personal injury case

Will a Personal Injury Settlement Affect my Social Security Disability Benefits?

If you have suffered an injury that resulted from the actions or omissions of another party, you may be eligible to file a civil claim for damages. A personal injury claim allows you to seek compensation for direct monetary losses such as medical expenses, property damage that occurred during the injury, and lost earnings, as well as noneconomic losses such as pain-and-suffering, psychological distress, and diminished quality of life.

A personal injury lawsuit can result in a significant settlement award, hopefully enough to fully and fairly compensate you for your injuries. But this type of case is made more complicated if you are receiving Social Security Disability benefits. Some injury victims wonder whether or not their personal injury settlement will affect their disability benefits, and whether it is worth pursuing a claim in the first place.

Will a Personal Injury Settlement Cause Me to Lose my Social Security Benefits?

The short answer to this question is “it depends”. Specifically, it depends on whether you are receiving Social Security Disability (SSDI) benefits or Supplemental Security Income (SSI) benefits.

If you are receiving SSDI benefits, then they will generally not be impacted by a personal injury settlement award – although there are a couple of caveats (more on this later). If you are receiving SSI benefits, then yes, your settlement could cause your benefits to be decreased or eliminated, but there are some ways to prevent this from happening (more on this later as well).

Personal Injury Settlements and SSDI Benefits

If you receive benefits through Social Security Disability Insurance (SSDI), then they should not be affected by an injury settlement award, even if it is a large amount. This is because benefits for the SSDI program are determined based on your employment history rather than your financial circumstances.

Assuming you have a qualifying disability, you become eligible for SSDI benefits by accumulating enough work credits, which you earn for each quarter that you have been employed. These credits are obviously not affected by whether or not you suffered a personal injury and received compensation for it, so your settlement should have no direct impact on your benefits.

All of that said, there are a couple ways in which being on Social Security disability might indirectly affect your settlement:

  • Your Award May be Lower Because you have a Disability: If you were already receiving SSD benefits, this means you had a debilitating health condition that prevented you for the most part from participating in gainful activity. And if you were not working at all at the time of the injury, then your award would not include any compensation for lost earnings.
  • The Defendant Could argue a Pre-Existing Condition: Another issue that could come up if you have an existing condition is how much of your injury happened because of the underlying accident or event, and how much of it was related to your pre-existing condition. The defendant will assuredly argue that you should receive less because you already have a disability, and you will want to have an experienced attorney in your corner who is ready to successfully thwart this argument.

Personal Injury Settlements and SSI Benefits

Supplemental Security Income (SSI) is a separate program that does not require a disabled individual to qualify through work credits. This is a “needs-based” program, and eligibility is based on your income and assets. As such, when you receive a personal injury settlement, it could cause you to exceed the program’s asset limits, which could result in having your benefits suspended.

There are a couple ways to avoid losing your SSI benefits when receiving a personal injury settlement. The first is to do a “spend down”. As the name implies, a spend down is the process of spending the excess funds until the benefits recipient reaches the allowable asset maximum. This is typically done within the first month that the lump sum is received so the recipient will only lose one month of benefits.

Some possible qualifying expenses that could be paid using a spend down include:

  • Paying off a home mortgage.
  • Making home repairs or modifications to accommodate the recipient’s disabilities.
  • Education expenses.
  • Paying off existing debts, such as credit cards and student loans.
  • Prepaying for burial expenses.

Of course, the major downside of a spend down is that you have already spent your settlement award and will not have it available for emergencies and important expenditures that may come up in the future. So, another way to protect your SSI benefits is to set up a special needs trust. This type of trust is designed for those who are physically or mentally disabled, and they are managed by a third party that oversees expenditures from it.

Suffered a Personal Injury in Alabama? Contact Burge & Burge for Legal Help

If you got injured because of someone else’s negligence or recklessness, do not let the fact that you are receiving Social Security benefits keep you from pursuing the just compensation you deserve. If your injury occurred in Alabama, Burge & Burge is ready to go to work for you. We have in-depth experience with both personal injury and Social Security disability cases, and we will work closely with you to successfully navigate the complexities involved when these two areas of the law intersect.

For a free consultation and case assessment with one of our attorneys, message us online or call our office today at 205-251-9000.

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