When creating an estate plan, many draft a power of attorney. This is a key element of estate planning in which you designate an individual to manage your finances should you become unable to do so.
However, many may be surprised to know that although managing your finances may include managing Social Security benefits, the Social Security Administration does not recognize powers of attorney, or POAs. You need a separate plan to designate an individual to manage your Social Security benefits.
How to create a plan addressing Social Security benefits
A 2018 law permits you to select and even rank up to three people to manage your benefits. You can name these individuals on the Social Security website, over the phone or even via mail. You can also change these individuals, or designees, at any time. The SSA will review, evaluate and accept each candidates’ ability to perform the duties. The organization will then work with the first designee of your choice.
What is the role of the designee in managing benefits?
Your designee will become the representative payee for your benefits. When the time comes for the individual to act on your behalf, they will receive your benefits and use them to pay for your needs. As the designee will need to maintain records of funds spent and file an annual report with the SSA, it is wise to select an individual who is accountable, organized and financially savvy.
What if you do not create a Social Security benefits plan?
If you fail to name a designee for your Social Security benefits, the SSA will do so if you need help managing your benefits. Relatives and friends can apply to become your representative. The court also can name a legal guardian for you.
In each of these cases, you run the risk of losing control of your finances to someone you did not select. The appointed individual may not know your wishes or, in a worst-case scenario, may not work in your interests. The only way to preserve your desires is with a comprehensive estate plan.
You should think of your estate plan as a series of living documents. Your life changes. Laws change. Each change can have a dramatic impact on your plans. In the end, an estate plan does more than tend to your money, property and other assets. It provides a legacy of love, not legal disputes.