People collect Social Security Disability benefits for a number of different reasons, including having a physical or mental disability that causes them to be unable to work. Disability benefits allow the recipient to receive monthly payments of a predetermined amount so that he or she may be financially independent despite the disability.
Unfortunately, those who collect Social Security disability benefits are sometimes mentally ill, addicted to alcohol or drugs, or have often come to a point in their illness in which they are no longer able to handle their own finances. If this occurs, it is usually necessary to appoint someone else to manage the spending of SSA benefits. This where the job of a Social Security representative payee comes in.
Examples of situations where a representative payee is needed are:
(For further discussion, see our article on why representative payees are assigned.)
The job of the representative payee is to see to the immediate needs of the Social Security recipient and to retain any money that is not needed immediately so that it can be used to meet future needs. The representative payee needs to return any funds to Social Security that are sent to the beneficiary in error (overpayments).
The payee needs to keep accurate records of all financial transactions, both incoming and outgoing. When the SSA asks for a report of expenses, which it does yearly, the report will cover what expenses were paid and how much money was saved. (More on this below.)
A representative payee must always act in the best interests of the disability recipient when distributing funds to be spent on his or her care.
The primary duties of the representative payee are to use the benefits of the beneficiary to do the following:
Note that the payee for a child who receives SSI payments is required to obtain medical treatment for the child's medical condition.
If there are any funds left over, the payee should place them in an interest-bearing account. (The payee for a child who receives SSI must open a dedicated SSI account.)
In situations where the beneficiary may have received a lump sum of benefits, the representative payee could use the payment to:
The payee may be reimbursed for expenses but should not intermingle or mix his or her funds with the disability recipient's funds. A payee also may not sign legal documents or otherwise act as a representative of the disability recipient, as becoming an SSA representative payee does not automatically give him or her power of attorney over all of the recipient's affairs. Here are some other things that a payee cannot do:
Any representative found misusing a beneficiary's funds must repay the misused funds and is subject to fines and imprisonment if found guilty.
The representative payee is required to file a report each year with the Social Security Administration indicating how the beneficiary's benefits have been used. This report, called the Representative Payee Report, will be sent every year to the representative payee. It needs to be filled out and returned promptly, and it may be mailed or can be submitted online on the online accounting form. Additional duties include reporting to the SSA any changes that may affect the beneficiary’s eligibility for payments or the amount of the beneficiary's payments. Some of the changes that must be reported are:
For more information, see our article on the payee's reporting requirements.
Typically, any minor child needs a representative payee. An adult who is legally incompetent or has an alcohol or drug problem needs a payee. Other than these two situations, it is assumed that most adults are able to handle their financial affairs. However, if the need is there, the SSA will investigate and look at the evidence to determine if a payee should be appointed. For more information, see our Q&A on when and how a representative payee is chosen.
Either an individual or an organization can become a payee. Usually a disabled person's relative or friend serves as the payee, but increasingly, no one is available or willing to fill that role. In that case, Social Security will require the disability recipient to have an organizational payee.
For an individual, the process of becoming a payee is simple. You need to contact the nearest SSA office and submit an application. You will need to bring proof of identification, provide your Social Security number, and go through an interview.
An organization that wishes to become a payee is allowed to collect a fee for services to the Social Security beneficiary. It needs to provide services to at least five people and not be a creditor to any of them.
For more information, see our article on fees and individual and organizational payees.