Guide to Players: Social Security

This is the third post on the role of government agencies in guardianships and conservatorships. The first was about the Oregon court system. The second was about the U.S. Department of Veterans Affairs. This one is about Social Security.

Social Security provides retirement income for nearly all Americans over the age of sixty-five and provides disability income for millions of disabled people no matter what their age. Thus, Social Security provides at least some income to most elders or disabled persons who become subject to a guardianship or conservatorship.

When an elder or disabled person cannot manage his or her money, Social Security uses a “representative payee” system that allows a responsible relative or a professional to receive and spend Social Security income for the disabled person. A relative applies to Social Security to be appointed “rep payee” for a disabled person, and if the facts support the need for a fiduciary, Social Security will send the money to the representative. The paperwork is minimal and the annual accounting requirements are fairly simple.

While the U.S Department of Veterans Affairs does not play well with the state court system, the Social Security Administration does. If a state court appoints a conservator to handle of the money of a disabled person, Social Security will generally honor the state court decision and, upon application, make the conservator the representative payee of social security benefits. The U. S. Department of Veteran's, as I noted in my last post, is seldom so cooperative.

You need to keep these relationships in mind when you are determining what kind of fiduciary your disabled elder needs. We know that a guardian makes medical and placement decisions, while a conservator takes control of money. If the elder's money all comes from the federal sources--Social Security or veterans disability--there is probably no need for a conservatorship. The existing federal systems already provide the mechanisms to protect the money. If you establish a conservatorship to handle non-federal assets, Social Security will honor the conservatorship by naming the conservator as rep payee for Social Security income. This puts all the money in one set of hands. The veterans administration, on the other hand, will probably not cooperate in this way and may ignore the state court proceeding.

The rule is that you do not need a conservatorship if the only income of the disabled person is federal money—whether that be social security, veteran's disability, or both. If the elder has assets other than from federal money--let's say a big investment account and some real estate—then a conservatorship may be necessary to manage those assets. Once the conservatorship is established the conservator can take charge of the Social Security money, but will not get control of veterans benefits (without making his or her case directly to the U.S. Department of Veteran's Affairs).

Conservatorships are expensive and messy. Before you wander down that path be sure what assets you want to conserve and whether the protection offered by a conservatorship is worth the cost of the legal proceedings. When making the calculation, don't include federal money—Social Security and veteran's benefits—because that income is conserved through the federal system. Once you have removed the federal component take a look at the costs of the state court proceeding. If the cost of the conservatorship exceeds ten percent of the the amount of money to be protected, look for another way.

More on other ways later.