How to Handle Personal Injury Settlements If You Are Disabled

If you're receiving disability benefits and have been injured in an accident, you may worry about how a personal injury settlement will affect your financial assistance. Many disabled individuals in Louisiana face this concern, and the answer depends on which benefits you receive and how you structure your settlement.

Our Shreveport personal injury lawyers explain what you need to know about personal injury settlements when you're receiving SSDI, SSI, Medicare, or Medicaid in Louisiana.

The Difference Between SSDI and SSI Benefits

Before accepting any settlement, you must identify which disability program supports you. These programs have different rules regarding personal injury compensation, and confusing them can lead to costly mistakes.

Social Security Disability Insurance (SSDI)

SSDI is an earned benefit based on your work history. You qualify by accumulating work credits through Social Security taxes. SSDI benefits in 2026 are not affected by personal injury settlements because eligibility depends on your employment record, not your current income or assets.

This means you can receive a settlement of any size without reducing your monthly SSDI payments. The settlement won't count as income for SSDI purposes, whether you receive it as a lump sum or structured payments over time.

Supplemental Security Income (SSI)

SSI operates differently. This needs-based program serves low-income individuals who are disabled, blind, or over 65. The SSA reports that in 2026, SSI recipients cannot have more than $2,000 in resources as an individual or $3,000 as a couple.

The federal benefit rate is $994 per month for individuals and $1,491 for couples. Since SSI considers both income and assets, a personal injury settlement can reduce or eliminate your eligibility if you're not careful about how you receive it.

How Personal Injury Settlements Affect SSDI

Most SSDI recipients can receive personal injury settlements without affecting their monthly benefits. The relationship is straightforward: your settlement will not reduce or eliminate your SSDI payments.

The Workers' Compensation Exception

However, one important exception exists. If you also receive workers' compensation benefits for the same disability, the workers' compensation offset rule likely will apply, unless the worker’s compensation obligor agrees to the contrary.  Meaning the money you receive from a personal injury settlement will prevent you from receiving worker’s compensation until the amount due to you under worker’s compensation exceeds what you received in your personal injury case.  

There is an additional offset under Federal law, which limits combined SSDI and workers' compensation payments to 80% of your average earnings before becoming disabled. If your total exceeds this threshold, your SSDI benefits will be reduced accordingly.

The offset calculation converts lump-sum workers' compensation payments into monthly amounts to determine how long your SSDI reduction will last. If you have a worker’s compensation settlement, you may want to utilize a structured settlement to minimize this offset and preserve more of your benefits.

How Personal Injury Settlements Affect SSI

SSI recipients face greater challenges when receiving personal injury settlements. Since SSI is needs-based, your settlement can threaten your eligibility in two ways.

Income in the Month You Receive It

In the month you receive a settlement, it counts as income. This can temporarily make you ineligible for SSI that month, depending on the amount.

Resources After the First Month

After that month, any remaining funds become a countable resource. If your resources exceed $2,000 as an individual or $3,000 as a couple, you lose SSI eligibility until your assets drop below these limits.

Losing SSI often means losing Medicaid coverage as well, since many states link Medicaid eligibility to SSI status. For someone who relies on Medicaid for medical care, medications, and therapies, this loss can be devastating.

Reporting Requirements

You must report your settlement to the SSA within 10 days of receiving it, according to federal regulations. Failure to report can result in overpayments that you'll need to repay, along with potential penalties.

Protecting Your SSI Benefits with a Special Needs Trust

A special needs trust (SNT) offers the most effective way to protect SSI benefits while receiving a personal injury settlement. This legal arrangement holds your settlement funds while preserving your eligibility for benefits.

Requirements for First-Party Special Needs Trusts in Louisiana

In Louisiana, a first-party special needs trust (also called a self-settled trust) must meet specific federal requirements. The Social Security Act mandates that a parent, grandparent, legal guardian, or court must establish the trust — you cannot create it yourself.

The trust must also name Louisiana's Medicaid agency as the remainder beneficiary, meaning after your death, the state recovers what it spent on your care before other beneficiaries receive anything.

What the Trust Can Pay For

The trustee manages the funds and pays for items and services that supplement, not replace, your government benefits. Permissible expenses include:

• Medical and dental care not covered by Medicaid
• Rehabilitative therapies and equipment
• Education and training programs
• Personal care attendants beyond Medicaid coverage
• Recreation and entertainment
• Transportation, including vehicle purchases and modifications
• Home modifications for accessibility
• Clothing and personal items

The trustee cannot give you cash directly, as this would count as income and increase your benefits. Distributions must go to third parties for goods and services on your behalf.

ABLE Accounts: A Simpler Alternative for Smaller Settlements

Louisiana ABLE accounts offer a simpler, more affordable option for protecting settlement funds than special needs trusts. These tax-advantaged savings accounts were created under the ABLE Act for individuals who became disabled before age 46.

How Louisiana ABLE Accounts Work

If you qualify, you can deposit up to $18,000 per year (2026 limit) into an ABLE account without affecting your SSI or Medicaid eligibility. The first $100,000 in your account doesn't count toward the $2,000 SSI resource limit.

ABLE account funds can pay for qualified disability expenses, including:

• Housing and transportation
• Education and employment training
• Health care and therapy
• Assistive technology and personal support services
• Financial management and administrative services

ABLE vs. Special Needs Trust

ABLE accounts work well for settlements under $100,000. They're easier to set up, cost less to maintain (no trustee fees), and give you direct control over the funds. However, larger settlements typically require a special needs trust for full protection.

You can use both strategies together: deposit the first $100,000 in an ABLE account for flexibility and accessibility, then place remaining funds in a special needs trust for long-term security.

Medicare and Medicaid Liens in Louisiana

Even when you protect your benefits, you must address government liens on your settlement. Both Medicare and Medicaid have legal rights to recover what they spent on medical care related to your injury.

How Medicare Recovery Works

Medicare liens operate under the Medicare Secondary Payer Act. When you have a personal injury claim, Medicare becomes a secondary payer. Your attorney must report your settlement to Medicare's Benefits Coordination and Recovery Center, which calculates the final lien amount considering attorney fees and expenses.

Louisiana Medicaid Lien Rules

Louisiana Medicaid liens are governed by state law codified in Louisiana Revised Statutes § 46:460.51-460.54. When you receive a settlement while covered by Medicaid, Louisiana's Department of Health has an automatic privilege (lien) on your recovery.

The 2022 Supreme Court decision in Gallardo v. Marstiller expanded Medicaid's recovery rights. States can now seek reimbursement not only for past medical expenses but also for future medical care from settlement proceeds.

Your attorney can negotiate these liens, often achieving significant reductions based on factors like the percentage allocated to medical expenses, whether the settlement fully compensates for all damages, and your future medical needs.

Structured Settlements and Special Needs Trusts

Combining a structured settlement with a special needs trust creates a powerful strategy for disabled individuals. A structured settlement converts a portion of your award into an annuity that makes periodic payments over time.

When funding a special needs trust with a structured settlement, the trust (not you) must be named as the annuity payee. This preserves your benefit eligibility while providing several advantages:

• Tax-free income: Annuity payments are not subject to federal income tax.
• Guaranteed income: Insurance companies guarantee both payment amounts and schedule.
• Reduced administration costs: Lower trust balances mean lower trustee fees.
• Protection from creditors: Payments are protected from lawsuits and poor decisions.

You can design payment structures to match your specific needs, such as higher initial payments for home modifications followed by regular monthly income, or periodic lump sums for anticipated expenses like vehicle replacement.

Get Help from Rice & Kendig Injury Lawyers with Your Settlement

The interaction between personal injury settlements and disability benefits involves federal programs, Louisiana state law, and technical regulations. Any misstep can cost you thousands in benefits or leave you liable for government liens you could have reduced or eliminated.

At Rice & Kendig, our attorneys know how to structure personal injury settlements that protect your disability benefits while maximizing your recovery. Contact us today for a free consultation about your case.