What Is a Representative Payee for Social Security Disability?

When someone collects Social Security disability benefits, it's usually because they're unable to work due to mental or physical limitations. Both Social Security disability insurance (SSDI) and Supplemental Security Income (SSI) disability benefits provide monthly payments so that the recipient can maintain financial independence despite the disability.

Sometimes the Social Security Administration (SSA) determines that a disability recipient is unable to manage his or her payments. This can happen for a number of reasons, including cognitive difficulties, mental illness, or evidence of drug or alcohol abuse. In these cases, the SSA will assign a "representative payee" to the recipient. The payee's job is to receive the SSDI or SSI funds and make sure they are spent for the care and well-being of the recipient.

This guide for representative payees will explain what a representative payee is and why Social Security might appoint a "rep payee." It will also cover who can serve as a representative payee and what you must do if you're appointed as one.

• What Is a Representative Payee for SSDI or SSI?
• Who Needs a Representative Payee?
• What Does an SSA Representative Payee Do?
• Who Can Be a Social Security Representative Payee?
• What Organizations Can Act as Representative Payees?
• Can Representative Payees Collect Fees?
• Do Payees Need to Report How the Money Was Spent?
• Do Representative Payees Have to Pay Taxes?
• How Do You Become a Social Security Representative Payee?

What Is a Representative Payee for SSDI or SSI?

Unfortunately, some people collecting Social Security disability benefits are mentally ill, addicted to alcohol or drugs, or have reached a point in their illness where they can no longer handle their own finances. When this happens, the Social Security Administration (SSA) will usually appoint a representative payee. A representative payee is a person or organization that receives someone's SSDI or SSI disability benefits on their behalf.

If you're serving as a representative payee, you must use the Social Security payments for the disabled person's support and care only. You can use the money for any of the following:

• paying the disabled person's bills
• buying food and clothing for the disabled person
• saving for the disabled person's future
• paying for the disabled person's entertainment, or
• in any other manner that is in the disabled person's best interest and for their benefit.

Who Needs a Representative Payee?

Social Security generally assumes that most adults can manage their own finances. But there are times when that isn't the case. The SSA might appoint a representative payee for a disabled person who is:

• an adult with a cognitive impairment or dementia
• someone whose physical condition might make them more vulnerable to unscrupulous people
• an adult suffering from a substance use disorder (drug or alcohol addiction), or
• a minor child (usually a parent serves as the rep payee for a child).

If there's reason to believe that a disabled adult can't handle their own money, the SSA will investigate to determine if the agency should appoint a rep payee. If you'd like to handle your own benefits, learn about how to prove you can be your own representative payee.

What Does an SSA Representative Payee Do?

If you're serving as a Social Security representative payee, it's your job to see to the immediate needs of the SSDI or SSI recipient. You must also save any money that's not immediately needed, so it's available when it's needed to meet the disabled person's future needs. As a payee, you're also responsible for returning any funds that Social Security sends to the recipient in error (overpayments).

As a Social Security rep payee, you must always act in the best interests of the disabled person when spending their SSDI or SSI benefits. You'll need to keep accurate records of all financial transactions, both incoming and outgoing. When the SSA asks for a report of expenses, which it does every year, the report should cover what you paid out and how much money was saved. (More on this below.)

What Are the Duties of a Representative Payee?

As an SSA representative payee, your primary duties are to use the recipient's disability payments to do the following:

• make sure the recipient has food and shelter
• provide medical or dental care not covered by insurance
• cover rehabilitation expenses, and
• fulfill the recipient's personal needs for clothing and recreation.

If you're the SSI representative payee for a child, you're also required to arrange for appropriate medical treatment for the child's condition.

If there are funds left over after paying the disabled person's expenses, you should place them in an interest-bearing account.

How Should a Payee Handle a Lump Sum of Back Pay?

If the Social Security recipient has received a lump sum of benefits (like retroactive disability payments or backpay), as payee, you could use the payment to:

• improve the recipient's living arrangements (including paying a security deposit or making a down payment on a mortgage or car)
• purchase durable medical equipment not covered by insurance, like a wheelchair
• arrange for the recipient to go to school or special training, or
• spend some of the money on recreational activities like movies, video games, or cable TV (for the recipient).

If you're the rep payee for a child who receives a lump-sum payment of SSI, you must open a dedicated SSI account.

What Can't a Social Security Rep Payee Do?

If you're a Social Security representative payee, you can be reimbursed for expenses you paid from your own funds, but you shouldn't intermingle or mix your funds with the disabled person's funds. You're required to keep the Social Security benefits in a separate account.

You also can't sign legal documents or otherwise act as a representative of the SSDI or SSI disability recipient—becoming an SSA representative payee doesn't automatically give you power of attorney over all of the recipient's affairs. Here are some other things that you can't do as an SSA rep payee:

• spend money that's needed for food or other basic necessities on other items
• spend the recipient's money on your own personal expenses
• put the funds in your personal account (or anyone else's account)
• charge a fee for your services, unless the SSA has authorized you to do so, or
• sign any legal documents on behalf of the recipient, except Social Security documents.

Any representative payee found misusing a recipient's funds must repay the misused funds. If you're found guilty of misusing the disability recipient's Social Security benefits, you'll be subject to fines and possible imprisonment.

What Changes Do Payees Have to Report?

If you're serving as someone's representative payee, it's your responsibility to report to Social Security any changes that might affect the recipient's eligibility for payments or the benefit amount. For example, you must tell the SSA if the recipient:

• moves
• starts or stops working, regardless of the amount earned
• has physical or mental improvements, or
• receives other benefits (like workers' compensation).

Social Security's payee guide lists other changes you must report as well.

Who Can Be a Social Security Representative Payee?

Both individuals and organizations can become Social Security rep payees. When appointing a representative payee, the SSA generally prefers someone who lives with and helps care for the disabled person. If the disabled person lives alone, Social Security might select a family member, friend, legal guardian, or lawyer to serve as rep payee.

Social Security could choose you to serve as a representative payee if the disabled person knows you well and sees you frequently, and you're familiar with their needs and wants. For instance, if your child receives SSI disability benefits, you (as the parent) would usually serve as the SSI representative payee (unless Social Security determines that you're not capable of managing the money).

Sometimes, a disabled person has no family member or friend who can (or will) fill the role of a representative payee. In that case, Social Security will require the disabled person to have an organizational payee.

Learn more about how Social Security chooses an appropriate representative payee.

What Organizations Can Act as Representative Payees?

Organizations that can serve as Social Security representative payees include:

• social service agencies
• institutions like long-term mental health facilities
• nonprofit organizations
• health care facilities, or
• state or local government agencies.

Can Representative Payees Collect Fees?

Whether a payee is eligible for payment of a fee differs between individual and organizational payees.

Individual payees. Individual payees are usually not entitled to receive payment for managing the beneficiary's money. But there are exceptions to this, such as where the court has awarded a payee the right to collect a "guardian fee" and in other limited situations.

Organizational payees. Organizational payees can apply to charge fees for services only if the organization is:

• a state or local government agency responsible for income maintenance, social services, health care, or other fiduciary duties, or
• a nonprofit organization that provides social services to the community and is bonded and licensed.

Organizational payees must meet numerous other requirements and apply to the SSA for permission to collect a fee. The SSA regulates how much an organization can collect as a fee, which is usually 10% of the disability recipient's monthly disability check, up to certain maximums.

Do Payees Need to Report How the Money Was Spent?

Both individual and organizational payees must file reports with Social Security detailing how they spent the SSDI or SSI payments.

Individual payees. An individual payee should keep careful track of how the payments are spent on an "Income and Expense Worksheet" that details the month, the amount of money received, and payments made for food, shelter, clothing, recreation, and other costs. At the end of the year, the payee will enter the totals into an online individual payee form on the SSA's website.

Organizational payee. Reporting requirements for organizational payees are more extensive. An organization must file an annual report and keep the following information for at least two years:

• copies of canceled checks
• bank statements, and
• receipts for payment of rent, utilities, and any other money paid on behalf of the beneficiary.

And organization must also keep clear and up-to-date records that show how much the beneficiary has in his or her account and how the funds were used and provide all financial records to the SSA when the SSA asks for them.

Do Representative Payees Have to Pay Taxes?

Many, if not most, people who get Social Security or SSI benefits don't have to have to pay taxes on them (read more here). But even if a recipient does have to pay taxes, it's not the job of the payee to file a tax return.

The payee will, however, receive a Social Security Benefit Statement (Form SSA-1099) each January from the agency showing the total benefits that the recipient received during the previous year. The payee should give this statement to the recipient's tax preparer in case any taxes are due.

How Do You Become a Social Security Representative Payee?

For an individual, the process of becoming a rep payee is fairly simple. When a loved one needs you to serve as a representative payee, you need to contact the nearest Social Security office and submit an application. You'll also need to:

• bring proof of identification
• provide your Social Security number, and
• go through an interview.

_{Updated February 27, 2023}