SSR 70-41: SECTION 205(j). -- REPRESENTATIVE PAYEE -- USE OF CONSERVED FUNDS FOR PREPAID BURIAL PLAN
20 CFR 404.1603 and 404.1604
- Where a representative payee used a social security beneficiary's conserved benefits to purchase a prepaid funeral plan for him, held, such expenditure of conserved funds may be considered proper under sections 404.1603 and 404.1604 of Regulations No. 4 of the Social Security Administration if the contract is valid under applicable State law, the current needs of the beneficiary are being net and the cost of the plan is reasonable in the light of the beneficiary's financial situation.
Pursuant to section 205(j) of the Social Security Act, N was named representative payee for her husband, O, who is confined to a State mental hospital. N used part of O's conserved benefits, which were in excess of his current needs, to purchase a prepaid funeral plan for him.
Section 205(j) of the Act provides that when it serves the interests of a beneficiary, payment of the beneficiary's benefits may be certified to a relative or some other person to use on the beneficiary's behalf.
Section 404.1603 of Regulations No. 4 of the Social Security Administration (20 CFR 404.1603) provides, as pertinent here, the payments certified to a representative payee on behalf of a beneficiary shall, subject to review by the Administration, be applied only for the use and benefit of such beneficiary in the manner and for the purposes determined by him to be in the beneficiary's best interest. Section 404.1604 provides that benefit payments so certified on behalf of a beneficiary shall be considered as having been applied for the use and benefit of the beneficiary shall be considered as having been applied for the use and benefit of the beneficiary when they are used for the beneficiary's current maintenance -- i.e., to replace current income lost because of the disability, retirement, or death of the insured individual. Where the beneficiary is receiving care in an institution, current maintenance includes the customary charges made by the institution to individuals it provides with care and services like those it provides the beneficiary which are not met by the institution.
The issue to be resolved in the instant case is whether or not a contract for purchase of a prepaid burial plan by N on O's behalf is a proper expenditure of his conserved benefits under sections 404.1603 and 404.1604 of Regulations No. 4, supra.
The facts shown that N paid $500 to the Y Funeral Home for the funeral contract. Under State law, payments made under this type of contract are to be deposited in the Y Funeral Home Trust Fund of the X Bank, and held for the benefit of the purchaser until the obligations of the contract are fulfilled according to its terms. The contract provides in part as follows:
- In consideration of the sum of $500.00 paid, or to be paid by the PURCHASER to the FUNERAL DIRECTOR and providing the amount contained in the County Welfare Board Social Welfare Fund at the time of the death of the PURCHASER is in no less an amount than that agreed upon between the parties, the FUNERAL DIRECTOR shall furnish the funeral service consisting of professional services, funeral home facilities and merchandise. An allowance of $ _____ is included for interment charges.
- If at the date of the PURCHASER'S death the Fund established is insufficient to cover the services and merchandise specified above, according to the prices being charged by the FUNERAL DIRECTOR to the general public at such date, then the funds on deposit shall be used by the FUNERAL DIRECTOR to provide services and merchandise of a type and quality as may be purchased for the total amount of funds on deposit in the SOCIAL WELFARE FUND at the date of PURCHASER'S death.
While N, as a person confined in a State mental institution, is disqualified under applicable State law from receiving old-age assistance, the contract here entered into is an old-age assistance contract form, and purports to guarantee him a funeral out of the Social Welfare Fund maintained by the Commissioner of Public Welfare or in an amount allowed by the county for old-age assistance burials, in the event the amount in the special bank fund is less than the amount allowed by the county for such burials.
Since, in the instant case, O's current needs are being met out of his current benefits, and the cost of the funeral plan is reasonable in view of his financial status, held, N as representative payee may properly use a portion of O's conserved benefits to purchase the prepaid funeral for him, pursuant to sections 404.1603 and 404.1604 of Regulations No. 4 of the Social Security Administration.