it takes both income and assets into account when determining eligibility. Receiving a settlement could potentially disrupt these benefits if not managed carefully.

At John J. Malm & Associates, our top-rated Illinois personal injury attorneys work with clients to ensure their settlements are structured thoughtfully, helping them maximize their recovery while protecting their SSI benefits. In this guide, we’ll explore how SSI is impacted by personal injury settlements and outline strategies to minimize the impact.

SSI Eligibility and Asset Limits: The Basics

SSI is a federal program designed to provide financial assistance to individuals with limited income and resources who are disabled, blind, or elderly. Because SSI is a needs-based program, the Social Security Administration (SSA) has strict income and asset limits for eligibility:

• Asset Limits: To qualify for SSI, individuals must have no more than $2,000 in countable assets ($3,000 for couples).
• Income Limits: Monthly SSI payments are also adjusted based on income, and any sudden increase in resources, such as a personal injury settlement, can impact eligibility.

Personal injury settlements are often considered unearned income, meaning the amount you receive could push you over these asset or income limits, potentially resulting in a reduction, suspension, or termination of your SSI benefits.

How Personal Injury Settlements Affect SSI Benefits

When you receive a settlement from a personal injury case, the SSA views this as an addition to your financial resources. This influx of resources can jeopardize your eligibility for SSI benefits if the settlement amount exceeds SSI’s asset limits. It’s important to note that any lump-sum payment is considered an asset in the month it is received. If the funds remain in your account beyond that month, they continue to count toward your asset limit, potentially affecting your SSI benefits in the following months.

For instance, if you receive a settlement of $20,000, this amount would exceed the $2,000 SSI asset limit, causing SSI benefits to be suspended until your assets fall below the allowable threshold.

Strategies to Preserve SSI Benefits After a Personal Injury Settlement

Fortunately, there are ways to manage a personal injury settlement in a way that preserves your SSI benefits. The key is to reduce the impact of the settlement on your countable income and assets, allowing you to keep the financial support you need while maintaining your SSI eligibility. Here are some of the most effective strategies:

1. Establish a Special Needs Trust (SNT)

One of the most effective ways to shield settlement funds from SSI asset limits is by creating a Special Needs Trust (SNT). A Special Needs Trust is a legal arrangement that holds settlement funds on behalf of an SSI recipient, allowing the funds to be used for approved expenses without impacting SSI eligibility.

Special Needs Trusts are specifically designed to benefit individuals with disabilities, covering costs that SSI does not typically provide for, such as:

• Medical and dental expenses not covered by Medicaid
• Specialized therapies and treatments
• Educational expenses
• Recreational activities and quality-of-life items

By placing your settlement funds in an SNT, you can maintain SSI eligibility while still benefiting from the funds in a way that enhances your quality of life.

2. Spend Down the Settlement

The SSA allows SSI recipients to “spend down” their settlement funds by using them on exempt resources. Spending down means using the funds to purchase items or services that do not count as assets under SSI guidelines. Qualifying purchases might include:

• Paying off outstanding medical bills or debt
• Making home improvements or repairs
• Purchasing a vehicle, as one car is usually exempt for SSI purposes
• Buying essential household goods or personal items

Spending down a settlement quickly, ideally within the month it is received, can help keep you below SSI’s asset limits.

3. Settle with Structured Payments

If you’re concerned about exceeding SSI limits due to a large, lump-sum payment, consider requesting a structured settlement. Structured settlements pay out in regular installments over time, instead of a single, large payment, which can help reduce the impact on SSI benefits. By spreading the payout, you may be able to avoid surpassing the asset limit each month.

This strategy requires careful planning with the help of your attorney and the insurance company managing the settlement, as not all cases are eligible for structured payouts. However, for eligible cases, this can be a beneficial approach to avoid a sudden asset increase.

4. Designate a Medicare Set-Aside Account (MSA) for Future Medical Expenses

For individuals on both SSI and Medicare, an MSA may help reduce the impact of a settlement by designating funds solely for future medical expenses related to the injury. While an MSA is primarily used to protect future Medicare benefits, it can also be helpful in limiting the portion of your settlement that affects SSI benefits by separating out funds used for specific medical expenses.

Since MSAs are complex and require compliance with specific guidelines, it’s advisable to work with an attorney to determine if this approach could benefit your specific situation.

Reporting Your Settlement to the SSA

It’s essential to report any settlement or significant change in your financial situation to the SSA as soon as possible. Failure to report a settlement could result in overpayments from SSI, penalties, or even termination of benefits. To avoid these issues, follow these steps:

1. Contact the SSA Promptly: Notify the SSA of the settlement and provide documentation, such as the settlement agreement and the amount received.
2. Explain How the Settlement Is Being Used: If you are spending down the settlement or placing it in a Special Needs Trust, provide details to the SSA to clarify how you are managing the funds.
3. Work with Your Attorney to Report Accurately: Reporting a settlement incorrectly can cause delays and complications. Your attorney can help ensure that all information is reported correctly and in compliance with SSA regulations.

Frequently Asked Questions About SSI and Personal Injury Settlements

1. Can I keep my SSI benefits if I receive a settlement?
Yes, with proper planning, you can keep your SSI benefits even if you receive a settlement. Options like a Special Needs Trust, structured payments, or spending down the settlement can help you remain eligible.

2. How much time do I have to spend down my settlement to keep SSI benefits?
The SSA generally allows one month for a spend down. If you use the settlement funds within this time frame, you can avoid exceeding SSI asset limits. However, working with an attorney can help ensure you take the right steps to maintain eligibility.

3. Can I spend the settlement on anything, or are there restrictions?
While you have flexibility in how you spend the settlement, it’s best to focus on exempt resources, such as medical bills, home improvements, or personal items, to avoid exceeding SSI asset limits.

Preserving Your SSI Benefits

Receiving a personal injury settlement while on SSI requires careful management to prevent the loss of benefits. By understanding your options, working with an experienced attorney, and using strategies like a Special Needs Trust or structured payments, you can maximize your settlement without jeopardizing your financial stability.

At John J. Malm & Associates, our Illinois personal injury attorneys are dedicated to helping clients protect their SSI benefits after an injury settlement. We offer guidance and expertise to ensure that your settlement is handled correctly, preserving both your recovery funds and the benefits you rely on. With offices in Naperville and St. Charles, we’re here to support clients across Illinois. Contact us today to learn more about receiving the compensation you deserve.