Will a Personal Injury Settlement in Garden City Cost You Your Benefits?

After an accident, you’re probably overwhelmed. You might even be wondering if a personal injury attorney at Horn Wright, LLP, can help you figure all this out. Dealing with injuries is tough enough, but now there’s another headache: "Will my personal injury settlement mess up my benefits?"

If you’re in Garden City you need to know how a settlement could impact Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), Medicaid, and Medicare. Let’s break it all down so you’re not left in the dark.

The Dangerous Truth About SSDI & SSI After a Settlement in Garden City

First, let’s talk about SSDI and SSI. Both programs are run by the Social Security Administration, but they work in totally different ways.

SSDI: This one’s an "earned benefit"—meaning, you’ve worked, paid into the system, and now you’re getting back what you put in.

• Will your settlement mess with SSDI? Nope! Your monthly payments stay the same because SSDI is based on your past work history, not your current financial situation. Under 42 U.S. Code § 423, SSDI benefits are determined by your earnings record and disability status.
• What about Medicare? If you’ve been on SSDI for at least 24 months, you’re automatically eligible for Medicare, no matter how much money you have in the bank.

SSI: Now, this is where things get tricky. SSI is a "needs-based" program, which means it has strict limits on how much money you can have. According to 42 U.S. Code § 1382, individuals must have limited income and resources to qualify.

• Can your settlement wipe out SSI? Yep. If your bank account suddenly gets a big boost from a settlement, you could lose your SSI benefits. The asset limit? Just $2,000 for individuals and $3,000 for couples in 2024.
• What if you go over the limit? You might lose SSI until you spend down the extra money to acceptable levels.

Why Every Injury Victim in Garden City Needs a Special Needs Trust

So, how do you protect your benefits after getting a settlement? A Garden City personal injury attorney can guide you through setting up a Special Needs Trust to safeguard your financial future. That’s where a Special Needs Trust (SNT) comes in.

An SNT holds your settlement money, so it doesn’t count as your personal asset. That means you keep access to crucial benefits like SSI and Medicaid while still having funds for things that make your life better.

Types of Special Needs Trusts:

• First-Party SNT: This is funded with your own money—like a personal injury settlement.
  • Got to be set up before you turn 65. If not, you could lose eligibility for Medicaid.
  • Medicaid payback required. When you pass away, any money left in the trust must go toward reimbursing Medicaid for your care.
• Third-Party SNT: Set up by someone else (like a parent or grandparent) for your benefit.
  • No Medicaid payback. This means after you pass, whatever’s left in the trust can go to other family members instead of the government.

Why an SNT is a Game-Changer:

• Keeps your benefits safe. You can keep your settlement without losing Medicaid or SSI.
• Lets you spend on things that improve your life. Think medical equipment, special therapy, a better wheelchair, or even a vacation.
• Managed by a trustee. This ensures your money lasts and is used properly.

Medicaid & Medicare: The Critical Steps to Take After a Settlement

Let’s get into how a settlement can affect your healthcare coverage—something a Garden City attorney can help you navigate to avoid losing Medicaid or Medicare—because losing Medicaid or Medicare can be a disaster.

Medicaid: This program is for people with low income, which means a settlement could push you over the limit and kick you off.

• How strict are the limits? In New York, Medicaid’s asset limit is $30,182 for individuals in 2024. Medicaid eligibility is governed by 42 U.S. Code § 1396p, which outlines asset transfer and trust regulations.
• What’s the fix? An SNT can hold your settlement money so you stay eligible.
• Other options? Some people use a "spend-down" strategy—spending the settlement on exempt assets (like a primary home or a car) to stay within Medicaid’s limits.

Medicare: Unlike Medicaid, Medicare isn’t needs-based, so your settlement won’t automatically affect your coverage.

• One catch: If your settlement includes money for future medical costs, you might need a Medicare Set-Aside (MSA) account to cover expenses Medicare would usually pay for. The Medicare Secondary Payer Act requires that settlement funds be allocated for future medical expenses before Medicare pays.

What Happens If You Suddenly Lose Medicaid Eligibility?

Losing Medicaid can be terrifying. Medical bills pile up fast, and without coverage, you’re stuck paying out of pocket.

• Can you get back on Medicaid? Yes! If your assets drop back below the limit, you can reapply.
• What if you need care now? Emergency Medicaid might cover urgent medical needs while you figure things out.
• Avoid the panic: Setting up an SNT from the start helps prevent this mess in the first place.

Lump-Sum or Structured Settlement? One Could Leave You Penniless!

You’ve got a big decision to make: take a lump sum or a structured settlement. Choose wrong, and you could lose your benefits—or burn through your money too fast.

Lump-Sum Settlement:

• Risky move: One huge payout can disqualify you from needs-based benefits.
• Tax surprise: While personal injury settlements are usually tax-free, any interest earned on the money is taxable.
• Easy to spend too fast: It’s tempting to pay off debt or splurge, but without a plan, the money disappears quickly.

Structured Settlement:

• Breaks your payout into regular installments. This can help keep you financially stable over time.
• Better for benefits. If payments are structured correctly, they may have less impact on your eligibility for programs like Medicaid.
• Not as flexible. You won’t have access to a lump sum if you suddenly need a big chunk of money.

Which Option Provides More Financial Security?

It depends on your situation, but many injury victims find that combining a structured settlement with an SNT gives them the best of both worlds. You get a steady income without jeopardizing your benefits. A good lawyer can help you set this up the right way.

Garden City Injury Victims: The Smartest Moves to Protect Your Money & Benefits

If you’re dealing with a personal injury settlement in Garden City, here’s what you need to do:

• Talk to a lawyer who knows personal injury and special needs planning. They’ll help you protect your settlement and your benefits.
• Set up a Special Needs Trust. This stops your settlement from counting against you for SSI and Medicaid eligibility.
• Pick the right settlement structure. Lump sum or structured? A lawyer can help you decide what works best.
• Stay informed. Medicaid and SSI rules change all the time. Keep up with them to avoid surprises.

Dealing with a personal injury settlement is more than just cashing a check. If you’re not careful, you could lose the benefits that keep you going. But with smart planning—like using an SNT and structuring your settlement the right way—you can have financial security and peace of mind. 

Need help figuring it all out? You may want to hire one of the best law firms in America to make sure you’re protected, so you don’t have to stress about losing what’s yours. A personal injury attorney can make sure you’re protected, so you don’t have to stress about losing what’s yours. A good attorney can make sure you’re protected, so you don’t have to stress about losing what’s yours.

Contact us today for a FREE consultation.