Dennis Fordham. Courtesy photo.

An incapacitated adult or minor person who is unable to manage their bill paying often has a representative payee appointed by the Social Security Administration to manage their receipt of Supplemental Security Income or Social Security Disability Income, as relevant.

Each year, the representative payee must report to and account to the Social Security Administration for the use of the Supplemental Security Income, or SSI, and Social Security Disability Income, or SSDI, monies. 

An SSI recipient may sometimes also be a beneficiary of a special needs trust established, with inheritance or settlement proceeds, to preserve their SSI and other needs-based government benefits, such as food stamps. 

It is important that the representative payee and the SNT trustee, if not the same person, coordinate their separate spending of monies for the beneficiary.

The representative payee of a SSI recipient must use SSI monies to pay for the recipient’s basic living expenses — food, shelter, utilities and medical expenses not covered by Medi-Cal. 

If any SSI money remains, which is unlikely, it must be kept for future expenses, less perhaps a possible discretionary spending allowance. 

Typically, the representative payee is a close family member or friend with close contact to the SSI beneficiary. One reason for this is that, except for certain approved organizations, a representative payee is not entitled to any compensation. 

Nevertheless, an uncompensated representative payee is still subject to duties and to liabilities imposed by the Social Security Administration, or SSA.

Specifically, the representative payee has a duty to report any changes in circumstances (such as changes in the recipient’s assets and in income) that would affect the SSI recipient’s eligibility to receive, or the amount of, their SSI benefits. 

If the SSA makes an overpayment in SSI benefits that should have been avoided had the personal representative reported relevant changes, then the SSA may proceed against the personal representative personally.

In addition, if the representative payee misuses the SSI recipient’s SSI money or, even worse yet embezzles the SSI money, then not only may the SSA go after the representative for reimbursement but any embezzlement is a felony that can result in incarceration. 

The trustee of a special needs trust, on the other hand, is typically compensated (by the trust) and may be a professional (such as a private fiduciary or a pooled special needs trust). Such trustees are much better equipped to deal with government regulations and oversight. 

Given that distributions from special needs trusts for the basic necessities of life count against the beneficiary’s right to receive SSI, it is important that the representative payee and the trustee work closely together and keep each other informed. 

Otherwise, the SSA may make SSI overpayments that have negative consequences to the recipient’s right to additional SSI benefits and to the representative payee in terms of his liability for SSI overpayments (which do accumulate).

Typically, the trustee of the special needs trust first makes distributions for the benefit of the beneficiary to improve the quality (comforts) of the SSI beneficiary by purchasing items that are not covered by SSI benefits. That is, the trust monies may be used to purchase travel, entertainment, and services excluding food, shelter, and utilities that are first paid with SSI monies. 

Nonetheless, given the high cost of basic living and the small amount of SSI checks, special needs trusts often authorize payments for such necessities. 

Such direct payments by anyone other than the SSI recipient from their SSI income is treated as “in kind, support and maintenance,” or ISM, and counts as unearned income to the SSI recipient. This negatively affects his or her right to receive SSI.  

Fortunately, ISM payments reduce but do not usually wholly eliminate a recipient’s right to receive SSI entirely. That is, ISM payments reduce the SSI check up to a presumed maximum value and no more (currently around $264). 

So long as at least $1 of SSI remains after subtracting for the ISM, the SSI beneficiary also remains categorically eligible to receive Medi-Cal health care benefits, sometimes more important than the SSI benefits.  

In sum, being a representative payee on behalf of an SSI or SSDI recipient is serious business. Know SSA’s rules, keep good book keeping, keep the money in a bank account in the recipient’s name, and, if the recipient receives other sources of income and assets make sure to notify SSA and know how such income and assets affects eligibility, as relevant.

The foregoing is not legal advice. Consult a qualified estate planning attorney for guidance. 

Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. and 707-263-3235.