Sometimes Social Security judges award benefits but require that benefit payments go to a "representative payee."   The judge may do this if the claimant is a child, is legally incompetant,  suffers from mental health or medical problems that would make it difficult for the claimant to manage money or in cases where the claimant requests a payee.

Representative payees assume a great deal of responsibility.  They are responsible for handing the claimant's money and for filing periodic reports with the Social Security Administration.   I have seen at least one case in which the rep payee was sued by Social Security because of an overpayment – the claimant went back to work and lost eligibility for benefits but Social Security did not find out for several years.

It has also been my observation that claimants often become angry with their representative payees when the payee refuses to allocate money for an item or service that the claimant deems necessary but the payee does not.   If you are thinking about serving as a representative payee I advise you to research and carefully consider the obligations of this position.

I recently received a question from a prospective payee named Celeste that touches on some of the issues faced by rep payees:

My friend just recently won her disability case, but the judge said she had to have a payee, which is me. I have a few questions that I would like for you to answer for me if you don't mind.

When we went to her appointment at the SS office to get her benefits started we were told that her disability check would be about $365 a month, plus she'd get regular Social Security for about the same amount.  She lives with her brother & his wife & has for quite some time and was hoping to move out on her own. If she did move out and had to take on all the bills herself is it possible that her benefits would go up? I understand her wanting to be on her own, but my fear is that she can't survive on what she's getting right now.

Also, she's getting back money because she's been considered disabled since June 2006. She has loan agreements with some people where she lived with them in the past and social security is paying them back. I understand that, but what I don't understand is her attorney still has to get paid too (25%), but what I'm not sure of is how he'll get paid. Does SS send him a check? Am I supposed to take 25% of the "loan payment" money & pay the attorney? I'm just a little confused about the whole thing. Can you help explain it to me, please?

Here are my thoughts:

1.  What happens when the claimant moves out on her own? It appears from Celeste's email that her friend has been approved for both SSDI and SSI and that her friend is receiving both.  As you may know from reading this blog, SSI payments are set by statute.  For 20o9 an individual can receive a maximum of $674 from SSI.  SSDI is based on a claimant's earnings record.   I am going to assume that the award is for $365 for SSI and around $365 for SSDI, which makes a total of $730.

SSI payments are reduced per a complicated set of rules called the "deeming" rules.  Social Security assigns a "value" for room and board provided by friends or family and reduces SSI accordingly.

If this was an SSI only case and the claimant was receiving only $365 because of the deeming rules, and the claimant then moved out, the SSI could increase to reflect the loss of the room and board.

In this case, however, it appears that the SSI and SSDI together (totaling approx. $730) generate a payment that is higher than the SSI maximum benefit amount.  Thus, from the limited information I am seeing here, I don't know that the claimant would receive any more in her monthly benefit if she moved out and lived on her own.

2. Loan agreements I am not sure what Celeste means when she states that "Social Security" will be repaying the claimant's former landlords.  Agreements to repay can be used to reduce the offsets to SSI but Social Security does not issue checks to anyone.  Also, an agreement to repay does not mean that the claimant has to repay her creditors immediately or at any particular time.   This is one of those areas where the rep payee needs to be very careful because repaying old creditors may not be the best use of the claimant's money.

3. Attorney's fees – most attorneys request direct payment from Social Security and file necessary paperwork so that they will be paid directly from SSA.  Celeste and the claimant should confirm this with the attorney – if there is no direct pay, Celeste should pay the attorney from the lump sum.  The attorney is not entitled to 25% of on-going benefits however.

I would advise Celeste to schedule a meeting with her friend's disability lawyer to discuss these issues.  Obviously my observations are intended to be general as I do not have all of the facts or paperwork in front of me.