The Surprising Estate Planning Step for Social Security Benefits

Social Security benefits are one of the items that fall through the cracks in many estate plans.

In this issue we already discussed the importance of having a financial power of attorney, so someone manages your finances when you aren’t able to do so. You also might need someone to manage your Social Security benefits, but the Social Security Administration (SSA) doesn’t recognize powers of attorney. Instead, you contact the SSA and make an advance designation of a representative payee.

Created under a 2018 law, this feature allows a person to choose one or more individuals to manage the person’s Social Security benefits. The SSA then is required to work with the named individual or individuals in most cases. You can name up to three people as advance designees and rank them in order of priority. If the first one isn’t available or is unable to perform the role, the SSA will move to the next person on the list.

Someone who already is receiving Social Security benefits may name an advance designee at any time. Someone claiming benefits can name the designee during the claiming process. The designee may be named using your “my Social Security” account on the Social Security website or by contacting the SSA via telephone, 1-800-772-1213, or at the local field office (though offices currently are closed due to the corona-virus pandemic).

Designees also can be named through the mail by using Form SSA-4547 – Advance Designation of Representative Payee.

You can change the designees at any time.The SSA will first evaluate a designee and determine the person’s suitability to act on your behalf. Once accepted, a designee becomes the representative payee for your benefits. The payee receives the benefits on your behalf and is required to use the money to pay for your current needs.

Representative payees generally must be individuals, but a representative payee also can be a social service agency, nursing home, or one of several other organizations recognized by the SSA to serve as payees.If you don’t name designated appointees, the SSA will name a representative payee on your behalf if it decides you need help managing your money.

Relatives or friends can apply to be a representative payee, or the SSA can choose someone.Sometimes a court will appoint a legal guardian. Representative payees generally can’t charge fees for their services unless they receive authorization from SSA or are court-appointed legal guardians authorized to charge fees.

Once someone is approved as a desig-nated payee by SSA, the individual has to file an annual report with SSA detailing how the benefits were spent. Receipts and records must be retained in case a state agency asks to review how the funds were spent. The SSA has a booklet explaining the duties and responsibilities of a representative payee.

Most people don’t realize that the SSA doesn’t recognize a power of attorney. Only a designated payee is recognized by SSA as the person who can receive and manage a person’s Social Security benefits.

If you don’t name one or more authorized designees as part of your estate planning process, someone will have to apply for it later or SSA will designate someone on its initiative. Being a designated representative doesn’t confer on the person any legal authority or power over any other aspect of your finances or personal life.