Will A Personal Injury Settlement Affect My Food Stamps? (Explained)

So, you’ve got a personal injury settlement coming your way. Congrats! That’s awesome news. 

But wait—what about your food stamps? It’s a totally valid concern! That chunk of money showing up in your bank account could definitely affect your benefits if you’re not careful.

That said, there are ways to handle this situation that might help you keep both your settlement AND your food assistance.

In this post, we’ll explain how a personal injury settlement will affect food stamps in detail.

Food Stamp Income Limits

To qualify for SNAP, you need to meet certain income limits and also have limited resources.

Most states set the resource limit at $2,750 for households, or $4,250 if someone in your home is disabled or over 60. “Resources” means money in your bank accounts, cash on hand, and other assets that could be used to buy food.

Income limits vary by state and household size, but generally, your gross monthly income needs to be at or below 130% of the federal poverty line. 

Then there’s also a net income test after certain deductions are taken into account.

When you get a personal injury settlement, it can potentially push you over these limits – especially the resource limit if that money lands in your checking account all at once. That’s where the trouble starts.

Will A Personal Injury Settlement Affect My Food Stamps?

Yes, your personal injury settlement could affect your food stamps.

A settlement is considered income or a resource by SNAP, and that means a big settlement could push you over the limit and make you ineligible.

For example, if you get $10,000 in March, that amount becomes part of your resources in April. If that pushes you over the resource limit, you could lose your SNAP benefits.

Also Read: How Much Is the Average Slip and Fall Settlement?

But it depends on how much you receive and how you handle it.

If you get a lump sum, it could count as an asset, but if you get smaller, structured payments, only part of it might count as income. So with the help of a lawyer, you might be able to structure it so that it doesn’t push you over the limit.

Types Of Compensation That May Count Against SNAP

Not all your settlement money will be treated the same. Some types of compensation will count against your food stamps, including:

• Lost wages
• Punitive damages
• Money for emotional distress or general suffering
• If your settlement includes interest, it’s often treated as income

The government sees these types of compensation as money that could be used for your basic needs, including food. So they’ll count toward those resource and income limits.

Exempt Payments That May Not Affect SNAP

But not all settlements are going to hurt your benefits. Some types of compensation don’t count as income or resources, so they won’t affect your food stamps.

For example, here’s what typically doesn’t count against SNAP:

• Medical expense compensation for past or future medical bills 
• Property damage reimbursement like cash to fix or replace something (like your car).
• Your attorney’s fees

Also Read: What Percentage Do Lawyers Take for Personal Injury Cases?

Do You Have To Report A Settlement To Welfare?

Yes! This is super important. You absolutely must report your settlement to your local SNAP office, especially if it involves cash or something that could affect your eligibility.

Most states require you to report any change in household circumstances within 10 days.

Failing to report could lead to an overpayment of benefits, which you’d have to pay back. In serious cases, it could even lead to fraud charges.

So just be honest and upfront.

The caseworkers have seen this situation before and can often help you figure out your options.

How To Prevent Settlements From Affecting Your Food Stamps

You’re probably wondering: How can I keep my food stamps if I’m expecting a settlement? 

We have good news for you – there are a few strategies that can help protect your benefits and keep you from becoming ineligible for SNAP:

#1 Spend Down Resources

One option is to spend some of the settlement money on exempt items before the settlement pushes you over the SNAP limits (before the end of the month).

Exempt purchases might include:

• Paying off debt
• Necessary home repairs
• A reliable vehicle (many states exempt one vehicle)
• Medical equipment or services
• Educational expenses

Just be careful—there are rules about what you can and can’t spend the money on. 

And  don’t spend it on things that don’t create new countable assets, like a second car or an investment account. A lawyer can help you with this.

Also Read: Are Personal Injury Settlements Considered Marital Property?

#2 Open A Special Needs Trust

Another option is to open a special needs trust. 

This is a special kind of account that’s set up specifically for people who need assistance but still want to have some assets. 

Money in a properly set up SNT doesn’t count toward your resource limit for SNAP as long as it’s being used for certain needs (like healthcare, housing, etc.).

This option works especially well for larger settlements. 

The trust can then pay for things that enhance your quality of life without jeopardizing your benefits. But, setting up a trust requires some legal help, so you’ll need to consult with an attorney to get it done right.

#3 Get Help From An Attorney To Structure The Settlement

This one is important! You can also work with an attorney to structure your settlement in a way that minimizes the impact on your food stamps. 

For example, your lawyer could arrange for your settlement to be paid out in small installments.

This can prevent the full amount from being counted all at once, which might push you over the income or resource limit.

Many personal injury attorneys understand these benefits issues. If yours doesn’t, consider consulting with an elder law or public benefits attorney who specializes in this area.

Bottom Line

A personal injury settlement can affect your food stamps, but with proper planning, you might be able to minimize or avoid the impact. 

The most important things are to report your settlement promptly, understand which parts might be exempt, and consider strategies like spending down or setting up a trust.

Your lawyer should be able to help you with this.

FAQs

Do I Have To Report My Settlement To Medicaid?

Yes. You must report your settlement to Medicaid. In many cases, Medicaid has the right to recover money from your settlement if it paid for medical expenses related to your injury. 

Failing to report it could lead to penalties or loss of coverage.

What Income Is Not Counted For SNAP?

Tax refunds, most child support payments, loans, disaster relief funds, and certain educational grants or scholarships. Some medical expense reimbursements and certain housing assistance payments are also excluded.