What if the SSDI beneficiary is not capable of managing their benefits?

What is an SSDI Representative Payee and what are his responsibilities?

Author Attorney Lloyd Bemis:
Updated: 12/19/2023

In some instances, the Social Security Administration (SSA) will decide that the beneficiary is not capable of managing their benefits so they will appoint a representative payee.
The representative payee will receive benefits on the beneficiaries’ behalf and then use those funds to provide for the beneficiary.

If the individual who qualifies for Social Security Disability is incapable of managing their received benefits the SSA will assign a Representative Payee. The representative payee will receive benefits on the beneficiaries’ behalf and then use those funds to provide for the beneficiary.

Who Needs a Representative Payee?

By default, Social Security benefits (both Disability Insurance and Supplemental Security Income) go directly to the beneficiary. If the Social Security Administration is in the process of determining whether an applicant needs a representative payee, the benefits will continue to go to the beneficiary. Usually, however, this decision will be made by the claims examiner or judge when eligibility for benefits is determined.

Representative payees are chosen for many different reasons. In almost all instances, a representative payee will be appointed for a beneficiary under the age of 18. Individuals with severe mental disorders or addictions are also often required to have a representative payee.

Who Can Be a Representative Payee?

The applicant can make a suggestion to the Social Security Administration as to who they would like their representative payee to be. Generally, applicants required to have a representative payee will know who they want to choose- usually a parent, child, or close friend. In some cases, a nursing facility, social services agency, or even an attorney may act as a representative payee. While the applicant is given the opportunity to suggest a representative payee, the decision as to who it will be is ultimately up to the Social Security Administration. If the applicant doesn’t agree with who the SSA has chosen, they may request a change of payee.

What Does the Representative Payee Do?

Your representative payee is required to keep the money they receive on the beneficiary’s behalf separate from their own funds. They are also required to use all of the money in the best interest of the beneficiary. Benefits are intended to provide food and shelter first, then medical care. Any funds left over may be placed in a savings account or otherwise used for the benefit of the beneficiary. The payee is required to keep records of the benefits and how they are spent and will be asked to account for benefits annually. The payee is also required to report any major changes that may affect eligibility- if the applicant moves, finds employment, gets married, becomes incarcerated, etc…

What Can’t the Representative Payee Do?

The representative payee is not allowed to charge a fee for their services without express written approval from the Social Security Administration. Even with permission, the fee is limited to 10% of the monthly benefits or $54 per month- whichever is lower (As of 2024).

Representative payees are chosen for many different reasons. In almost all instances, a representative payee will be appointed for a beneficiary under the age of 18. Individuals with severe mental disorders or addictions are also often required to have a representative payee.

It is important to keep in mind that the representative payee relationship applies only to Social Security benefits. The representative payee does not acquire power of attorney over the applicant. The payee is not empowered to make medical decisions or enter into contracts on the beneficiary’s behalf simply because they are the payee.

What if The Representative Payee is Mismanaging Benefits?

Whether the payee is intentionally stealing benefits or simply not doing a good job of bookkeeping, it is a criminal offense to misuse Social Security benefits. The beneficiary should notify the Social Security Administration and attempt to find a new representative payee.

What if the Beneficiary No Longer Needs/Wants a Representative Payee?

Representative payees are assigned because the Social Security Administration believes the applicant is not capable of managing their finances on their own. If the applicant is able to prove otherwise, they can apply to receive their benefits directly. Doctor’s statements are the best evidence you can provide, but anything that demonstrates the beneficiary can manage their finances capably can be used as evidence. Keep in mind however, if the beneficiary’s condition improves significantly, it may be determined they are no longer eligible for benefits.

H.R. 4547: Strengthening Protections for Social Security Beneficiaries Act of 2018

On April 13, 2018, H.R. 4547: Strengthening Protections for Social Security Beneficiaries Act of 2018 was signed into law after being unanimously approved by Congress.

The bill was sponsored by U.S. Representative Sam Johnson of Texas who said, “This new law is great news for the millions of Social Security beneficiaries who rely on a representative payee to help them manage their benefits. Not only will it provide much-needed accountability for the representative payee program, but it also puts measures into place that ensure newly selected representative payees are qualified and trustworthy.”

The representative payee program was overhauled in 2004, but since that time government agencies such as the Social Security Advisory Board and groups advocating for the disabled have been concerned about certain issues challenging the program, among them:

•    Individuals serving as representative payees who were not qualified.
•    Inadequate monitoring of representative payees.
•   Important information not being shared between the Social Security Administration and organizations that serve the same population of disabled people, the elderly, and children.

As a result of these oversights, there have been numerous instances of neglect, abuse and misconduct on the part of some representative payees.

The new law strengthens the Social Security representative payment program in a number of ways:

•    Requires an increased number of representative payee performance reviews and additional types of on-site reviews of representative payees;
•    Requires the Protection and Advocacy system of each state to conduct reviews on behalf of the Social Security Administration;
•    Eliminates the requirement to file an annual payee accounting form for parents living with their children and for spouses;
•    Allows beneficiaries to choose a representative payee in advance of needing one;
•   Increases information sharing between child welfare and the SSA and adult protection agencies and the SSA;
•    Limits overpayment liability for children in the child welfare system; and
•    Bars people with certain criminal convictions from acting as representative payees and individuals who have representative payees themselves from serving in that capacity for someone else.

Enactment of H.R. 4547 is welcome news for disabled individuals, providing critical protection of their Social Security benefits as well as much needed reforms to the representative payee program.

Author: Attorney Lloyd Bemis has been practicing law for over 35 years. He is Superlawyers rated by Thomson Reuters and is Top AV Preeminent® and Client Champion Gold rated by Martindale Hubbell. Through his extensive litigation Mr. Bemis obtained dual board certifications from the Texas Board of Legal Specialization. Lloyd is admitted to practice in the United States District Court - all Texas Districts and has argued before the U.S. Court of Appeals, Fifth Circuit. Mr. Bemis is a member of the Travis County Bar Association. He has been active in the American Association for Justice and is a past Director of the Capital Area Trial Lawyers Association. Mr. Bemis and all the members of Bemis, Roach & Reed have been active participants in the Travis County Lawyer referral service.