By Frederick P. Niemann, Esq. of Hanlon Niemann & Wright, a NJ Elder Law Attorney
More than eight Million People, who get monthly Social Security or Supplemental Security Income (SSI) benefits, need help managing their money.
In these cases, Social Security will approve the appointment of a relative, friend, or other interested party to serve as the “representative payee.” Prior to being appointed Social Security investigates those who apply to be representative payees to protect the interests of Social Security beneficiaries, because a representative payee receives the beneficiary’s payment and is given the authority to use on the beneficiary’s behalf.
With certain exceptions, a payee may not collect a fee for services provided to the beneficiary. You can’t collect a fee for services from the beneficiary, unless Social Security allows it, or you’re the legal guardian authorized by a court to charge a guardian fee. Each year, Social Security will ask you to complete a form to account for the benefits you’ve received for the benefit of another.
As a representative payee, you’ll also need to tell Social Security about changes that may affect the beneficiary’s eligibility. Remember, the law requires representative payees to use the benefits properly if a payee misuses benefits, they must repay the misused funds. A payee who’s convicted of misusing funds may be fined and imprisoned.
A representative payee only manages Social Security and SSI funds. A payee has no legal authority to manage non-social Security income or medical matters. A representative payee however, may need to help a beneficiary get medical services or treatment.
Family members often use a power of attorney as another way to handle a family member’s finances. For Social Security purposes, a power of attorney isn’t an acceptable way to manage a person’s monthly benefits. Social Security recognizes only the use of a designated representative payee for handling the beneficiary’s funds.
A Special Note about Children Who Get Supplemental Security Income (SSI) Payments
If you’re a payee for a child receiving SSI payments, you must seek treatment for the child’s medical condition when its necessary. If you don’t get medical treatment for the child, Social Security may appoint a new representative payee.
How you must use monthly benefits
First, you must take care of the beneficiary’s day-to-day needs for food and shelter. Then, you must use the money for the beneficiary’s medical and dental care that’s not covered by health insurance. You can also pay for the beneficiary’s personal needs, such as clothing and recreation. You must save any money left after you pay for the beneficiary’s needs, preferably in an interest-bearing account or U.S. Savings Bonds.
If a beneficiary is in a nursing home or institution, use their benefits to pay the fees. In this case, you should set aside a minimum of $30 each month to use for the beneficiary’s personal needs.
Special Purchases
You may want to make some of the following special purchases for the beneficiary.
- A home – Use funds for a down payment. Use the money for payments on a house owned by the beneficiary.
- Home improvements – Pay for repairs and changes to make the beneficiary’s home safer and more accessible.
- Furniture – Buy furniture for the beneficiary’s personal use. You can buy items such as a television the beneficiary can share with others in the household.
- A car – Use funds for a down payment. Use the money for monthly car payments as long as the car is used for and owned by the beneficiary.
A Special Note about SSI Beneficiaries
To continue receiving SSI, a beneficiary must not have resources worth more than $2,000.00 ($3,000.00 for couples). We don’t count all resources; however, some items you buy could cause the beneficiary to lose their SSI benefits. Any money you don’t spend could also count as a resource. Check with us before making major purchases for an SSI beneficiary.
How to Hold Funds
The Treasury Department requires all federal benefit payments to be made using a form of electronic payment. We recommend that you hold benefits in a checking or savings account to protect against loss or theft. Also, don’t mix the beneficiary’s funds with your own or other funds.
The checking or savings account title must show the beneficiary’s ownership of the funds and show you as the financial agent. Neither you as the payee, nor another third party, can have any ownership of the account. The beneficiary must never have direct access to the account. Any account title (under state law) that shows beneficiary ownership of the account with you as the financial agent is acceptable. Don’t use joint accounts.
Organizations that Serve as Payees
Sometimes nursing homes or other organizations place funds for several beneficiaries in a single checking or savings account known as a “collective account.” This is usually acceptable, but special rules apply to these accounts:
- Account titles must show the funds belong to the beneficiaries and not the representative payee;
- The account must be separate from the organization’s operating account;
- Any interest earned belongs to the beneficiaries;
- There must be proper procedures to document credits and debits with clear, current records of each beneficiary’s share;
- The organization must make the account and supporting records available to us when we ask for them; and
- The organization must obtain approval from Social Security before establishing the account.
Keeping Records
As a representative payee, you’re responsible for keeping records and reporting on how you spend the benefits by completing a Representative Payee Report (Form SSA-623, SSA-6230, or SSA-6233). We’ll mail the proper form to you once a year.
Changes to Report
You need to tell Social Security about any changes that may affect benefit payments. As payee, you’re responsible for repaying the money you receive for the beneficiary, if any of the events listed below occur, and you don’t report them. For example, tell us if:
- The beneficiary moves
- The beneficiary starts or stops working, no matter how little the earnings amount.
- A disabled beneficiary’s medical condition improves.
- The beneficiary starts receiving another government benefit or the benefit amount changes.
- The beneficiary travels outside the United States for 30 days or more.
- Custody of a child beneficiary changes or a child is adopted.
- The beneficiary is a stepchild, and the parents’ divorce.
- The beneficiary gets married.
- The beneficiary no longer needs a payee.
- The beneficiary dies.
You Must also Tell us if:
- You’re no longer responsible for the beneficiary.
- You move
- You no longer wish to be payee.
- You’re convicted of a felony
If You Stop Being a Payee
If you’ll no longer be the payee, you must notify Social Security immediately. This is important, because we’ll have to select a new payee as soon as possible.
If the Beneficiary Dies
If the beneficiary dies, you must give any saved benefits belonging to their estate to the legal representative of the Estate, or the savings must be handled according to State law. If you need information about state law, contact the probate court or an attorney.
When a person who receives Social Security benefits dies, no check is payable for the month of death, even if they die on the last day of the month. You must return any check received for the month the beneficiary died. An SSI check, however, is payable the month of death. But you must return any SSI checks that come after the month of death.
If the beneficiary has low income and few resources, the state may pay Medicare premiums and some out-of-pocket medical expenses. A person may qualify even if their income or resources are too high for SSI. For information, contact the state or local medical assistance (Medicaid) agency or social services office.
The beneficiary may also be able to get extra help paying for the annual deductibles, monthly premiums, and prescription co-payments related to the Medicare prescription drug program (part D). The beneficiary may qualify for extra help if they have limited income and resources. These income and resources limits usually change each year.
Beneficiaries will automatically get extra help and don’t have to apply if:
- They have both Medicaid with prescription drug coverage and Medicare; or
- They have Medicare and Supplemental Security income; or
- The state pays for their Medicare premiums.
For more information about getting extra help with Medicare prescription drug plan cost, call Social Security’s toll-free number, or visit our website. You can also help the beneficiary apply for extra help online at Social Security’s website.
The above is just a summary of the rules applicable to a representative payee.
To discuss your NJ elder law matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.