Managing personal finances can be complex, especially for individuals who rely on disability benefits for their livelihood. More than eight million people receive monthly Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), and some need assistance when it comes to managing their money.
In these cases, the SSA can appoint a beneficiary’s friend or relative to serve as the “representative payee.” The SSA thoroughly vets those who apply to be representative payees to ensure that the best interests of Social Security beneficiaries are protected. This is because a representative payee receives the beneficiary’s payments and is authorized to use them on their behalf,
However, it is crucial to understand how different account roles and ownership structures can impact the protection of these benefits. Specifically, it is essential to distinguish between having someone on your account as a representative payee or signer versus owning the account jointly. This distinction is critical because it can affect the security of your benefits against potential creditors’ claims. If you are collecting disability benefits and considering trusting a loved one with your finances, here’s what you need to know.
The Risks of Joint Account Ownership
Owning a bank account jointly with another person presents a different set of risks. Joint account ownership means that both account holders have equal rights to the account. They can both deposit, withdraw, and manage the funds within the account. However, this shared access comes with a significant downside: your money becomes vulnerable to the creditors of the joint account holder. If the co-owner of the account faces financial difficulties or legal judgments, their creditors can potentially claim a portion of the funds in the account, placing your benefits at risk. To protect your benefits from debts that are not yours, you must add someone to your account only as a representative payee or signer.
Representative Payees and Signers: Key Differences
A representative payee is an individual appointed by the Social Security Administration (SSA) to manage Social Security benefits on behalf of someone who cannot handle their financial affairs due to disability or other reasons. This role is designed to ensure that benefits are used appropriately for the beneficiary’s needs. Importantly, a representative payee manages the funds but does not have ownership of the account. This means that the payee’s creditors cannot make claims against the funds in the beneficiary’s account. The responsibility of the representative payee is strictly to oversee and direct the use of the funds for the benefit of the account holder.
Similarly, a signer on an account has the authority to manage the account’s finances, such as writing checks and making deposits. While a signer has significant access and management capabilities, they do not own the account. The signer’s creditors cannot claim the funds in the account, protecting the account holder’s assets from being affected by the signer’s financial issues.
Proceed With Caution
Adding a new spouse or adult child to your bank account might seem like a convenient way to manage finances or assist with bills. However, this well-intended decision can have serious consequences. One example we’ve seen is when a person added a new spouse to their bank account. Unfortunately, the new spouse had outstanding debts and creditors intervened and seized all the individual’s backpay to cover the spouse’s debt—despite the debts not being the original account holder’s responsibility. This situation wiped out their much-needed financial support.
Another individual placed their adult son on their bank account to help manage their finances while they were hospitalized. Unbeknownst to them, the son had significant credit card debt. Because the son was listed as a co-owner, creditors were able to garnish the account to recover the son’s debts, leaving the original account holder vulnerable and without essential funds.
These examples highlight the importance of carefully considering the implications of joint account ownership, as it could inadvertently put your benefits and assets at risk. Always seek professional legal advice before making changes to your bank account arrangements to ensure your SSDI or SSI benefits remain protected.
Schedule a Free Consultation With Michigan’s Leading Disability Law Firm
Understanding the differences between a representative payee, a signer, and joint account ownership is essential for protecting your benefits. By choosing the appropriate account structure and seeking advice from a trusted disability lawyer, you can effectively shield your financial resources from potential threats and secure your economic stability. At Disability Attorneys of Michigan, we are committed to helping you navigate these challenges and protect the benefits you may be entitled to by law.
Contact us today by submitting a form online or calling our office at 800-949-2900 to schedule a free legal consultation.