Find Out Why Only 1.5% Of Social Security Recipients Use This Program!

Q. My mother, Louise, was diagnosed with dementia when she was 60 years old. Her dementia has progressively gotten worse since then, and I am helping a lot these days with some caregiving tasks, and money matters.

My mother is currently living off of Social Security only. Since I am in charge of her finances at this time, is there a way to ensure that her Social Security benefits are managed properly (since she can no longer manage them herself)? Is it enough to have a Financial Power of Attorney and opt for direct deposit of her benefits? I heard about the Social Security Representative Payee Program. Is it a good idea to participate? Thanks for your help!

A. Today, millions of seniors are living almost exclusively on Social Security. Among beneficiaries 65 and older, 1 out of 5 married couples — and 2 out of 5 singles — receive at least 90% of their income from the program, according to the Social Security Administration. But what if (as in your situation), a parent or another loved one has dementia. How can you ensure that her Social Security benefits are managed properly? Turns out, the Social Security Administration has a program to help, but be aware, the program may actually be more bursensome than helpful.

The Social Security Representative Payee Program — A Last Choice

A representative payee is a person or an organization that is appointed to receive the Social Security or SSI benefits for anyone who can’t manage or direct the management of his or her benefits. Sounds like a good thing. Here’s why it often isn’t the best option

• The Social Security Administration is struggling to effectively administer the Representative Payee program. The agency’s frontline staff is undertrained and underfunded to make the kind of difficult judgments the program calls for. The agency needs more resources to develop better protocols and improve its ability to evaluate potential applicants.
• For about a decade, government oversight agencies have released a stream of reports documenting how the payee system is ripe for abuse and mismanagement.
• Due to program management issues, if a payee is committing fraud, it might not be discovered until 6 months later, or it may never be discovered!
• Sometimes, payees in the program make large expenditures with no supporting documentation. This can be a big problem for the payee if he or she is not keeping receipts for large expenditures.
• One of the biggest complaints about the program is its paperwork requirements. Social Security requires that representative payees file annual reports detailing every single penny spent with the beneficiary’s funds during the previous year.
• Payees often complain that they do not get the support from Social Security that they need.

A Power of Attorney is Usually a Better Choice

Currently only 500,000 Social Security beneficiaries have representative payees. This may seem like a large number, but the figure amounts to only 1.5% of retirees. The Representative Payee program is widely used for those with disability who collect SSI, and for these SSI recipients, often the Representative Payee program is their only option.

The program isn’t widely used by retirees because most people do not know about it and, in reality, most people actually do not need a representative payee, because a Power of Attorney is a much easier and much better choice.

A properly-drafted Financial Power of Attorney is the most important legal document that a person can have, and is an essential part of every Incapacity Plan and Estate Plan. It authorizes an agent, sometimes called “Attorney-in-Fact,” to act on your behalf and sign your name to financial and/or legal documents.

A Power of Attorney is more than sufficient to manage the finances of a loved one with dementia, including her Social Security payment, because the check is typically direct deposited into the recipient’s bank account. As an agent, you can automate your loved one’s finances as much as possible, so most income and expenses are handled seamlessly. Then, you can check that person’s bank, credit card, brokerage and mutual fund statements to be sure everything is on track.

Helping Your Loved One with Dementia

Every adult over the age of 18 should have an Incapacity Plan that includes a Financial Power of Attorney, an Advance Medical Directive (including a Long-term Care Directive), and an Advance Care Plan.   If you don’t have an Incapacity Plan in place, or if your mother has not planned for long-term care, now is the time to get started.  Call us to set up an appointment for a no-cost consultation:

Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

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