Incapacity planning for Social Security

As the Coronavirus continues to put people of all walks of life in hospitals and on ventilators, the necessity of incapacity planning is starting to hit home. The question now isn’t so much “what if I die?” (although there’s that, too), but “what if I’m unable to speak for myself? Who will take care of things if I’m temporarily incapacitated?”

Note, though COVID-19 is on everyone’s minds now, this is a wake up call to have your affairs and documents in order all the time for any reason.

Two recent media articles, What You Should Know Before You Need a Ventilator and After ICU, Coronavirus Patients’ Ordeal Is Far From Over should be required reading for people.

Incapacity planning for Social Security has always been a conundrum. SSA doesn’t recognize a properly executed power of attorney. * But until recently it didn’t have its own form allowing a recipient to appoint another person to interact with Social Security on their behalf, even to submit address changes. Social Security does have a representative payee program, but it’s really designed for people who can’t manage their Social Security checks, such as minors or truly incapacitated people. The representative payee is appointed by SSA, not the person receiving Social Security, and once the appointment is made, benefits are paid to the payee. People doing regular incapacity planning are not usually ready to lose complete control over their Social Security benefits in this way.

Now SSA has come out with an Advance Designation program that allows anyone receiving Social Security to name up to three people in priority order whom they would like to serve as their representative payee should they become unable to manage their financial affairs. The advance designation is just that: it tells SSA who you want your representative payee to be at some point in the future.

When that time comes, the official appointment is still done by SSA. Once SSA considers a person too incapacitated to manage their own Social Security benefits, they will name a representative payee to take over. The advance designation on file will inform their choice, but SSA still has the final say. Indeed, they will evaluate the capacity of the person named on the advance designation before appointing that person representative payee. When you think about it, this makes sense. The Social Security benefits paid to old people are ripe for fraud, and SSA just wants to make sure they are being properly managed.

Once appointed, the representative payee would receive the Social Security checks on behalf of the benefit recipient and be required to account for the funds using the Internet Representative Payee Accounting Report This Guide for Representative Payees explains more. Some of the duties of a representative payee include:

  • Determining the beneficiary’s total needs and using the benefits received in the best interests of the beneficiary
  • Maintaining a continuing awareness of the beneficiary’s needs and condition, if the beneficiary does not live with the representative payee, by contact such as visiting the beneficiary and consultations with custodians
  • Applying the benefit payments only for the beneficiary’s use and benefit
  • Notifying SSA of any change in his or her circumstances that would affect performance of the payee’s responsibilities
  • Reporting to SSA any event that will affect the amount of benefits the beneficiary receives and to give SSA written reports accounting for the use of the benefits

Representative Payees cannot:

  • Use a beneficiary’s funds for their own personal expenses, or spend funds in a way that would leave the beneficiary without necessary items or services (housing, food and medical care)
  • Put a beneficiary’s Social Security or SSI funds in the representative payee’s or another person’s account
  • Keep conserved funds once they are no longer a representative payee for the beneficiary
  • Charge the beneficiary for services unless authorized by the Social Security Administration to do so

Incapacity planning for Social Security, while important, is not as crucial as it is for other areas of a your life because so much of Social Security is automated. Once benefits start, they are direct-deposited into your bank account. Conceivably, you could spend some time in the hospital with the Coronavirus and have no need to interact with SSA as checks hit the account like clockwork (see chart below).

But because a period of extended incapacity cannot be ruled out, and because it’s so easy to do, you should consider to do your Social Security advance designation at the time you are getting the rest of your affairs in order. All you have to do is go to, log in, and click on Advance Designation.

Once you’re in your account that online link described above takes you to a page where you can enter the names and phone numbers of up to three people, in order of priority. These designees can be changed at any time, as long as you have the capacity to do so.

Please note: the person named in a power of attorney may NOT do the advance designation. So if you wait too long and become incapacitated to the point where the previously appointed attorney-in-fact named in the power of attorney takes over the management of his or her financial affairs, that person may not interact with SSA on the benefit recipient’s behalf. SSA would step in and appoint a representative payee to manage the recipient’s Social Security, most likely taking into account the recipient’s wishes, but not necessarily.

People should, of course, inform their designees that they have been so named. Then when the time comes, the first designee would contact SSA and ask to be named personal representative. SSA will see the advance designation on file and go through their usual procedure for appointing a personal representative taking into account the recipient’s wishes while assuring the proper management of the funds.

Original article for an adviser newsletter by Elaine Floyd, CFP®, Director, Retirement and Life Planning, Horsesmouth, LLC, within which I’ve made edits for the broader public.

*Note that Financial Power of Attorney should be another important document that is specific to finances and are specific to your finances rather than broad and general powers that some banks may not want to use because they don’t give specific powers in many cases about finances.

Note too that, although YOU may not be receiving Social Security yet, is a loved one of yours receiving benefits? Are they prepared?

Photo by EVG Photos on Stocksnap.

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