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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.

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