Navigating the world of Social Security Disability (SSD) can be challenging, especially when you come into a lump sum payment like a settlement, lottery winnings, or inheritance.
If you’ve recently received a payment like this, you might be concerned that it could reduce your SSD benefits. After all, how does a lump sum settlement affect Social Security Disability anyway?
Social Security Disability Insurance (SSDI) benefits aren’t affected by lump sum payments. However, people who receive Supplemental Security Income (SSI) may see their monthly payments reduced or even stopped.
Understanding how large payments impact your SSD benefits is crucial to maintaining your financial stability. Continue reading to learn more about the impact lump sums can have on your monthly benefit amount.
The Impact of Lump Sum Payments On Social Security Disability
Depending on the type of benefits you receive, a lump sum payment could affect your Social Security Disability benefits.
How Does a Lump Sum Settlement Affect SSI?
Supplemental Security Income is a needs-based program designed to help individuals with low income and limited resources. Because SSI is based on financial need, receiving a lump sum payment can directly impact your eligibility for benefits. For example, if you receive a large settlement or inheritance, it could push your income or resources above the allowable limits. This would result in a reduction or revocation of your SSI benefits.
How Does a Lump Sum Settlement Affect SSDI?
Social Security Disability Insurance is based on your work history and what you’ve paid into the Social Security System. Your financial resources or non-work-related income don’t affect SSDI. Therefore, a lump sum payment like a settlement generally doesn’t impact your SSDI payments. However, it’s always wise to consult a professional to ensure that no unique circumstances apply to your situation.
Why Do Large Payments Affect SSI But Not SSDI?
The key difference between SSI and SSDI lies in the eligibility criteria for each program. Only disabled workers can receive SSDI. Their eligibility is based on work credits acquired through previous work history.
With SSI, you don’t need any work history to be eligible for benefits. SSI is strictly for disabled, blind, and aged individuals with limited means. When someone suddenly obtains a large sum of money or valuable assets, their available resources increase. This can be through inheriting property, receiving a gift, or a lump sum settlement in a personal injury case.
How To Protect Your SSI Benefits
If you receive a lump sum payment, there are ways you can keep the money without allowing it to reduce or eliminate your SSI. Two reliable ways to do this are by spending down or opening a trust.
Spending down essentially means spending your lump sum payment on things that don’t count towards your resource limit. This does not mean carelessly spending it. Rather, you put the funds solely towards exempt items and resources. This includes things like your home and the land it’s on, personal property you use for work, like tools or safety equipment, a vehicle, or burial funds.
You can also protect your SSI and retain the maximum amount of a lump sum payment by establishing a special needs trust. When you transfer the lump sum into the trust, you can safeguard your eligibility for SSI.
With a trust, you can set aside money for costs that SSI doesn’t cover, like legal fees or nursing care, while still receiving benefits. You can also inherit a house while on disability. Should that house become your primary residence or be added to a trust, you can keep it.
Creating a special needs trust is a complicated process. To prevent errors that may jeopardize your SSI benefits, you should work with a qualified attorney.
How We Can Help
At Patrick J. Kelly Law Office, we understand the intricacies of both SSI and SSDI and how lump sum payments can affect your benefits. We offer personalized assistance to help you understand your rights and the potential impact of such changes.
We can guide you through the necessary steps to protect your disability benefits. Our experienced SSD lawyer will work with you to develop a strategy that minimizes any negative impact on your monthly amount.
If you have questions about how a lump sum settlement can affect Social Security Disability, don’t hesitate to reach out. We’ll help you navigate the Social Security Administration’s (SSA) legal guidelines and ensure you keep the benefits you deserve.
Contact us at Patrick J. Kelly Law Office today to schedule a free consultation. Learn about how our disability lawyer in San Francisco can help you secure your financial future.
