The Truth Behind Personal Injury Settlements...
Personal injury claims aren't the "get rich quick" scheme that some people think they are. In fact, some claimants need insurance benefits desperately. Their own Personal Injury Protection (PIP) benefits help pay for the treatment of accident-related injuries, while property damage benefits can help repair vehicle damages. These benefits make it possible for a claimant to continue living and working normally. Without them, a person may not be able to support themselves or the family members that depend on them.
A claim can take a long time to resolve. During that time, a person may need to claim disability or social welfare benefits because the accident has made them unable to work and earn an income. Some car accident or injury cases involve Supplemental Security Income (SSI) benefits in addition to any benefits payable for property damage or injuries. Car accident victims may be able to get benefits based on the fact that their resources and income dwindle to the low levels that are needed to qualify.
How Settlements Impact a Person's Ability to Get SSI and Other Benefits
If a claimant is eligible for SSI, they may also be picked up for Medicaid coverage to help pay for medical bills. These benefits can be essential to getting treatment and reaching recovery. But if a claimant suddenly doesn't meet the requirements for either program, they may stop getting benefits. Lump sum personal injury settlements can be high enough to disqualify a person from receiving SSI, thereby disqualifying them from receiving Medicare. Anyone who receives Medicaid, such as older individuals, may also have their benefits stopped if they get a large amount of money at once, such as an inheritance.
Sometimes, insurance companies or defendants pay out a large settlement at the end of a case. The amount depends on the circumstances of the case, liability, etc., but sometimes the net proceeds to the client can be thousands of dollars. Getting the equivalent of one year's salary in a single lump sum can make a claimant automatically disqualified for disability benefits and any additional benefits they get, such as Medicaid. But the client may be able to allocate that money so that it does not disqualify them from getting more benefits.
Using a Special Needs Trust to Keep Disability Benefits
Medicaid beneficiaries have some options if they expect a large amount of money to disqualify them from the program. One option is to set up a Special Needs Trust. The beneficiaries of these trusts are people with special needs or disabilities, in this case, that would be the claimant. They can put the personal injury settlement into this type of trust so they can withdraw money when they need it and at a rate that won't disqualify them for disability benefits.
Using a Spend-Down Plan to Keep Disability Benefits
Another option that can be much more helpful is referred to as a "spend-down plan." Essentially, the claimant spends their settlement on things that won't count as countable resources according to the Social Security Administration (SSA). These exempt resources include:
- A house of any value that is the disabled person's primary residence.
- A vehicle of any value if the disabled person uses it for transportation.
- Household goods (items used often or to maintain the premises, also appliances and furniture) and personal effects (items worn or carried by the individual often, also those that have personal value) regardless of value.
- Burial spaces worth any amount,
- A dedicated bank account for burial expenses (up to $1500) or an unlimited amount in an irrevocable funeral service contract.
- Life insurance policies up to $1,500 or uncapped term life insurance.
It isn't a good idea to repay personal loans with your settlement proceeds, especially those only made in oral agreements with friends or families. There needs to be proper documentation of how the money is spent, so in these situations, the SSA may say you're giving the money as a gift rather than repayment. A small claims court may be able to produce an order that reduces the debt to a judgement so there is proof of repayment.
Do I Need an Attorney to Help Spend My Settlement?
Medical treatment is an important part of recovering from an accident, and Medicaid may be one of the only ways you can pay for it. Make sure you maintain your eligibility for Medicaid by discussing your options with an accident attorney. They can help you allocate the proceeds of your case in a way that protects your future benefits.