Why Does Social Security Withdraw Direct Deposits From A Deceased Person's Bank Account?

Category: 
Apr 13 2017 - 10:45am

My Father -in-law recently passed away at age 90.

My wife and I researched the regulations about when his benefits stop. We learned that if someone who was receiving Social Security benefits dies ,the bank where the direct deposit was going, must return the benefit received for the month of death or any later months. However, the account is entitled to keep death benefits for the month the died.

He died April 1 so his March benefits were payable in April. We were very surprised to receive a letter from his bank that SS had taken back the money. We called SS any they agreed we were entitled to the payment but that we had to file a Form 1724 to have to money deposited back into his checking account.

They told us that they AUTOMATICALLY recall the last check when they receive notice of death. Without looking at the date of death on the notice.

We expect to have this payment re-deposited. BUT, I'm sure that there MANY people who are not aware of the regulations. When these people receive a letter from a bank that SS has pulled back a benefit they'll assume it's all kosher and won't challenge it.

Many millions of dollars are being taken from legitimate beneficiaries.

Hi,

I'm sorry for your loss.

When a person dies on the first day of a month or later, but before their regular payment date, this creates an underpayment. The reason that Social Security withholds payment in these cases, or requires the bank to return the funds if the deposit has already been made, is because the person(s) entitled to the underpayment is determined by law. And, the person with access to the deceased person's bank account may or may not be the person legally entitled to the underpayment.

Underpayments are payable in the following order (https://www.ssa.gov/OP_Home/handbook/handbook.19/handbook-1902.html):

A. The widow(er) of the underpaid person if:
1.Living in the same household with the underpaid person at the time of death; or
2.Entitled to a monthly benefit on the same earnings record as the underpaid person for the month of death.

B. The child or children of the underpaid person entitled to monthly benefits on the same earnings record as the underpaid person for the month of death. If there is more than one entitled child, payment is made in equal parts to each child;

C. The parent or parents of the underpaid person entitled to monthly benefits on the same earnings record as the underpaid person for the month of death. If there is more than one entitled parent, payment is made in equal parts to each parent;

D. A widow(er) who does not meet the requirements of (A);

E. A child or children who do not meet the requirements of (B). If there is more than one child, payment is made in equal parts to each child;

F. A parent or parents who do not meet the requirements of (C). If there is more than one parent, payment is made in equal parts to each parent; and

G. The legal representative of the underpaid person's estate.

The form SSA-1724 that you were required to complete and submit is required for Social Security to determine which person or persons are legally entitled to claim any underpayment due to a deceased beneficiary.

Best, Jerry