How to Protect Disability Benefits

Protecting disability benefits

The Social Security Administration makes multiple types disability payments, Supplemental Security Income (SSI) and Social Security Disability Income (SSDI).

Eligibility for Social Security Disability Income (SSDI) is an earned benefit. Eligibility is based on having a disability and paying into the Social Security system for enough quarters through payroll deductions. SSDI is not based on income limits and assets.

It is possible to lose SSI if someone receives even a one-time payment of $2,000 or more. Exceptions may apply; however, personal injury settlements, monetary gifts and inheritances can be the reason that someone loses their SSI.

SSI inflicts transfer penalties, meaning that gifting assets to family or friends will not protect eligibility for SSI. Penalty periods can be created if assets are given away. The most beneficial way to protect eligibility for SSI is to create a Special Needs Trust.

If you know about Special Needs Trusts but want to speak with someone about questions that you may have, call (877) 766-5331.

If you are interested in getting more information about Special Needs Trust.

A True Life Example

Several years ago, Adam was injured in an automobile accent and is no longer able to work. Adam started receiving disability payments in the form of Supplement Security Income (SSI) after he received a formal determination of disability by the Social Security Administration. This type of disability payment imposed a strict income and set forth asset limits. Due to Adam not having enough work quarters to qualify, he was not eligible for the other type of earned Social Security disability payment, which is Social Security Disability Income (SSDI).

Adam is also eligible for Medicaid in his state because he receives SSI. These programs can seemingly provide for Adam’s important basic needs, however, the highest amount that SSI pays is approximately 25% below the federal poverty level. This means that Adam still has many unmet needs and is in the same position as other SSI recipients.

Adam is not even able to accept help from his family because if he accepts monetary help, it will reduce his monthly SSI payment. His family is not even able to assist by making direct payments due to a portion of those direct payments still counting as income for Adam which would reduce his already minimal SSI check.

Adam hired an attorney shortly after his accident to recover damages from the responsible driver. After several years of litigation, his case will soon be settling, and Adam expects to receive a sizeable settlement. Adam’s attorney realizes from experience that this settlement will in fact cause Adam to lose his SSI and Medicaid. It is recommended by his attorney that he establish a Special Needs Trust to receive his settlement proceeds in a way that will preserve his eligibility for Medicaid and SSI.

Adam decided to establish a Trust after speaking with a proposed Trustee about how a Special Needs Trust works. In the next month or so when his case settles, Adam’s settlement will be paid to a Special Needs Trust created for his benefit rather than being paid to Adam personally. A sizeable settlement can disappear quickly if not managed properly for Adam’s benefit.

The decision to maximize his resources was the right choice for Adam. The Special Needs Trust will preserve his eligibility for SSI and Medicaid while simultaneously stretching the life of his settlement. Adam’s Special Needs Trust will supplement his needs above the basics that are provided by SSI and Medicaid while they continue to provide for his basic needs.

Disclaimer: The information provided through these blog posts does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available through these blog posts are for general informational purposes only.

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