If a friend or relative of yours qualifies for Social Security Disability Insurance or Supplemental Security Income benefits but isn't able to handle their own finances for some reason, they may need you to be their representative payee. A representative payee is a person who is authorized to manage Social Security benefits for the beneficiary.
It's not difficult to become a representative payee, but once you've taken on the responsibility, it's important to make sure that you perform your duties correctly. Mistakes could have serious consequences for you and for the beneficiary of the funds.
1. Keep Funds Separate
Representative payees are not allowed to use any of the Social Security funds that they manage for themselves. Some people erroneously believe that they can charge a fee for managing Social Security benefits, but this is incorrect. Some organizations that act as representative payees can charge fees, but no individual acting as a representative payee may charge a fee. All of the funds must be used on the beneficiary.
If the Social Security Administration finds that you've charged fees or used any of the money for yourself, you can be forced to repay the beneficiary. You can also be fined or even go to jail.
It's best to keep all of your beneficiary's funds separate from your own money. It's too easy to end up misusing funds otherwise.
You may need to establish a separate bank account if the beneficiary does not have their own. This will give you clear documentation of how much goes in, how much goes out, and where it goes so that you and the Social Security Administration can be satisfied that only the beneficiary is benefiting from the Social Security payments.
2. Know the Spending Rules
Avoiding any personal spending isn't the only rule that you'll have to follow when it comes to using the Social Security beneficiary's money. You also have to know how you can and cannot spend the money on the beneficiary themselves.
Social Security benefits are meant to be used for the current needs of the beneficiary first. Current needs include food, shelter, clothing, medical care, and personal comfort expenses. You cannot use funds to pay off debts that the beneficiary owns or save or invest money for the future unless the current needs are paid for first.
Be very careful about saving any money for future use. Supplemental Security Income (SSI) payments are only made to very low-income beneficiaries. If a beneficiary has more than $2000 to their name, they are ineligible for benefits.
Saving up unused money could cause your beneficiary to reach this limit, and then they would be ineligible for their benefits the following month. If your beneficiary accrues or inherits assets above the limit, they may need those assets placed in a special needs trust to preserve their eligibility.
3. Keep Careful Records
In addition to managing money, one of your responsibilities as a representative payee is to document how the benefits are used. You'll be responsible for filling out a form detailing how the benefits are being spent each year.
It's very important that you keep careful, detailed records of your spending on behalf of the beneficiary. When the Social Security Administration sends the form requesting your report, you only have 10 days from the date of the notice to respond, and the beneficiary's benefits can be delayed or even canceled if you're not on time.
Keep your receipts, canceled checks, bank records, and other documents organized and in a place that's accessible. You may want to make sure that you keep a second copy of everything in a safe place. For example, if you keep your records on your computer, you should also have hard copies stored somewhere that you can access them even if your computer malfunctions. That way, you'll be able to quickly provide complete records when requested.
If you have questions about your role as a representative payee or you need help being approved for or reinstating benefits for someone, a Social Security attorney can help. Contact the Law Offices of Betsy H. Alberts for Social Security assistance in Chico, Placerville, Sacramento and Yuba City.