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Five Steps to Ensure Your Clients Are Benefitting from Their Federal Benefits

Amy Claire Harfeld


  • Many foster youth with SSI and OASDI benefits are unlikely to receive their money, as foster care agencies routinely intercept and use the funds to reimburse themselves for the cost of foster care.
  • This practice is deemed predatory, as it goes against the intended use of the benefits for the well-being of the beneficiaries.
  • Foster care agencies often serve as representative payees without adequately exploring more suitable caring adults in the child's life.
  • Attorneys can play a crucial role in protecting foster youth's federal benefits by checking eligibility, demanding an accounting of benefits usage, identifying alternative representative payees, and ensuring proper management of funds.
Five Steps to Ensure Your Clients Are Benefitting from Their Federal Benefits
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According to the Social Security Administration, Social Security Disability (SSI) and Survivor (OASDI) benefits must be used or conserved for the benefit, and in the best interest of, the beneficiary. Approximately 10–20 percent of foster youth have either a qualifying physical or mental disability or had a working parent who paid their Social Security (or Veterans) retirement insurance premiums and died, leaving their surviving child as their beneficiary. These benefits average over $700–$850/month and—if used as intended—provide potentially transformative resources for some of the most vulnerable foster youth as they move toward self-sufficiency.

Unfortunately, these foster youth beneficiaries will probably never see a dollar of their money. Almost all foster care agencies automatically screen and apply for these benefits on behalf of youth when they enter foster care. That’s a good thing—it’s what reasonable parents would do to address their own children’s needs. The agencies then routinely request to serve as the representative payee for the benefits. Agencies are allowed to serve in this capacity only when they prove they looked for other more suitable caring adults in the child’s life first. Finally, the foster care agencies then almost uniformly intercept the child’s monthly check to reimburse itself for the cost of that child’s foster care, despite the fact that the agency is already legally obligated to pay for it—all without ever informing the child or the child’s attorney. This lack of transparency and improper use of foster youth assets to serve the state rather than the child’s needs is nothing short of predatory.

As stated by one youth, “I never thought that the system that was supposed to be helping me really was stealing from me the entire time.”

Public awareness and media coverage about this issue has evolved slowly, starting with a 2012 report by the Children’s Advocacy Institute, but has seen unprecedented attention since the release of a Pulitzer-recognized investigative series by National Public Radio and the Marshall Project. Other coverage by the Philadelphia Inquirer, CBS News Chicago, Hawaii News Now, the Insider, the Imprint, Omaha World Herald, and The Hill has led to efforts to advance federal, state, and local reforms.

Recent state bills to end or limit this predatory practice include those in Texas, Nebraska, Connecticut, Illinois, Hawaii, Minnesota, and California. Locally, action or legislation has occurred in Los Angeles, New York City, Philadelphia, and Washington D.C.

Although federal and state reforms are critical to stop this practice (call it takings, conversion, breach of fiduciary duty, misuse of funds, violation of due process and equal protection, etc.), the most immediate benefits to children will come from strategic advocacy by children’s attorneys on the ground, case by case.

Five Things Attorneys Can Do to Protect the Federal Benefits of Their Clients

  1. Check to see if your client is receiving or is eligible for benefits, and counsel accordingly. You may inquire of the agency attorney and/or caseworker as to whether the agency has screened your client for benefits, and whether benefits have been assigned. If no information is forthcoming, file a motion to produce such information. If current or former clients would like to check for themselves, they can review the guide and utilize this tool developed by the Marshall Project. Foster youth may have strong reactions to learning that this is or was happening without their knowledge. Be prepared to counsel accordingly.
  2. Request an accounting for use of benefits, justification of expenditures in your client’s best interest, and your client’s stated priorities for the use of their benefits. Representative payees are obligated to use the benefits received on behalf of a beneficiary only for the use and benefit of the beneficiary. Bipartisan Congressional leaders have commented, “We are specifically concerned [] about reports that benefits are being used to help state budgets instead of children.”

    Request that the state provide an explanation as to how your client’s benefits are being used (or conserved) for the child’s individual use and benefit or how the use furthers their best interest.

    Interview your client and ask what their priorities would be for use of their funds. Do they have unmet current needs? Would they like to plan for expenses ahead such as housing, food, transportation, or education? Make a motion to the court to compel the agency to use your client’s benefits consistent with federal rules and their wishes.

    The Social Security Administration (SSA) requires representative payees, including child welfare agencies, to keep a detailed record of money received and how it was spent in the beneficiary’s best interest, and to complete an annual accounting report which is sent to the payee. If the agency has not provided this accounting, submit a motion to provide an accounting history, and for future accounting to be sent regularly to your client and to you. Pay special attention as to whether the benefits track the particular child, or are deposited into general child welfare or state funds, which is improper.
  3. Identify an alternative representative payee who has your client’s best interest at heart, apply for a change, and establish an exempted account to deposit the child’s benefits. If a foster care agency is taking and improperly using your client’s benefits, the fastest way to ensure the appropriate use of your client’s benefits is to change the representative payee. The SSA is explicitly obligated to proactively identify family or other caring adults who could serve as the payee for the child before appointing the foster care agency to do so. SSA employees are admonished, “Do not routinely appoint the foster care agency as payee for a child in foster care. If there is a payee candidate higher than the agency on the payee preference list, contact that person and document why they are or are not interested in filing as payee before appointing the agency.” Yet automatic appointment of the agency is routine in most cases.

    The SSA’s payee preference list governing appointment for foster youth is:
    1. a natural or adoptive parent who has custody of the beneficiary, or a guardian;
    2. a natural or adoptive parent who does not have custody of the beneficiary, but is contributing toward the beneficiary's support and is demonstrating strong concern for the beneficiary's well-being;
    3. a natural or adoptive parent who does not have custody of the beneficiary and is not contributing toward his or her support but is demonstrating strong concern for the beneficiary's well-being;
    4. a relative or stepparent who has custody of the beneficiary;
    5. a relative who does not have custody of the beneficiary but is contributing toward the beneficiary's support and is demonstrating concern for the beneficiary's well-being;
    6. a relative or close friend who does not have custody of the beneficiary but is demonstrating concern for the beneficiary's well-being; and
    7. an authorized social agency or custodial institution.

      Hold SSA accountable by demanding evidence of its efforts to identify a payee higher up on the list, and an explanation as to why each candidate was not able to serve. Then consult with your client to identify any potential family members or caring adults in their life who might be willing to serve, and help an appropriate alternative apply to change the representative payee.

      If you succeed, help ensure that the funds will be deposited into the proper type of account. Clients receiving Social Security Survivor or Veterans Survivor benefits have no asset caps to contend with, so most custodial trust accounts will suffice. Foster youth receiving SSI/disability benefits may not accumulate more than $2,000 in assets without jeopardizing their eligibility. This is not as big of a problem as many believe. There are at least three types of accounts which can be used to deposit funds without running up against the asset caps: Plan for Achieving Self Support (PASS) accounts, ABLE (529A) accounts, and Special Needs Trusts. If there is no better option than the agency available to serve as representative payee, make a motion requesting the judge to compel proper management and use of your client’s funds as was done by one judge in North Carolina.
  4. Determine whether the agency has used your client’s benefits appropriately. A fiduciary may use a child’s benefits to pay for current maintenance needs such as food, clothing, and shelter, only if those needs are not being provided for elsewhere. Federal rules require that if current maintenance costs are otherwise provided for, the payee must either conserve the benefits for reasonably foreseeable future needs or use them for current needs for which the agency is not already obligated or willing to pay (such as a piece of equipment related to your client’s disability which is not Medicaid-approved). 

    Foster children do not have a debt obligation to pay for their own care. State and federal law explicitly provide that state foster care agencies must pay the costs of foster care. E.g., Md. FL § 5-527(b)-(c) (requiring that the “Department shall pay for foster care” for all foster children). Foster care maintenance payments must include “payments to cover the cost of (and the cost of providing) food, clothing, shelter. . . .” 42 U.S.C. § 675(4)(A).  Whether a child is IV-E eligible or not, the agency may not use the child’s own assets to supplant their obligations without an independent showing that it would be in the best interest of that child. For Title IV-E eligible children, federal law specifically prohibits states from using other federal funds to defray or replace required state expenditures.

    File a motion to compel the agency to document its rationale for how its use of your client’s benefits furthers your client’s particular best interests, and not simply serving to supplant their existing fiscal obligations to all youth in care.
  5. Demand fiduciary accountability for agencies serving as payees and raise misuse of funds claims if appropriate. Representative payees are fiduciaries, and owe very specific duties to beneficiaries in foster care. Some of these include using and saving the money for the child’s (not the state’s) benefit, and returning conserved funds to the beneficiary.

    Misuse” of Social Security benefits occurs when the representative payee converts the benefits of another person to a use other than for the use and benefit of that person. 42 U.S.C. § 405. In the case of misuse, federal law provides that SSA must repay the beneficiary for misused funds though public agencies are shielded from liability. Misuse of benefits claims are difficult—but not impossible — to win in order to restore your client’s misappropriated funds. Arguments to do so were made recently in an amicus appeal brief to the Alaska Supreme Court. The best recourse to get your client their property is to change the payee ASAP.

    If filing suit for breach of fiduciary duty or misuse of funds doesn’t work out, advocate for the Commissioner of Social Security to issue new policy and rules clarifying that using foster youth’s benefits to reimburse the states for their own foster care does not serve the children’s “use and benefit” or “best interest.” The Commissioner of Social Security (currently Kilolo Kijakazi) has the authority under federal law to issue regulations clarifying proper “use and benefit.” The Commissioner of the Children’s Bureau (currently Aysha Schomburg) also has the authority under existing law to ensure foster care agencies are following the rules and acting in the best interest of the children they are charged to serve.

    Finally, you can always report any of these, or additional claims of improper use of benefits, to the Social Security Administration’s Office of the Inspector General. They are obligated to investigate and respond.

Policy and legislative changes are underway across the country in cities, counties, states, and in Congress. If you are interested in following the example of these reform efforts or spearheading your own, visit the Children’s Advocacy Institute’s dedicated webpage for information and resources.

At the end of the day, however, children’s attorneys on the front line are best equipped to ensure that their clients are benefiting from their benefits. Following these steps and engaging in advocacy and litigation will help ensure that your client is better equipped to move toward independence and will contribute to awareness and policy reforms to put an end to this practice once and for all.