The Settlement Alliance

Will My Settlement Award Conflict With Government Benefits?

Will My Settlement Award Conflict With Government Benefits?

Nov 21, 2016

This is the time of year when everyone begins looking at their healthcare options for next year. If you are on Medicaid and you are about to accept a settlement, make sure you read this post first! Accepting a lump-sum settlement could potentially eliminate your eligibility for Medicaid and other needs-based government benefits. Luckily, there are a few options available to you that may help you protect your eligibility. But first, let’s make sure you understand the difference between the two different types of benefits: entitlement vs. needs-based.

Entitlement Benefits vs. Needs-Based Government Benefits

Entitlement benefits are the types of programs that don’t have any income or asset test for eligibility. That includes Social Security Disability Insurance (SSDI), Social Security Retirement Income, and Medicare. Since these programs don’t have income or asset tests, they shouldn’t be interrupted if you accept a lump sum settlement.

Eligibility for needs-based government benefits, on the other hand, does depend on your income and assets. If you accept a lump sum settlement, you could potentially have too much in terms of assets to qualify for needs-based programs. Those types of programs include Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Subsidized Housing, and Children’s Health Insurance Program (CHIP).

Why Does it Matter if I Accept a Lump Sum?

In some states, the asset limit for needs-based benefits is as low as $2,000 ($3,000 if married). You can’t just give away your settlement proceeds to a family member or friend, either—that could still result in a temporary or even permanent loss of benefits, or the government seeking reimbursement for past benefits distributed on your behalf.

If you have suffered an injury or the death of a loved one, the settlement proceeds may or may not be enough to cover your daily needs. For instance, let’s say that you were involved in an injury that left you paralyzed from the waist down. You may need to purchase a wheelchair, make home modifications, purchase a special vehicle, pay for physical therapy—and suddenly, your settlement doesn’t seem so big anymore. It’s important to make sure that the settlement money is there to support your needs both now and for the long-term. That means that whenever possible, you should consider settlement options that preserve your needs-based government benefits and in turn, your quality of life.

What are My Settlement Options?

There are a few different options that you’ll want to discuss with an experienced settlement planner, including a spend down and a special needs trust. If you are able to do a spend down, you essentially “spend down” your monthly assets until you are under the asset limit for needs-based benefits. There are very strict guidelines regarding what the money can be spent on, and allowable expenses can vary by state (examples may include clothing, furniture, eyeglasses, dental work, etc.). You should speak with your caseworker or local government agency to determine what guidelines exist within your state or jurisdiction.

With a special needs trust, you are able to access the settlement proceeds without jeopardizing your eligibility for needs-based government benefits. The money that you get from the settlement is placed into the trust and managed by a trustee. Much like a spend down, there are strict guidelines regarding what the money can be spent on, and again, the guidelines may vary by state (examples of eligible distributions may be a home or automobile purchase, dental expenses, personal hygiene expenses such as haircuts, etc.). In the meantime, by placing the settlement proceeds in the trust, you may retain eligibility for your needs-based government benefits.

In either instance, you must have a plan for how you will handle your settlement proceeds BEFORE the settlement is finalized. For more information or for a free copy of our brochure, Government Benefits Planning: What Claimants Need to Know, contact us today at or 800-464-2500.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential