Personal Injury Settlements and Social Security Disability
In an earlier post, I talked about the difference between Social Security Disability Insurance (SSDI) and Supplemental Security Insurance (SSI). In short, SSDI is a program that you can qualify based on the amount of work you have done in the past, regardless of the amount of assets that you hold. SSI, on the other hand, is only available when you have a very limited amount of assets and income.
When a person who is on SSI obtains a large personal injury settlement, the settlement can increase the amount of assets that they are holding and put them in jeopardy of losing their benefits. While the settlement may be beneficial as a short-term infusion of cash, it can also be catastrophic in the long run, when the settlement funds run dry and the injured party has no access to income or to medical treatment through Medicaid, the government program that provides medical benefits to SSI recipients.
To avoid a situation where the recipient of a personal injury settlement gets kicked out of the SSI and Medicaid programs, it is sometimes necessary to set up one or more trusts for the injured person. The first of those is what is known as a Medicare set-aside account (MSA). The MSA is a fund of money that is put in reserve from a personal injury claim. It is designed to pay for anything that Medicare will not pay for as a result of the settlement.
Often working in conjunction with the MSA is a special needs trust or a pooled special needs trust. This trust can make it possible for the injured party to remain on SSI and Medicaid even after there is a large infusion of cash from a settlement. Pooled special needs trusts are often the ideal solution because they allow a disabled individual to retain a non-profit entity to act as trustee and manage the funds on the disabled individual's behalf. Using the non-profit, rather than a friend or family member, as a trustee, is often the better solution because it helps to ensure that the trust is properly administered.
If you are on SSI or SSDI and you are in the process of resolving a lawsuit, you should take steps to make sure those benefits are being protected as well as possible. Ask your attorney about the issue, and if you don't have an attorney for your injury settlement, you should consider retaining one. In the long-term, you will probably be better off with some solid legal advice.