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Are SSI Benefits Affected by a Car Accident Settlement?

Steven Matz
March 20, 2023 | Car Accident

A personal injury settlement can help offset some of the expenses after you are injured or disabled in a car accident. However, a settlement could jeopardize your benefits if you already receive supplemental security income (SSI). Without proper planning, the car accident settlement meant to alleviate your financial burdens can create more problems by making you ineligible for your SSI benefits. Let the experienced Michigan auto lawyers at Matz Injury Law guide you through the steps after settlement to help protect your benefits and financial security.

What is the Difference Between SSI and SSDI?

man sitting down at a table with a laptop and paperwork

Accepting a settlement after involvement in a car accident may come as a welcomed relief, allowing you to focus on recovery and easing your mind concerning financial burdens. Yet, if you are receiving government benefits prior to the accident, you will need to consider the effects a settlement can have on those benefits. The following types of benefits need review to determine if a settlement will affect them.

Supplemental Security Income (SSI)

Supplemental Security Income (SSI) is a need-based program calculation that pays monthly income benefits. This calculation is based on age, household resources, and income. For example, low-income adults over the age of 65 may be eligible for SSI benefits. Supplemental Security Income can be affected by auto accident settlements.

Social Security Income (SSI)

Social Security Income is based on employment history and Social Security payroll taxes paid by a person during their working years. It results in a monthly benefit once they reach a specific age. As such, car accident settlements will not impact these benefits.

Social Security Disability Insurance Income (SSDI)

Social Security Disability Insurance Income (SSDI) is given to individuals who are not able to work due to permanent disability. SSD payments for disabled individuals are not considered actual income by the Social Security Administration (SSA) and are not impacted by car accident settlements. However, any SSDI benefits received as a result of an injury suffered in a motor vehicle accident may be used to reduce any PIP wage loss benefits owed under a personal injury claim.

If you have questions concerning your SSI or Social Security disability benefits as a disabled person following a car accident and settlement offer, consult with a Michigan personal injury attorney to learn more.

Do I Need to Report My Settlement to Social Security?

a handicapped woman sitting in a wheelchair reviewing paperwork

If you are on Supplemental Security Income at the time of the accident, you must report any personal injury case settlement directly to the Social Security Administration. This is because the personal injury settlement amount is considered income and will affect your income-based benefits.

More specifically, the Social Security Administration requires that benefit recipients report changes that can affect SSI eligibility and amounts as early as possible and before the designated deadline, which is ten days following the end of the month in which the change in your income occurs. For example, if you receive a settlement on June 15th, you must report it to the Social Security Administration by July 10th.

What Happens If I Don’t Report My Settlement to Social Security?

While you may be tempted not to report the settlement to the Social Security Administration or become so busy with your personal affairs that time slips away from you, you should understand how important it is to do so in a timely manner. Unreported settlements from car accident claims can result in consequences such as needing to pay back benefits, penalties to future benefit payments, and even sanctions that can suspend your SSI payments.

  • Requirement to Pay Back Benefits: If the settlement amount is not reported on time and used in SSI calculations, the Social Security Administration may overpay you. If so, there is a high potential you will have to pay back some of those benefits under the administration’s guidelines.
  • Penalties to Future Benefit Payments: Failing to report a settlement can result in penalties against future benefits. Penalties can potentially reduce your monthly SSI payment by a set amount, often between $25 and $100. In addition, these penalties apply any time you fail to report an income change of any type or fail to report the change before the designated deadline.
  • Sanctions: Failing to report changes in income or making a misleading or false statement can cause the SSA to impose sanctions that can suspend your SSI payments as follows:
    • First sanction: withholding payments for six months
    • Subsequent sanctions: withholding payments for 12-24 months

In addition, continuing to receive regular benefit payments while knowing that you are withholding information about a personal injury settlement can potentially result in criminal charges and loss of SSI eligibility.

While you will understandably be relieved at receiving a settlement, you must remain diligent and report it to the government agency as soon as possible. Avoid losing your benefits by seeking legal advice from a trusted Michigan personal injury lawyer at Matz Injury Law. We will help you report your car accident settlement before the deadline so you can avoid any potential government-induced penalties.

How Do I Protect My SSI Benefits After a Car Accident Settlement?

In addition to reporting a settlement to the Social Security Administration, you can take steps to protect your SSI benefits for the future. Your two options are to spend down your settlement or set up a special needs trust. Which way you go will depend on the amount of your settlement and your current financial needs.

Spend Down Your Settlement

Spending down your settlement means you use the lump sum settlement money you receive to make allowable purchases or pay off debts so that you remain eligible for your SSI benefits. However, if you choose this option, you must spend your settlement within the month that you receive it.

You still need to report the settlement in accordance with the SSA guidelines and be able to show how you spent the received funds. Potential ways to spend down your settlement may include:

  • Paying outstanding medical expenses
  • Paying off credit card or other back debts
  • Purchasing or paying off a vehicle that has a title with your name
  • Paying off your mortgage
  • Purchasing a home with your name on the title
  • Paying rent for that one month only
  • Making necessary house repairs
  • Purchasing needed appliances or furniture
  • Applying to fees for hiring an experienced attorney (e.g., for Medicaid benefits or estate planning)
  • Pre-paying funeral and burial expenses

It is essential that you maintain all receipts for anything you spend your settlement on, as these will be necessary for showing how you used the settlement funds.

Create a Special Needs Trust

Another way to protect your benefits and your settlement is to consider creating a special needs trust. A special needs trust is designed to provide for quality-of-life expenses not covered by government benefits. It is established to benefit you or your loved one with disabilities and prevent the loss of government assistance.

Under such a trust, a trustee is put in charge of the money and distributes funds as needed to the beneficiary to cover expenses not covered by SSI program guidelines, such as additional medical treatment, nursing care, transportation, and therapy services.

The role of trustee is critical as it requires diligent handling of funds so as not to jeopardize a beneficiary’s ability to continue receiving SSI benefits. Appointing a dependable and trustworthy trustee will be critical to your or your loved one’s future, so you will want to designate someone you can count on to make the best choices. The attorneys at Matz Injury Law will work with you to select the best trust fund to fit your particular needs.

Secure Your Finances With Matz Injury Law

Being involved in a car, truck, or motorcycle accident and its aftermath can be stressful and overwhelming, especially considering the possibility of a long wait for a settlement. While a settlement can bring relief, it can negatively affect your monthly benefits from Supplemental Security Income if you are not careful.

For help and guidance with accident claims, insurance company settlement negotiations, personal injury lawsuits, or SSI benefits protection, consult the experienced attorneys at Matz Injury Law. We help clients in Michigan find the right way to secure their finances and feel confident in how a settlement can help, not hinder, the receipt of government benefits.

Contact our law firm today by calling 1-866-22Not33 or using the online contact form to schedule a free consultation.

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Written By Steven Matz

Founding Shareholder

Steven J. Matz is a founding shareholder of Matz Injury Law. The firm’s concentration is on personal injury litigation, with an emphasis on traumatic brain injury.

The maximum contingency fee permitted by law is actually 331/3%. Michigan court rules require that the attorney fee be computed on the net sum recovered after deducting all disbursements properly chargeable to the enforcement of the claim.

What does 22not33 mean, exactly?

We can charge 22% while virtually all other injury attorneys charge 331/3% because we are very, very, good at obtaining results for our clients.

We do not spend millions of dollars on television ads; instead, we offer a lower fee to all our clients. We do not have dozens of lower paid associates handling our work. All our clients are represented by Steven and Jared Matz. Steven Matz started the firm in 1977 and since then has dedicated his life to representing injury victims. Jared joined the firm in 2016 but grew up listening to stories, discussing theories, and generally learning at the dinner table about how to effectively and compassionately represent injury victims. Jared Matz was literally born to represent individuals involved in motor vehicle crashes.

All of our cases are handled on a contingency fee and all our cases are handled at 22%. Whether the case settles or goes through trial, the fee does not change. While our competitors make excuses as to why they charge so much, we are obtaining results for our clients at a lower fee.

At a typical television advertising law firm, your first call will be handled by a receptionist, who may refer you to an intake person, who will discuss your claim with an intake manager, who then discusses your claim with an associate, who may then report to a partner. You may never speak with the person whose name is at the top of the letterhead. At Matz Injury Law you will always speak with either Steven Matz or Jared Matz.