By Matt Young, Attorney
What is a Representative Payee Account and when is it appropriate, or even necessary, to open such an Account? First, it is important to understand the role of a Representative Payee. A Representative Payee is an individual or organization appointed to receive Social Security benefits on behalf of another party known as the Beneficiary. When the Beneficiary is viewed as unable to personally manage his benefits or even able to direct someone else to manage his or her money, a Representative Payee must be appointed and a Representative Payee Account opened. Representative Payees are appointed by a Social Security Administration’s Administrative Law Judge for a number of reasons including when an individual is determined a minor, mentally incompetent, a drug or alcohol addict, or one who can no longer handle his finances due to the advancement of an illness. A Representative Payee does not have free reign with the Beneficiary’s benefits, but must use the money in the best interest of the Beneficiary to pay current and foreseeable needs of the Beneficiary. Furthermore, the Representative Payee is expected to save any surplus monies.
Credit Unions are advised to adopt “Guidelines for Representative Payee Accounts”. Issues to be addressed within the Representative Payee Account Guidelines include not only Account opening procedures, but establishing what “extras” will be associated with the Account. For instance, will an ATM card be issued to the Representative Payee? Will the Account have online banking services? And what about the issuance of a debit card? Note that these services are available to the Representative Payee rather than the Beneficiary since the Beneficiary is not capable of managing his funds independently.If an ATM card is issued, the Representative Payee may have a limited number of lobby visits and checks if the ATM replaces PIN POS transactions on a transaction account. Access to online banking allows the Representative Payee with the ability to transfer monies from his personal accounts to the Payee Account. Yet, the Representative Payee has full access to the funds and these measures simply provide ease of access to manage the Beneficiary’s money. These are examples of the issues to be considered when opening Representative Payee Accounts. What Weltman, Weinberg and Reis do is help assist you in developing guidelines for your Credit Union allowing you to incorporate Account-opening instructions as well as policy on how to manage the issuance of ATM cards, debit cards and other concerns singular to Representative Payee Accounts.