Q. Mom recently moved in with us so we can help care for her. When we notified Social Security of this, they asked if I wished to become mom’s representative payee. Is that something I should do?
A. It all depends. In the Social Security system, a representative payee is appointed to receive funds for someone, such as your mom, who is unable to manage her own money or pay her own bills. If you become her representative payee, you would have the power and the responsibility to manage that money for her benefit. If you assume that responsibility, you will essentially be a fiduciary with four very important duties:
(1) You must act only in your mother’s best interest. You cannot pay yourself for managing her money, and you cannot borrow it or lend it to anyone else;
(2) You must manage her monthly benefit carefully, making sure that her daily needs are met, bills are paid on time and all taxes, if any, are paid when due;
(3) You must keep her money separate from your own, which means that you must keep it in a separate account which clearly identifies your mother as the owner of the funds and you as her representative payee: Example: if your mother’s name is Mary Jones and you are John Jones, the account should be set up to read like this: “Mary Jones, by John Jones, Representative Payee”;
(4) You must keep good records of everything you do with her money, keep all receipts and – very important — make an annual report to Social Security showing how you spent or conserved her money. You must also keep Social Security informed about your mother, notifying it of any change in circumstances which might change her benefit amount.
I find that the biggest drawback to serving as a representative payee for a loved is the requirement that you must keep careful records and submit an annual written account to Social Security showing how you handled the beneficiary’s money. This annual requirement often comes as a big surprise at the end of the year and many are unprepared to complete that report. Further, if Social Security feels that you have mishandled the beneficiary’s funds, you might be obliged to make restitution with your own money.
I generally recommend an easier approach: if you can, arrange for your mother’s social security benefit to be electronically deposited into her checking account on which you have signing rights as her agent. Then, just pay her bills from that account using your authority as her agent. This informal arrangement eliminates the need for an annual accounting to Social Security and the corresponding scrutiny. Assuming that you will be just as diligent in handling her funds in this manner as you would be if you were required to submit an annual report to Social Security, your job will be less burdensome and you mother will be served just as well.