If you’re living with a disability and navigating the labyrinth of Social Security benefits, we know you’ve got plenty on your plate. But what happens when an unexpected lump sum settlement arrives on your doorstep? Perhaps from a personal injury case, a workers’ comp claim, or another source. It might seem like a gift at first, but, as with most things in life, there are implications that you need to be aware of. Balancing the short-term gains from a settlement with long-term Social Security benefits is crucial if you have a disability, and the team at Fusco, Brandenstein & Rada, P.C. can help you make the most of your compensation. Our Social Security disability lawyers in New York have more than 40 years of legal experience and in-depth knowledge of disability claims. We’re here to help you maintain your financial security after suffering a disability, and this blog dives into how lump-sum settlements can affect Social Security benefits. Read on to learn more.
How a Personal Injury Settlement Affects Social Security Benefits
Personal injury settlements offer a financial lifeline to help cover medical bills, lost income, and other damages after an accident. However, they can also have a ripple effect on your Social Security disability benefits.
If you’re receiving Supplemental Security Income (SSI), your settlement could significantly impact your benefits. SSI is a needs-based program, which means it’s there to help people with limited income and resources. Depending on the size of your settlement, the Social Security Administration (SSA) might view it as income or resources. This could reduce your SSI benefits or make you ineligible if your total assets exceed the SSI limit.
Unlike SSI, Social Security Disability Insurance (SSDI) is not based on financial need. Instead, you’re eligible for benefits based on your work history and whether you’ve paid into Social Security through your taxes. As such, a personal injury settlement typically doesn’t impact SSDI benefits. You could receive a large settlement and still maintain your SSDI benefits.
The key here is understanding how these benefits work and how to make the best decisions for your situation. When dealing with a personal injury settlement, it’s important to work with experienced professionals who can guide you through this complicated process. Remember, your well-being is our top priority, and we’re here to provide you with the information and resources you need.
Workers’ Comp Settlements and Social Security
If you’ve received a workers’ compensation settlement, it’s essential to know how it might affect your Social Security benefits. While SSDI and workers’ compensation are two distinct programs, they intersect when the total monthly amount you receive from both programs exceeds 80 percent of your average earnings before your disability. If this happens, the SSA may reduce your SSDI benefits, an action often referred to as “offsetting.”
How to Protect Your Social Security Benefits After Receiving a Lump-Sum Settlement
So, how do you protect your Social Security benefits while benefiting from your personal injury or workers’ comp settlement? Here are some strategies you can use:
- Special Needs Trust: A Special Needs Trust (SNT) is a legal tool designed to hold assets for a person with disabilities without those assets being counted for SSI and Medicaid eligibility. You can use the funds in an SNT for certain approved expenses without impacting your benefits. However, establishing an SNT can be complex and requires an experienced attorney.
- Structured Settlements: Instead of taking a lump-sum payment, consider structuring your settlement so that payments are distributed over time. This can be particularly helpful in a workers’ compensation case to avoid the SSDI offset.
- Spend Down: If you receive a lump sum that makes you ineligible for SSI, you can “spend down” this money on certain expenses like paying off debt, making home modifications for accessibility, or prepaying rent or bills. Once your resources are below the limit again, you can reapply for SSI.
- Professional Advice: Navigating this process can be complicated, and mistakes can have significant consequences. Seeking advice from experienced professionals who understand the intricacies of Social Security and lump sum settlements can be invaluable.
Understanding how a lump-sum settlement can affect your social security disability benefits and learning strategies to protect those benefits is crucial to navigating your journey with a disability. We’re here to support you every step of the way, equip you with the knowledge to make smart decisions and help you understand your options. Call 516-496-0400 or fill out our online form for a complimentary consultation with one of our attorneys.
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