SSR 68-9: Section 205(j).—Representative Payee—Investment of Conserved Benefits in Federal Credit Union—Applicability of State Law
20 CFR 404.1605
Where conserved social security benefits must be invested in accordance with rules applicable to investment of trust estates by trustees in State of beneficiary's domicile, and parents of child-beneficiary were divorced under decree where mother, prior to her death, had legal custody of child but father continued to have parental rights and responsibilities, and after mother's death, child lived in France and father lived in New York held, since domicile of child is considered to be that of surviving parent with parental rights (here, child's father) after death of parent with legal custody, child's accumulated benefits must be invested in accordance with New York law regarding investment of trust funds by trustees and further held, proposal to invest child's accumulated social security benefits in shares of credit union would be improper under such law.
C became entitled to child's insurance benefits on the earnings record of her deceased mother in January 1961. Her father, A, then living in New York State, was selected as representative payee for C, who had been living in France with maternal relatives since before her mother's death. C's parents had been divorced in 1954, with the mother receiving custody of C. A continued to act as representative payee and to administer the benefits because of his sustained active interest in his child's welfare and education, until October 1965. At that time the child's benefits were made payable to C's maternal aunt in France with whom C was living.
During the years that A acted as representative payee, he sent part of the child's benefits to France for her maintenance and support, and deposited the rest in a bank account. When the change of payee took place, A was permitted to retain and continue to administer the conserved funds, amounting to $1,122.69, which he had decided to invest in a teacher's Federal credit union in New York State, for C's future education.
Under section 404.1605 of Regulations No. 4 of the Social Security Administration, (20 CFR 404.1605) funds certified to a relative or other person on behalf of a beneficiary which are not needed for the current maintenance of the beneficiary, shall be conserved or invested on the beneficiary's behalf. Preferred investments are U.S. Savings Bonds, but such funds may also be invested in accordance with the rules applicable to investment of trust estates by trustees in the State of the beneficiary's domicile.
Since, in this case, there has been an investment of conserved funds by the representative payee in other than U.S. Savings Bonds, two questions must be determined: (1) which State is the beneficiary's domicile? and (2) is the form of investment, i.e., shares in a teacher's Federal credit union, proper under the rules applicable to investment of trust estates by trustees in that State?
The determination of domicile is governed by applicable principles of Federal law. Generally, the forum will apply its own law in determining the domicile of an individual even though such individual is residing outside the forum. Restatement (First), Conflict of Laws §10,1934; In Re Annesley, Chancery Division, 1926 (1926) Ch. 692. Applying Federal law to the facts of this case, it would appear, although there are no Federal decisions directly in point, that the Federal courts would follow the general rule that upon the death of a parent to whom the custody of a child has been awarded by a decree of divorce, the child acquires the domicile of the surviving parent if he continues to have parental rights and responsibilities (136 ALR 914, 915, In Re Thorne, 204 N.Y. 444 (1925), rehearing denied 241 N.Y. 513 (1925), Re Skinner, 300 N.W. 1 (Iowa 1941). Accordingly, in this case, C's domicile would be considered to be New York, the domicile of her father, and New York law would be applicable in determining the propriety of the investment.
This leaves the question whether investment in a Federal credit union is permitted to trustees under New York law. New York Personal Property Law, § 21, which enumerates the categories of permissible investments for funds held by trustees, authorizes investment in various types of commercial banks and savings institutions subject to certain limitations not pertinent herein. Thus, deposits in the former are authorized only if the full amount of any such deposit is insured by the Federal Deposit Insurance Corporation, and deposits in savings institutions are authorized only if such institution is a savings bank incorporated under the laws of New York, or is a savings and loan association organized under The Home Owners' Loan Act of 1933, 12 U.S.C.A. §1461 et seq., or the laws of New York.
Since the Federal credit union does not come within any of these categories of permissible investments of funds held by trustees, it is accordingly held that such investment is inappropriate under New York law and therefore improper for conserved title II benefits.