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SSI and car accident settlement: Will a Car Accident Settlement Affect SSDI Benefits?

Michael Agruss

Written and Reviewed by Michael Agruss

  • Managing Partner and Personal Injury Lawyer at Mike Agruss Law.
  • Over 20 years of experience in Personal Injury.
  • Over 8000+ consumer rights cases settled.
  • Graduated from the University of Illinois Chicago School of Law: Juris Doctor, 2004.

Receiving a Social Security Disability Insurance (SSDI) benefit often leads to questions about how other types of income or settlements may impact these benefits. Individuals who get into car accidents and are entitled to a settlement might wonder if this financial gain could affect their eligibility or the amount received from SSDI. This concern is rooted in the need to maintain consistent support while managing the additional complications that arise from such accidents.

It is important to understand the distinction between SSDI and Supplemental Security Income (SSI) when considering the implications of a car accident settlement. SSDI is designed to provide assistance to individuals who have accumulated a sufficient work history but are no longer able to earn a living due to a disability. Unlike SSI, SSDI is not based on the recipient’s income and assets, but rather on their work credits. Therefore, in most cases, a car accident settlement does not affect SSDI benefits, as it is not considered earned income by the Social Security Administration (SSA).

However, the situation differs significantly for individuals receiving SSI benefits, which are need-based and depend on the claimant’s income and resources. A car accident settlement could potentially disrupt SSI benefits if it causes the recipient’s income to exceed the stipulated limits. Those dependent on SSI must be aware of how a settlement could jeopardize their benefits and take steps to minimize the financial implications, such as structured settlements or spend-downs that maintain their eligibility for benefits.

Woman With A Neck Injury Standing By A Crashed Car

Understanding SSDI and SSI

Before diving into the impact of car accident settlements, it’s crucial to understand the distinctions and conditions for Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Both are federal programs designed to assist those with disabilities, but they differ in eligibility and funding sources.

Fundamentals of SSDI and SSI Benefits

Supplemental Security Income (SSI) provides financial assistance to individuals who are disabled, blind, or aged 65 and older with limited income and resources. In contrast, SSDI offers disability benefits to disabled individuals who have a qualifying work history, having paid Social Security taxes on their earnings.

SSI Benefits: Funded by general tax revenues, not Social Security taxes. Provides a minimum basic financial assistance.

SSDI Benefits: Funded through payroll taxes. Benefit amounts are based on the individual’s earnings record and the amount of Social Security taxes paid.

Eligibility Criteria for SSI and SSDI

For SSI benefits, the key eligibility criteria include:

  1. The individual must be aged 65 or older, blind, or disabled.
  2. The individual must have limited income and resources below specified thresholds.

For SSDI benefits, eligibility is determined by:

  1. The individual must have a disability that meets the Social Security Administration’s definition.
  2. The individual must have accrued a sufficient number of work credits, which typically means having worked and paid into the system for a certain number of years.

Both programs require that the individual’s disability is expected to last at least one year or result in death.

Impact of Car Accident Settlements on Disability Benefits

Receiving a car accident settlement may have implications for individuals relying on disability benefits. It is imperative to understand how such settlements can affect Supplemental Security Income (SSI) benefits and SSDI.

How Settlements Affect SSI Benefits

Supplemental Security Income (SSI) is designed to aid individuals with limited income and resources. A car accident settlement can be deemed as unearned income, which might influence SSI eligibility. The Social Security Administration (SSA) imposes strict income and asset limits for SSI recipients. Hence, receiving a settlement might reduce SSI benefits, depending on the amount and the portion of the settlement considered countable income. As well, it may terminate SSI benefits if the settlement pushes one’s resources above the SSI limit.

Additionally, the structure of the settlement matters. Funds explicitly allocated for pain and suffering, for example, may be treated differently than other types of compensation, like lump sum settlements.

Interaction Between Personal Injury Settlements and SSDI

Social Security Disability Insurance (SSDI) benefits, unlike SSI, are not based on income and resource limits. Rather, they are based on an individual’s work history and the amount of Social Security taxes they have paid. A personal injury settlement may not directly affect SSDI benefits, because the SSA does not consider it as earned income. However, recipients are still obliged to:

  • Report the settlement to the SSA within 10 days of receipt.
  • Understand the potential tax implications of their settlement, which may indirectly affect their overall financial planning, but not SSDI directly.

One should consult with a professional, like a Chicago personal injury lawyer at Mike Agruss Law, when receiving a personal injury settlement to understand fully how it may interact with their SSDI benefits.

Legal Aspects of Personal Injury Claims and SSI/SSDI

When dealing with personal injury claims, it’s important to understand how a settlement may impact Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) benefits. The Social Security Administration (SSA) has distinct rules on reporting settlements and how they affect these disability benefits.

Navigating the Claims Process

The claims process for a personal injury case is complex, requiring careful navigation to ensure proper handling with regard to disability benefits. Claimants must meticulously document their injuries and negotiations to secure a personal injury settlement compensation. For those receiving SSI, it’s crucial to comprehend that any settlement could be seen as an asset increase, potentially reducing or even suspending benefits. By contrast, SSDI recipients generally don’t need to worry about their settlement affecting their benefits due to SSDI’s lack of asset limits.

Reporting Settlements to Social Security Administration

All recipients of SSI are obligated to report any personal injury settlements to the Social Security Administration. The SSA must be notified promptly; SSI benefits are means-tested and any additional income can influence eligibility criteria. SSDI beneficiaries, however, are not subject to the same financial criteria and typically are not required to report personal injury settlements as part of their SSDI claim.

State-Specific Considerations for SSI and SSDI Recipients

In the realm of Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI), state-specific rules can affect how a car accident settlement impacts eligibility and benefits. Particularly within Illinois, recipients must navigate a complex set of regulations.

The Impact of Settlements in Illinois

Illinois applies particular scrutiny to SSI and SSDI recipients who receive car accident settlements. Under state law, an SSI recipient’s financial increase from a settlement may adjust their benefits, as the Social Security Administration includes most types of settlements as a resource. However, SSDI benefits typically remain unaffected by such settlements because they are based on the recipient’s work credits and not their current income level.

Recipients in Illinois should be aware that keeping their settlement money directly in their bank accounts could risk exceeding the SSI resource limits, which is $2,000 for an individual and $3,000 for a couple. Careful planning with a qualified professional is advised to ensure that the receipt of a settlement does not jeopardize their SSI or Medicaid benefits. SSDI recipients face less financial disruption from settlements because the program does not set limits on unearned income or resources.

Managing SSI and SSDI Benefits After Receiving a Settlement

When individuals who receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) obtain a personal injury settlement, it is crucial to understand how to manage these benefits. The key is to navigate the impact of the settlement on SSI eligibility and preserve SSDI benefits.

Strategies for Preserving Benefit Eligibility

Since SSI is a needs-based program, a personal injury settlement can affect an individual’s eligibility. SSI limits both income and assets, and receiving a substantial amount might result in a benefit reduction or termination if not correctly managed.

Detailed Considerations:

Reporting: All changes, including settlement receipts, must be reported to the Social Security Administration (SSA) within 10 days after the end of the month.

Spending Settlement: Carefully spending the settlement on eligible expenses can prevent it from being counted as a resource. For example, spending on medical expenses, education, or home modifications may be advisable.

In contrast to SSI, SSDI recipients won’t see an impact on their benefits due to a personal injury settlement because SSDI is not based on assets.

Asset Protection Strategies:

Special Needs Trust (SNT): Creating an SNT can protect the settlement from affecting SSI by holding the assets in a trust.

ABLE Accounts: For those eligible, an ABLE account can be a feasible way to maintain assets up to a certain amount without affecting SSI.

Paying Off Debt: The settlement can be used to pay off debt, which is not considered a countable resource for SSI purposes.

It’s essential for individuals to receive guidance on the specifics of effectively managing both SSI and SSDI benefits after receiving a settlement, as the proper steps can ensure essential support remains uninterrupted.

Mike Agruss Law Is Here to Help With Your Personal Injury Lawsuit and Understand SSDI Funds

If you have questions about social security disability benefits and how they may be affected by any personal injury settlement funds you may claim, you don’t need to handle these concerns on your own.

Contact the team at Mike Agruss Law to learn more about how any type of benefits or insurance affects your personal injury claim.

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