How Is a Child’s SSI Payment Supposed to Be Spent?

Parents of children with disabilities who receive Supplemental Security Income (SSI) often ask: "How can the monthly SSI payment be spent?" A parent can spend the money from SSI in several ways, assuming the parent is the representative payee for the child.

The Social Security Administration (SSA) presumes that children under 18 can't manage their own benefit payments, so they require a child to have a representative payee. (20 CFR 404.2010(b).) Social Security has spending rules in place for representative payees—including the parents of disabled children.

This article will examine what Social Security allows you to spend your child's SSI benefits on, what's off-limits, and when you're required to save the money.

Child's SSI Can Pay for Food, Housing, and Clothing

If you're a child's representative payee—whether you're the parent or not—you must spend the monthly SSI payment on the child's "maintenance," which includes the following:

• food
• housing
• clothing
• medical care, and
• personal needs.

If necessary, it's okay for a parent payee to use a child's SSI benefit to contribute more than the child's share to certain expenses for the whole family, such as rent and utilities. Social Security understands that the family's overall well-being and stability are of value to the child, and it's a payee's responsibility to see that the child has a habitable home with electricity, heat, and running water.

Paying a Child's Medical Expenses With SSI Benefits

If you're a payee for a child receiving SSI payments, part of your responsibility is to ensure the child receives necessary medical treatment. (20 C.F.R. § 416.994a(i).) Fail to do so and Social Security can choose another representative payee for the child.

Children who qualify for SSI also qualify for Medicaid, but there are some medical or dental expenses that Medicaid doesn't cover. If the child has medical and dental costs not covered by Medicaid, you can use the SSI money to pay for things like:

• copays for medication
• any equipment that Medicaid doesn't cover, and
• services that Medicaid won't pay for, like:
• counseling
• occupational therapy, or
• physical therapy.

Using Your Child's SSI for Lessons and Recreational Expenses

If there's money left over after taking care of the child's basic needs, the payee parent can also spend money on recreational expenses that benefit the child. These can include things like:

• sports
• lessons
• tutoring
• movie tickets, or
• special camps.

Learn more in Social Security's Guide for Representative Payees.

Putting Your Child's SSI in a Savings Account

A payee is also allowed to set aside some money as savings for the child. Historically, children couldn't save much without becoming ineligible for SSI because of Social Security's $2,000 resource limit for children receiving SSI. (Note that Social Security can count a parent's cash or other assets toward this limit if it's over a certain amount).

Today, a payee or parent can put some of the child's SSI money into an ABLE savings account. ABLE accounts are special savings accounts created by the Achieving a Better Life Experience Act. (I.R.C § 529A.) Money in an ABLE account doesn't count as assets or resources for SSI (up to $100,000) or for Medicaid eligibility. (Learn more about setting up an ABLE account for a child.)

In addition, money put into a Program to Achieve Self-Support (PASS) to help a teenager get a job doesn't count as a resource, nor does money put into a special needs trust.

Using a Child's SSI for Paying Off Debts

As a child's payee, you're only allowed to pay off past debts, such as past-due rent or utility bills, if it's in the child's best interests and if the child's current needs can still be met—as well as the child's needs in the future. (Future needs may include transitioning into independent living as an adult).

At the least, Social Security allows a payee to pay off debts only if the child will still have savings equal to two monthly SSI payments after the debts are paid.

How to Handle a Child's SSI Back Pay

SSI recipients usually receive a lump-sum payment of benefits when they're finally approved for benefits. The lump sum represents the monthly payments the child was eligible to receive while waiting for approval—starting the month following the application until the approval date.

If the child's back payments are for more than six months of benefits, Social Security says the representative payee must set up a separate "dedicated account" in the child's name. And the account can only contain the lump-sum payment of SSI. Funds in an SSI dedicated account don't count toward the child's $2,000 resource limit.

But the spending rules for a child's dedicated account are much stricter than those for spending the child's regular monthly SSI payments. The money in a child's dedicated account can be spent only on the following:

• medical treatment and related expenses, such as:
• rehabilitation
• therapy, or
• skilled nursing assistance
• educational expenses, including job or skills training
• special equipment, including computers and specialized vans
• home modification costs, or
• respite child care (with approval from Social Security).

The funds in the dedicated account can't be used for basic needs like food, clothing, or shelter, except in the case of a true emergency. (20 C.F.R § 416.640(e)(2)(iii).) These funds also can't be used to purchase certificates of deposit (CDs), stocks, or any other type of investment.

Even when a child turns 18, the same rules apply to the dedicated account if there's still money in it.

Keep Track of How the Child's SSI Is Spent

Representative payees must keep documentation of how the child's SSI benefits were spent. Rep payees must keep accurate spending records and they usually have to file an annual spending report, unless they're the parents of a child receiving SSI.

Since 2018, parents or legal guardians acting as representative payees for children they live with no longer have to file the annual report. (20 CFR 404.2065(b).) But you must still keep accurate records of how you spent the child's SSI benefits, as Social Security can ask you to show how you spent the money at any time. And you'll likely have to repay any misspent funds. (20 C.F.R. § 404.2041(a).)

When Can a Child Receive SSI Directly From Social Security?

Children who get their SSI monthly payments directly from Social Security have no spending restrictions. They can spend the money however they choose.

Children between the ages of 15 and 17 can collect SSI disability benefits directly from the SSA in some cases—particularly if a parent isn't qualified or available to act as the representative payee. (20 C.F.R. § 404.2010(b)(1-6).)

Specifically, Social Security can pay the following groups of children aged 15 through 17 their benefits directly:

• children older than 17 years and 4 months
• children who've demonstrated the ability to handle finances and have no qualified payee available
• children living alone who are self-supporting
• children on active duty in the armed forces
• children who are parents and filed their own benefit claim (or a claim for their child) and have experience handling finances, and
• children who are entitled to disability benefits based on their own earnings.

In addition, Social Security can directly pay beneficiaries who are ages 15 through 17 temporarily—even if they don't meet the above criteria—while efforts are made to identify a new representative payee.

(Learn how the eligibility rules change when a child receiving SSI benefits turns 18.)