Representative Payee Accounts

We would not recommend opening a deposit account for deposits of social security benefits without documenting the account owner’s status as a representative payee. Under the Social Security Administration (SSA) regulations, the SSA generally will select a representative payee for SSA beneficiaries who are under the age of eighteen, and only the representative payee is liable for his or her misuse of the account funds. 20 CFR 416.610(b)20 CFR 416.641(a). For beneficiaries under the age of eighteen, the minor’s legal guardian will receive notice stating that the SSA has appointed a representative payee for the beneficiary. 20 CFR 416.630(a).

If a child has over six months of past-due benefits (as you have indicated is the case here), the benefits must be paid into a separate, dedicated account at a financial institution. 20 CFR 416.546(a). The SSA’s FAQs state that when a child has been recently approved for disability benefits and has a large amount of past-due benefits, the SSA will send a letter informing the representative payee about opening a dedicated account.

A dedicated account can be a checking, savings, or money market account, and they are subject to strict limitations on the use of account funds. 20 CFR 416.640(e). Such dedicated accounts should be titled as follows:

______ (Name of beneficiary) by ______ (Name of payee), representative payee. (12 CFR 416.645(b)(2))

As to the use of debit cards, we are not aware of any limitations on using debit cards in connection with a representative payee account. It is up to your institution to weigh the benefits and risks of allowing a representative payee to use a debit card to access account funds.

Uniform Transfers to Minors Act (UTMA) Accounts

We do not believe that a Uniform Transfers to Minors Act (UTMA) account would be appropriate for deposits of social security benefits, and we would recommend that your customer contact the SSA before depositing funds into a UTMA account. There are several provisions of the UTMA that would conflict with a representative payee’s responsibilities to the SSA. For example, the UTMA allows a custodian to use funds “for the minor’s benefit,” while the SSA regulations impose strict limitations on how SSA funds can be used. 760 ILCS 20/15. The UTMA also requires custodians to terminate the custodianship and transfer the property to the minor once he or she reaches the age of twenty-one, but the SSA may impose different requirements after a minor becomes of age. 760 ILCS 20/21.