Millions of people with special needs rely on Supplemental Security Income (SSI), a needs-based government program that provides income support to qualified individuals who are 65 or older, and/or blind or disabled. In fact, 86 percent of SSI recipients received payments because of disability or blindness in 2017. However, eligibility for benefits depends on how much income a person receives. That’s a particularly important fact to know for people who have filed a personal injury lawsuit, because they will need careful planning to avoid crossing over the government’s income eligibility threshold.
Finding the Balance
While SSI covers the basic needs of daily life, a settlement recovery can also provide much-needed income for someone with a catastrophic injury. That’s why it’s important to strike a balance between benefits and settlement income so they are as beneficial as possible to the individual. One option is to “spend down” to re-qualify for SSI benefits and establish a long-term plan for financial security.
How to Spend Down After Settlement
The basic concept behind a spend-down is simple: accept the lump sum settlement, but instead of placing the entire amount in a bank account, spend the money until the beneficiary has reached the program’s allowable resources limit. Spending should be limited to “exempt” resources – those that are not covered by SSI – and are solely for the benefit of the recipient.
For the purposes of SSI, the Social Security Administration considers a lump sum settlement to be income for the month in which it is received. The goal with a spend-down is to spend a sufficient amount of the settlement in that calendar month. Even so, it’s likely that the SSI recipient will still need to repay all or a portion of their benefits for that month. Parts of the settlement that aren’t used will roll-over to the next month and be counted as assets for the determination of benefits eligibility.
As you can probably tell, a spend-down is typically appropriate for handling a smaller settlement amount. It can also be a good choice for SSI recipients who need to purchase high-value items immediately – as long as those items are exempted by the Social Security Administration. For those with a larger settlement recovery, other planning tools, like a special needs trust, might be a better fit.
Getting the Right Help
SSI is not likely the only government program with which a beneficiary must work to comply after settlement. As different programs have different eligibility requirements, it’s best to consult with an experienced settlement planner to come up with an appropriate plan.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).