PR 07211.039 Ohio

A. PR 10-050 MOS-Ohio — Court Order Directing Representative Payee’s Investment of Benefits on Behalf of Beneficiary — REPLY Your Ref: S2D5G6 Our Ref: 10-0024-ncs

DATE: January 20, 2010

1. SYLLABUS

A court order directing representative payee’s investment of benefits on behalf of beneficiary is not binding on the payee. Section 207 of the Social Security Act prohibits attempts to direct the disposition of benefits certified to a representative payee. If a court order directs a payee how to use an individual's social security benefit, the payee can use section 207 as a defense against such action.

2. OPINION

You asked us to review an order issued by an Ohio state court in a case involving Amanda H~, a recipient of Social Security benefits. You requested that we provide the field office with guidance for Amanda’s representative payee with respect to the court order. For the reasons discussed below, we conclude that the court order is inconsistent with the Agency’s rules governing representative payees. We have attached proposed language that may be used in a letter to the representative payee.

BACKGROUND

Amanda H~ receives Social Security benefits on the account of her deceased father, Matthew H~. Julie H~ is Amanda’s stepmother and representative payee. Amanda’s grandmother, Christine H~, also applied to be her representative payee but was denied.

In October 2009, the Cuyahoga County Court of Common Pleas, Domestic Relations Division issued a Judgment Entry pursuant to the mutual agreement of the parties, Julie H~ and Christine H~. The court ordered that Amanda’s Social Security benefits “shall be placed into an interest bearing account in the name of Amanda H~, and not used or disposed of unless agreed to, in advance, by the parties in writing.” The field office staff indicated that the grandmother obtained this court order after the Agency denied her request to be appointed representative payee.

DISCUSSION

As an initial matter, it is well-established that the Federal government, as sovereign, is immune to suits in and the orders of state courts, unless the sovereign has consented to submit itself to the jurisdiction of the court. See United States Const. Art. VI, cl. 2; Hercules Inc. v. United States, 516 U.S. 417, 422-23 (1996). Here, the Social Security Administration, a federal agency, has not relinquished its sovereignty and has not submitted to the jurisdiction of the Ohio courts. The limited waiver of sovereign immunity in the Social Security Act is unambiguously limited to individuals who have exhausted their administrative appeals remedies. See 42 U.S.C. § 405(g). Such a waiver of sovereign immunity is strictly construed in the Agency’s favor. See Block v. North Dakota, 461 U.S. 273, 287 (1983); United States v. Mitchell, 445 U.S. 535, 538-39 (1980).

Moreover, under the Social Security Act, a state court does not have the authority to direct the use of Social Security benefits. 42 U.S.C. § 407(a) provides:

The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

The Supreme Court has stated that this section “imposes a broad bar against the use of any legal process to reach all social security benefits. That is broad enough to reach all claimants, including a State.” Philpott v. Essex County Welfare Board, 409 U.S. 413, 417 (1973). Thus, Social Security benefits and the associated rights under the Act are generally neither assignable nor subject to legal process, including court orders. See 42 U.S.C. § 407(a); Washington Dep’t of Social & Health Servs. v. Guardianship Estate of Danny Keffeler, 537 U.S. 371, 385 (2003); see also POMS GN 02410.001.

Rather, Congress granted the power to determine who should manage a Social Security beneficiary’s benefits and how they should be managed to the Commissioner. See 42 U.S.C. § 405(j). That power includes the right to appoint or remove a representative payee, and the right to direct the representative payee. See id.; 20 C.F.R. §§ 404.2001-404.2065. A representative payee must use the payments she receives only for the use and benefit of the beneficiary in a manner and for the purposes she determines to be in the beneficiary’s best interests. See 20 C.F.R. § 404.2035(a). Payments are considered to be “for the use and benefit of the beneficiary” if they are used for the beneficiary’s current maintenance. See id. § 404.2040(a)(1). “Current maintenance includes costs incurred in obtaining food, shelter, clothing, medical care, and personal comfort items.” Id. After a representative payee has used Social Security benefit payments for the beneficiary’s current maintenance, any remaining amount must be conserved or invested on behalf of the beneficiary. See id. § 404.2045(a). The investment must show clearly that the payee holds the property in trust for the beneficiary. See id. The representative payee can be held personally liable for misuse of benefits, and the Agency may change the representative payee or take any other action allowed under the regulations if the representative payee cannot establish that she used the funds for the beneficiary’s needs. See id. §§ 404.2041, 404.2050.

Here, as noted above, the Ohio Court of Common Pleas has no jurisdiction over the Social Security Administration, under the Supremacy Clause of the United States Constitution and the doctrine of sovereign immunity. As such, the Agency is not bound by the court’s October 2009 judgment. Moreover, the court is prohibited under 42 U.S.C. § 407 from directing the disposition of Social Security benefits; that power is reserved to the Commissioner alone. The court order requires Julie H~ to place all of Amanda’s benefit payments in an interest bearing account in Amanda’s name and to obtain Christine H~’s consent prior to the disbursement of those funds. This, however, is inconsistent with Julie’s duties as representative payee under the Social Security Act and regulations, and constitutes an improper exercise of legal process with respect to Amanda’s Social Security benefits. Specifically, Julie is obligated to use Amanda’s benefit payments first for her current maintenance. Only after Amanda’s current maintenance needs are met, may any remaining funds be invested or conserved.

Such conserved funds must be placed in a properly titled account which shows clearly that Julie, as representative payee, holds the property in trust for Amanda. Moreover, to the extent the court orders payment in way that is not for Amanda’s use and benefit, Julie may be responsible for repaying those benefits.

We suggest sending a letter to Julie, clarifying her obligations as representative payee with respect to Amanda’s Social Security benefits and the statutory limitations on the court’s authority to direct the use of those benefits.

CONCLUSION

For the reasons discussed above, we conclude that the Ohio state court’s October 2009 judgment cannot override controlling Federal statutory law and the Agency’s implementing regulations. The court order impermissibly attempts to direct the disposition of benefits certified to a representative payee, in violation of 42 U.S.C. § 407. A sample letter to the representative payee is attached to this opinion.

Donna L. C~
Acting Regional Chief Counsel, Region VII

By ______________
Cristine B~
Assistant Regional Counsel

Dear Julie H~:

The Social Security Administration has been informed of a judgment entry dated October 6, 2009, by the Cuyahoga County Court of Common Pleas, Domestic Relations Division regarding Amanda H~, a minor child for whom you have been appointed the representative payee. In the judgment entry, the court ordered that Amanda’s Social Security benefits “shall be placed into an interest bearing account in the name of Amanda H~, and not used or disposed of unless agreed to, in advance, by the parties [Julie H~ and Christine H~] in writing.”

The court order conflicts with federal statutory and regulatory laws which govern the use of Social Security benefits and the responsibilities of representative payees. The Social Security Act and its implementing regulations give the Social Security Administration, a federal agency, the sole authority to appoint a party to serve as the payee to receive benefits on behalf of a Social Security beneficiary, and to determine how those benefits should be managed. See 42 U.S.C. § 405(j); 20 C.F.R. §§ 404.2001-404.2065. Moreover, under the Social Security Act, Social Security benefits are not subject to legal process, including court orders. See 42 U.S.C. § 407(a); Washington Dep’t of Social & Health Servs. v. Guardianship Estate of Danny Keffeler, 537 U.S. 371, 385 (2003). Furthermore, it is well-established that the Federal government, as sovereign, is immune to suits in and the orders of state courts, unless the sovereign has consented to submit itself to the jurisdiction of the court, which it has not done in the present case. See United States Const. Art. VI, cl. 2; Hercules Inc. v. United States, 516 U.S. 417, 422-23 (1996).

The Social Security Administration generally appoints a representative payee to receive a child’s benefits because, in such cases, the beneficiary is not able to manage or direct the management of benefit payments in his or her interest. See 20 C.F.R. § 404.2001. A representative payee must use benefit payments only for the use and benefit of the beneficiary in a manner that is in the beneficiary’s best interests. See id. § 404.2035(a). Payments are considered to be for the use and benefit of the beneficiary if they are used for the beneficiary’s current costs incurred in obtaining food, shelter, clothing, medical care, and personal comfort items. See id. § 404.2040(a)(1). Any remaining amount must be conserved or invested on behalf of the beneficiary, in a manner that clearly shows that the payee holds the property in trust for the beneficiary. See id. § 404.2045(a). The representative payee can be held personally liable for misuse of benefits, and the Social Security Administration may change the representative payee or take any other action allowed under the regulations if the representative payee cannot establish that she used the funds for the beneficiary’s needs. See id. §§ 404.2041, 404.2050.

In sum, the Cuyahoga County Domestic Relations Court lacks jurisdiction over the Social Security Administration, a federal agency, and is prohibited under 42 U.S.C. § 407 from directing how Social Security benefits are to be used. The court’s judgment entry appears to be inconsistent with federal statutory law, federal regulations, and the Agency’s rules governing benefit payments to representative payees. As a payee for Amanda H~ appointed by the Social Security Administration, you are required to comply with your obligations under federal law. You may want to advise the court of the information outlined above.

We hope that the information in this letter answers any questions or concerns you may have. If you would like to discuss this matter further, please contact _____________.

B. PR 09-112 Summit County Children Services and the Juvenile Court System- REPLY Our Ref.: 09-0124-nc

DATE: June 4, 2009

1. SYLLABUS

A juvenile courts may not issue an order that prevents a child protection agency from reporting to SSA when it takes custody of a child who is receiving SSI benefits. By not reporting this custody change, SSA would not consider a change of payee but instead would continue to pay benefits to the parents as payee.

Furthermore, the court may not forbid a child protection agency from applying to become payee for a child beneficiary for whom they have taken custody and the court may not require that the protection agency turn over any social security funds they receive to any third party.

2. OPINION

You asked us to draft some language that responds to certain concerns raised by Summit County Children Services (SCCS) with respect to court orders where SCCS has taken custody of child SSI recipients. Below, we address the issues raised by the court orders, and then provide some model language that could be used to respond to SCCS.

BACKGROUND

A manager at SCCS in Akron Ohio advised that juvenile courts in her area are including language in their orders stating that SCCS is not to notify SSA when SCCS takes custody of a child who is receiving SSI so as not to disrupt funding to the parent/representative payee. It appears that, when SCCS takes custody of a child, it may affect the child's continued eligibility for SSI, and thus it has been SCCS's practice to notify SSA when it takes custody of such a child. Also, the juvenile courts are apparently ordering that, after taking custody of such a child, SCCS should forward any SSI payments that they receive to the parents, and SCCS should not request to become a representative payee for the child. As to the last aspect of the order, SCCS has indicated that they would not, in any case, ask to become a representative payee because a child in their custody would not be eligible for SSI due to receipt of Title IV-E benefits. The juvenile courts are apparently making these orders so that the parents can continue receiving their child's SSI benefits, pay their rent, and get their children back. SCCS has asked for guidance on these issues and on how a representative payee must spend SSI benefits.

In light of SCCS's requests, you asked that we provide some language that could be used by SCCS to address the appropriate use of the child's SSI funds by a parent as representative payee. You also asked for language that addresses the obligation of a parent as representative payee to report any change in custody arrangements.

DISCUSSION

As an initial matter, a state court lacks the authority to direct the disposition of benefits that are paid to a representative payee. Aside from some exceptions not pertinent here, Social Security SSI benefits are exempt from any legal process by 42 U.S.C. §§ 407(a), 1383(d)(1), which provides that:

The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

42 U.S.C. § 407(a) (emphasis added); see POMS GN 02410.001. Thus, to the extent that state courts are instructing non-custodial parents to use SSI benefits to maintain a home to which the SSI beneficiary may or may not someday return, this would appear to be impermissibly subjecting the SSI payments to legal process. See POMS GN 02410.001 (legal process is generally a court order).

SSA also has a number of very specific requirements regarding how a representative payee may spend received benefits. A representative payee must use SSI only for the beneficiary's use and benefit in a manner that is in the beneficiary's best interest. 20 C.F.R. § 416.635(a). SSA considers SSI to have been used for the use and benefit of the beneficiary if the benefits are used for the beneficiary's current costs incurred in obtaining food, shelter, clothing, medical care and personal comfort items, or for reasonably foreseeable needs. 20 C.F.R. § 416.640(a); see POMS GN 00602.001 ("A payee must use benefits to provide for the beneficiary's current needs such as food, clothing, housing, medical care and personal comfort items, or for reasonably foreseeable needs."); POMS GN 00604.001(B)(4) ("Misuse of benefits occurs when the payee neither uses benefits for the current and foreseeable needs of the beneficiary, nor conserves benefits for the beneficiary."). If SSI benefits are not needed for the beneficiary's current maintenance or reasonably foreseeable needs, they must be conserved or invested on behalf of the beneficiary. 20 C.F.R. § 416.645(a); POMS GN 00603.001(B)(2) ("The purpose of the title XVI benefit is to meet the daily living expenses of the beneficiary. Remaining benefits must be conserved or invested for the beneficiary."). If state courts are instructing non-custodial parents to use SSI benefits to maintain a home to which the SSI beneficiary may or may not someday return, this may be inconsistent with the rule that benefits either be used for the beneficiary's current maintenance, be used for the beneficiary's reasonably foreseeable needs, or be conserved on behalf of the beneficiary.

Finally, if the state courts are instructing representative payees not to report a change in custodial status so as not to disrupt funding, that would appear to be inconsistent with the representative payee's reporting requirements. See 20 C.F.R. §§ 416.635(d), (f); 416.665(a); POMS GN 00605.010 (representative payee must report changes that affect entitlement to benefits or circumstances that may affect performance of the payee's responsibilities and must provide an annual accounting, which includes information on where the beneficiary lived during the accounting period).

To inform SCCS of the foregoing, we would suggest a letter containing the following language:

Thank you for alerting us to certain practices of the juvenile courts when Summit County Children Services (SCCS) takes custody of a child that is receiving Social Security Supplemental Security Income (SSI) through his/her parents as representative payees. You indicated that the juvenile courts are entering orders stating that SCCS is not to notify the Social Security Administration (SSA) when SCCS takes custody of a child who is receiving SSI, so as not to disrupt funding to the parent/representative payee. Also, the juvenile courts are apparently ordering that, after taking custody of such a child, SCCS should forward any SSI payments that they receive to the parents, and SCCS should not request to become a representative payee for the child. The juvenile courts are apparently making these orders so that the parents can continue receiving their child's SSI benefits, pay their rent and get their children back. You asked for guidance on these issues, as well as guidance on how a representative payee should spend SSI benefits.

As an initial matter, we note that any action by a state court that attempts to direct the use of SSI benefits would violate the Social Security Act's anti-assignment provision, which provides that:

The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

42 U.S.C. §§ 407(a), 1383(d)(1). Thus, to the extent that state courts are instructing non-custodial parents to use SSI benefits to maintain a home to which the SSI beneficiary may or may not someday return, this would appear to be impermissibly subjecting the SSI payments to legal process.

You have advised that SCCS would not apply to become a representative payee for a child after taking custody, because a child in your custody would not be eligible for SSI due to receipt of Title IV-E funds. Since SCCS would not be appointed as representative payee, the court's order for SCCS to pay over SSI to the non-custodial parent's should not be an issue.

However, regardless of who is selected, the representative payee must use SSI only for the beneficiary's use and benefit in a manner that is in the beneficiary's best interest. 20 C.F.R. § 416.635(a). SSA considers SSI to have been used for the use and benefit of the beneficiary if the benefits are used for the beneficiary's current costs incurred in obtaining food, shelter, clothing, medical care and personal comfort items, or for reasonably foreseeable needs. 20 C.F.R. § 416.640(a). If SSI benefits are not needed for the beneficiary's current maintenance or reasonably foreseeable needs, they must be conserved or invested on behalf of the beneficiary. 20 C.F.R. § 416. 645(a). If state courts are instructing non-custodial parents to use SSI benefits to maintain a home to which the SSI beneficiary may or may not someday return, this would seem inconsistent with the rule that benefits either be used for the beneficiary's current maintenance, be used for the beneficiary's reasonably foreseeable needs, or be conserved on behalf of the beneficiary.

Finally, although SSA appreciates SCCS providing us with notification of custody changes, SSA does not have any requirement that would obligate you to provide such a notification. Only the representative payee (in this case, the parent) would be required to notify SSA of a change in custody of a child beneficiary. Representative payees are regularly informed of their responsibility to report changes in address, persons moving in or out of the household, changes in income, changes in help with living expenses, and changes regarding entering or leaving an institution. 20 C.F.R. §§ 416.704, 416.708; POMS SI 02301.005(B). A representative payee also must notify SSA of any change in the representative payee's circumstances that would affect performance of his/her payee responsibilities. 20 C.F.R. § 416.635(f).

If the parent no longer has custody of the child, the parent may be unable to ensure that SSI benefits will be used for the child's current maintenance. If a representative payee uses funds other than for the support and maintenance of the child, the payee may be responsible for repaying those benefits. See 20 C.F.R. § 416.641; POMS GN 00604.060. Furthermore, as you point out, when a child is in the custody of SCCS, the child may receive Title IV-E funds that may affect the child's eligibility for SSI. See POMS SI 00830.410. If the child is overpaid benefits in this situation, both the child and the representative payee may be held liable for repaying the overpayment. See POMS SI 02201.021.

Donna L. C~
Acting Regional Chief Counsel, Region VII

By ______________
Todd D~
Assistant Regional Counsel

C. PR 04-043 REPLY - Court Order Barring Representative Payee's Distribution of Funds

DATE: December 15, 2003

1. SYLLABUS

The Court has no jurisdiction over the Agency (SSA) and, under the Social Security Act, does not have the power to block the use of social security benefits. The representative payee is required to use and distribute benefit payments in a manner consistent with the Social Security Act and regulations.

2. OPINION

You asked whether a representative payee, who is the beneficiary's guardian, may withdraw benefit funds for use on behalf of the beneficiary without prior court consent despite a state court order which states that no funds held in the beneficiary's name may be distributed to the guardian without prior court approval. For the reasons stated below, we conclude that the court has no jurisdiction over the Agency and, under the Social Security Act, does not have the power to block the use of social security benefits. Further, the representative payee is required to use and distribute the benefit payments in a manner consistent with the Social Security Act and regulations. We advise that you remind the representative payee, the court and the financial institution of the statutory limitations on the court's authority to direct or control the use of the benefits and inform them of the representative payee's obligations with respect to these benefits.

BACKGROUND

The beneficiary, James R. M~, receives social security benefits on the account of his father, William M~. The benefits are deposited into a financial institution by direct deposit. The beneficiary has a representative payee, who is also his guardian. As part of a guardianship appointment order, the Probate Court of Columbiana County, Ohio, stated "[f]unds being held in the name of the within-named Ward shall not be released to Guardian without a Court order directing release of a specific fund and amounts thereof." The financial institution into which the benefits are deposited wrote a letter asking whether the representative payee could withdraw funds from the bank account without prior court approval. According to the information you submitted, you advised the financial institution "that the Social Security Act and regulations govern the use of benefits by a representative payee," but noted that the financial institution "seeks a legal opinion." You also stated that, per POMS GN 006702.120, you are requesting a legal opinion regarding an attempt to direct the disposition of benefits.

As an initial matter, it is well established that the Agency is not is not bound by a state court order. See Hercules Inc. v. United States, 516 U.S. 417, 422-23 (1996), citing United States v. Testan, 424 U.S. 392, 399 (1976) and United States v. Sherwood, 312 U.S. 584, 586 (1941). Moreover, section 207 of Title 42 of the United States Code provides:

DISCUSSION

The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law.

42 U.S.C. § 407(a)(emphasis added). This provision has been interpreted to impose "a broad bar against the use of any legal process to reach all social security benefits. That is broad enough to include all claimants, including a State." Philpott v. Essex County Welfare Board, 409 U.S. 413, 417 (1973). In this situation, the Agency is not a party to the court order and has not been asked or ordered to take any action. The court order is directed to the representative payee. The court's order that the guardian seek court approval prior to the disbursement of funds appears to constitute an improper exercise of legal process with respect to Social Security benefits.

Pursuant to the order, the representative payee may not withdraw funds held in James's name without prior court consent. To our knowledge, the court has neither consented nor withheld such consent, and the representative payee has thus far discharged his duties in accordance with the Social Security Act and regulations. However, to the extent that the court could, in the future, withhold consent or provide consent in an untimely manner that ultimately affects the representative payee's duties under the Social Security Act and regulations, such action would constitute an improper attempt to direct the disposition of benefits, and would be prohibited by the statute. Id.

A representative payee must use the payments he receives "only for the use and benefit of the beneficiary" in the manner and for the purposes he determines to be "in the best interests of the beneficiary." 20 C.F.R. § 404.2035(a). Payments are considered to have been used "for the use and benefit of the beneficiary" if they are used for the beneficiary's current maintenance. 20 C.F.R. § 404.2040(a)(1). "Current maintenance includes costs incurred in obtaining food, shelter, clothing, medical care and personal comfort items." Id. The Agency is not liable if the representative payee breaches his obligation to ensure proper use of the benefits. See 20 C.F.R. § 404.2041. However, the representative payee can be held personally liable for misuse of benefits and the Agency may change the representative payee or take any other action allowed under the regulations if the representative payee cannot establish that he used the funds for the beneficiary's needs. See 20 C.F.R. § 404.2050.

We recommend that the Agency consider sending general informational letters to the court, the financial institution and the representative payee to clarify that that Agency is not bound by the state court order and that state courts do not have jurisdiction and are prohibited under 42 U.S.C. § 407 from directing how Social Security benefits are to be used. These letters would also clarify that the representative payee is responsible for ensuring that the funds he receives as representative payee are properly spent. A representative payee is obligated under federal law to properly use the funds only for the beneficiary's use and benefit. See 20 C.F.R. §§ 404.2035(a), 404.2040(a)(1). While the Agency is generally not liable if the representative payee breaches his obligation to ensure proper use of the benefits, we recommend that you remind the representative payee that he can be held personally liable for misuse of benefits and that the Agency may change the representative payee or take any other action allowed if he cannot establish that he used the funds for the beneficiary's needs. See 20 C.F.R. §§ 404.2041, 404.2050. Finally, you may wish to suggest that the representative payee seek a court order clarifying that he may withdraw and disperse social security benefits funds for the use and benefit of the beneficiary without prior court approval.

CONCLUSION

In sum, we conclude that we need not take any action regarding the court order. However, we suggest sending information letters to the court, financial institution and representative payee as outlined above.

Kim L. B~
Acting Regional Chief Counsel, Region VII

By ______________
Anne K. K~
Assistant Regional Counsel

D. PR 03-159 SSI - Wisconsin - Court Order for Payment of Funds by Gregory S~ to Susan M. S~ - REPLY Our Ref. No.: 03-P-063

DATE: July 22, 2003

1. SYLLABUS

A court order directing how a representative payee uses a beneficiary's social security benefits is not binding on the payee. Section 207 of the Social Security Act prohibits attempts to direct the disposition of benefits certified to a representative payee. If a court order directs a payee how to use an individual's social security benefit, the payee can use section 207 as a defense against such action.

2. OPINION

Pursuant to the direction of POMS § GN 00602.120(2), you have requested our opinion regarding an order issued by the Barron County Circuit Court Family Court Branch, Wisconsin requiring Gregory S~ to pay funds to his ex-wife Susan M. S~. We conclude that the Agency is not bound by the court order, and does not need to take any legal action with respect to the order. However, the Agency may wish to send a letter to Gregory S~ and/or the court explaining the court's lack of authority on this issue and a representative payee's responsibilities with respect to the benefits.

BACKGROUND

As we understand the facts, Gregory S~ is currently serving as the representative payee for their minor child, Robert's SSI benefits. At the time of the initial application, both parents were living together but Susan S~ was not made the representative payee because she was known to the field office as a recipient of SSI benefits and may have not been competent to serve as representative payee.

On March 24, 2003, pursuant to divorce proceedings, Barron County Circuit Judge James E~ issued an order. The order directs that both Gregory S~ and his ex-wife Susan S~ be awarded joint legal custody and share share physical custody of their minor child, Robert. The order also directs that Susan S~ be awarded specific placement including alternating weekends, every Tuesday, Monday, Wednesday, Thursday and alternating Fridays from after school until the conclusion of Gregory S~'s workday, school snow days and Robert's sick days during Gregory S~'s work hours. Gregory S~ has placement at all other times. The court order further directs that "[n]either party shall pay child support to the other. If the Social Security Administration continues to pay SSI for Robert, Susan S~ shall receive such payment."

DISCUSSION

It is well established that the Social Security Administration is not bound by a state court order. See United States Const. art. VI, Cl. 2 (the Supremacy Clause); Hercules Inc. v. United States, 516 U.S. 417, 422-23 (1996). However, in this situation, the Agency is not a party to this order and has not been asked or ordered to take any action. The issue is whether the provision in the court order that Robert's SSI benefit payments be made to Susan S~ is an improper assignment of benefits.

Section 407 of Title 42 of the United States Code provides:

The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or the operation of any bankruptcy or insolvency law.

42 U.S.C. §§ 407(a), 1383(d)(1) (emphasis added).1_/

The Agency is not being directed to pay the amount to the mother but the court order is directed to Gregory S~, Robert's father. See Rose v. Rose, 481 U.S. 619, 635 (1987) ("Thus, while it may be true that these funds are exempt from garnishment or attachment while in the hands of the Administrator, we are not persuaded that once these funds are delivered to the veteran a state court cannot require that veteran to use them to satisfy an order of child support.").

It is unclear whether the court is ordering Gregory S~ to release Robert's funds to the mother for child support as the order specifically references the payment of SSI benefits to Susan S~ under the "Child Support" section of the order. This is somewhat confusing since the court order specifically directs that "[n]either party shall pay child support to the other." It appears that the court order is based on the grounds that Susan S~ will require money to provide for Robert's needs when she has physical custody of him and presumably, will use the money for Robert's basic needs while he is in her care.

However, Susan S~ is not the representative payee. As representative payee, Gregory S~, still retains the obligation to ensure that all funds, including those given to the mother, are used for Robert's needs, i.e., for food, shelter, clothing, medical care, and personal comfort items. See 20 C.F.R. §§ 416.635, 416.640, 416.665. A court cannot assign a representative payee for a Social Security claimant or direct the disposition of benefits certified to a representative payee. Designation of a representative payee is reserved solely to the Agency, which may also change the rep payee. 42 U.S.C. § 1383(a)(2); 20 C.F.R. §§ 416.601-416.665.

Even if the court's direction of the benefits in this case is intended to benefit Robert, it is still invalid. Id. The court does not have authority to direct that Susan S~ receive Robert's SSI funds. 42 U.S.C. § 407(a). See Washington State Department of Social and Health Services v. Guardianship Estate of Keffeler et. al., 123 S.Ct. 1017, 1027-28 (2003) (section 407(a) barred State's legal action when not acting as a representative payee despite providing for the care and maintenance of a beneficiary); Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973) (section 407 "imposes a broad bar against the use of any legal process to reach all social security benefits."). The court's direction of Robert's SSI funds is thus directing benefit monies by a "legal process" and is prohibited by statute.

We recommend that the Agency consider sending a general informational letter to Gregory S~ and/or the court to clarify that the Agency is not bound by a state court order because, generally, state courts do not have jurisdiction and are prohibited under 42 U.S.C. § 407 from directing to whom benefits will be paid. This letter would also clarify that the representative payee Social Security selects to receive the benefits retains responsibility to ensure that the funds he receives as representative payee are properly spent. A representative payee is obligated under federal law to properly use the funds only for the recipient's use and benefit. See 20 C.F.R. §§ 416.635, 416.640, 416.665. The Agency is not liable if the representative payee breaches his obligation to ensure proper use of all of the SSI recipient's benefit payments. See 20 C.F.R. § 416.641. However, the representative payee can be held personally liable for misuse of benefits. The Agency may change the representative payee or take any other action allowed under the regulations if the representative payee pays the benefits to another, including another parent, and cannot establish that the funds were expended for the SSI recipient's needs. See 20 C.F.R. § 416.650.

CONCLUSION

In sum, we conclude that we should not take any court action regarding the order. However, we suggest sending an informational letter to Gregory S~ and/or the Court as outlined above.

Kim L. B~
Acting Regional Chief Counsel, Region VII

By ______________
Thomas H. K~
Assistant Regional Counsel

1_/ There is a statutory exception to provide garnishment from social security payments to fulfill child support obligations, which is not at issue in this case since these benefits are for the child, who does not owe any child support obligation. 42 U.S.C. § 659.

E. PR 03-172 Creditor Seizure Of SSI Benefits In Representative Payee's Bank Account - Gabrielle E. and Aaron B. M~

July 31, 2003

1. SYLLABUS

Section 207 of the Social Security Act prohibits attempts to direct the disposition of benefits certified to a representative payee. If a creditor attaches a beneficiary's account, for which a representative payee has only a fiduciary interest, the creditor's action violates section 207. A representative payee has no ownership interest in the benefits received on behalf of beneficiary and must use such benefits for the current needs of the beneficiary. Failure to do so constitutes misuse and is grounds for a change of representative payee. A representative payee can use section 207 as a defense against attachment by creditors.

2. OPINION

You have asked for our opinion as to whether a creditor has the right to seize Title XVI benefits from a bank account that only contains Title XVI funds that belong to two children Gabrielle E. M~, ~ and Aaron B. M~, ~. Their mother, Chris D. N~, is their representative payee; therefore, her name is on the account as their payee. A collection agency (creditor) is automatically withdrawing the benefits because Ms. N~ has a debt with them. A Justice of the Peace in Great Falls, Montana, ruled that the funds were not Social Security funds, but a personal loan to the mother because she was on the account as representative payee. For the reasons set forth below, we believe the creditor's action violates section 207 of the Act. We also believe the court erroneously considers the children's SSI benefits to be property of their mother.

Section 207(a) of the Act, 42 U.S.C. § 407, states that:

(a) The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

42 U.S.C. § 407(a). "This section is specifically incorporated into the statutory provisions pertaining to the SSI program by section 1631(d)(1) of the Act, 42 U.S.C. § 1383(d)(1)." Memorandum from Regional Chief Counsel, Philadelphia, to Regional Commissioner, Philadelphia, Pennsylvania Support Decree Assigning Social Security Payments - Rachel R. M. , SSN: ~ (March 25, 1994). "Section 207(a) applies not only to funds in the hands of SSA that have not yet been paid out, but also to funds that have been disbursed." Id. (citing 42 U.S.C. § 407(a) ("none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process . . . .")). Indeed, the protections of section 207 continue to apply to the proceeds of a social security benefit or supplemental security income payment that is held in a bank account, so long as the funds can be traced to the Federal payment. See Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973); Dean v. Fred's Towing, et al., 245 Mont. 366, 371-372 (1990).

"Federal courts have generally interpreted section 207 broadly. Courts have upheld the bar of section 207 when attempts have been made to alienate social security benefits from both recipients and representative payees." Memorandum, Pennsylvania Support Decree, supra (citing Tidwell v. Schweiker, 677 F.2d 560, 566-68 (7th Cir. 1982) (holding that a consent form, which a state psychiatric facility asked those seeking hospitalization to sign authorizing the facility to reimburse itself for the cost of hospitalization from the social security benefits of the individual, violated section 207); Woodall v. Bartolino, 700 F. Supp. 210, 219-20 (S.D. N.Y. 1983) (holding that court orders may not properly be entered against social security benefits when they are managed by representative payees in order to enforce the application of the benefits to the care and maintenance of an institutionalized individual)).

"Federal courts have also enforced the protection of section 207 from post-judgment garnishment procedures that allowed the garnishment of bank accounts containing social security funds, where the procedures did not clearly distinguish these funds." Memorandum, Pennsylvania Support Decree, supra (citing Finberg v. Sullivan, 634 F.2d 50, 63 (3d Cir. 1980) (holding that bank accounts may not be attached without regard to whether they contain social security funds); Reigh v. Schleigh, 595 F. Supp. 1535, 1555 n.15 (D. Md. 1984) (holding that notice to debtors must inform them of the exemption of social security benefits from attachment); Deary v. Guardian Loan Co., Inc., 534 F. Supp. 1178, 1187-88 (S.D. N.Y. 1982) (holding that judgment debtors were entitled to notice of both the exemptions to which they may be entitled and the procedures for assessing those exemptions).

The cases cited above "demonstrate how clearly and carefully courts have followed the language of section 207. As section 207 sets forth, 'none of the moneys paid . . . shall be subject to legal process.'" Memorandum, Pennsylvania Support Decree, supra (quoting 42 U.S.C. § 407). Thus, we believe the creditor's seizure of the children's SSI benefits constitutes an attachment that violates section 207.

Moreover, Gabrielle and Aaron, the two children, are the individuals that SSA had found eligible for SSI payments, not Ms. N~, their mother. See Memorandum, Pennsylvania Support Decree, supra (citing 42 U.S.C. § 1382 (for definition of eligible individual)). Because the children are the individuals eligible for SSI payments, those payments are their property, not their mother's, who is simply their representative payee. See id. Representative payees have no ownership interest in the SSI payments. They must use the payments for the use and benefit of the eligible individual. See 42 U.S.C. § 1383(a)(2)(ii)(I). Failure to do so constitutes misuse and is grounds for a change of representative payee. See 20 C.F.R. § 416.650(a); POMS GN 00604.001. "Although we have found no [Montana] cases precisely on point, we have found authority in other jurisdictions that support this proposition." See Memorandum, Pennsylvania Support Decree, supra (citing Miller v. Shapiro, 225 A.2d 644, 646 (Conn. Cir. Ct. 1966) (holding that child's insurance benefits are the child's property and not the parent's or the representative payee's)). Because the children's SSI benefits are not their mother's property, they may not be seized to discharge Ms. N~'s debt. See id.

In conclusion, "section 207 is intended to protect social security benefits from all attempts to use legal process to alienate them, unless Congress has specifically indicated otherwise." Memorandum, Pennsylvania Support Decree, supra. However, if any court action is to be taken at this time, Ms. N~ should take it, through her attorney. If Ms. N~ does not take action to stop the seizure of her children's benefits, SSA should appoint a new representative payee for Gabrielle and Aaron. Then the creditor will not have access to the children's funds.

Yvette G. K~
Acting Regional Chief Counsel, Region VII

By ______________
Thomas H. K~
Assistant Regional Counsel

F. PR 03-155 Court Order Directing Use of Monthly Social Security Benefits - John A. H~(Revised) _1

DATE: July 15, 2003

1. SYLLABUS

Under section 207 of the Social Security Act, social security benefits and the associated rights under the SS Act are generally neither assignable nor subject to legal process. Section 207 prohibits attempts to direct the disposition of benefits certified to a representative payee. SSA does not get involved in section 207 issues that occur after payment to a beneficiary has been completed. If a court order directs a payee how to use an individual's benefits, the payee can use sectin 207 as a defense against such action.

2. OPINION

Your office has requested our assistance in reviewing a court order, issued by the Montana Thirteenth Judicial District Court, Carbon County, to determine whether the order is contrary to Social Security Administration (SSA) regulations and policy. The court order directs the guardian/conservator and representative payee, Tracy J. R~, to deposit the future Social Security benefits of John A. ~H (John), a minor child, in a restricted guardian/conservator account at Edward J., an investment company in Red Lodge, Montana. The court order further provides that Ms. R~ shall be paid a monthly stipend of $548 from the restricted account for John's care and support, i.e., current maintenance. You have informed us that John's monthly Social Security benefits amount is $1095. For the reasons set forth below, we believe the court order violates section 207(a) of the Social Security Act (Act), 42 U.S.C. § 407(a).

Section 207(a) of the Act states:

The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

42 U.S.C. § 407(a). See also POMS GN 02410.001. "Under the Act, therefore, Social Security benefits and the associated rights under the Social Security Act are generally neither assignable nor subject to legal process. Indeed, section 207's broad bar against the use of any legal process to reach Social Security benefits includes not only all claimants or creditors, but also states." Memorandum from Regional Chief Counsel, Philadelphia, to Regional Commissioner, Philadelphia, Pennsylvania Support Decree Assigning Social Security Payments - Rachel R. M~, SSN: ~ (March 25, 1994) (citing Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973).

"Federal courts have generally interpreted section 207 broadly. Courts have upheld the bar of section 207 when attempts have been made to alienate Social Security benefits from both recipients and representative payees." Id. (citing Tidwell v. Schweiker, 677 F.2d 560, 566-68 (7th Cir. 1982) (holding that a consent form, which a state psychiatric facility asked those seeking hospitalization to sign authorizing the facility to reimburse itself for the cost of hospitalization from the Social Security benefits of the individual, violated section 207); Woodall v. Bartolino, 700 F. Supp. 210, 219-20 (S.D. N.Y. 1983) (holding that court orders may not properly be entered against Social Security benefits when they are managed by representative payees in order to enforce the application of the benefits to the care and maintenance of an institutionalized individual).

"Furthermore, it is well-established that the Federal Government, as sovereign, is immune from suits in and the orders of state courts, unless the sovereign has consented to submit itself to the jurisdiction of such court, which in the present case, it has not." Memorandum from Regional Chief Counsel, Chicago, to Manager, Cleveland Downtown Field Office, Charles C~, SSN ~, Advice About State Court Order to Appoint Representative Payee (October 4, 2002) (citing United States v. Sherwood, 312 U.S. 584 (1941)).

Moreover, if Ms. R~ "complies with the court's order, she may violate her responsibilities as a representative payee." Memorandum, Pennsylvania Support Decree, supra (citing 42 U.S.C. § 1383(a)(2)). "Under the regulations, a representative payee has the responsibility to ensure [that Social Security] benefits are used only for the use and benefit of the beneficiary in the manner she determines to be in the best interests of the beneficiary." Id. (citing § 416.635); see also 20 C.F.R. § 404.2035. "In this case, it could be said that by complying with the court order, [Ms. R~] has allowed her rights and responsibilities as a representative payee to be usurped: she is not making the decisions about the use of the funds, but has turned them over to [the court and to Edward J. ] in accordance with the court order." Id.

In sum, section 207 of the Act is intended to protect the rights and benefits arising under the Act "from all attempts to use legal process to alienate them, unless Congress has specifically indicated otherwise." Id. We believe the court's order, which can be construed as assigning control of John's Social Security benefits to another, is violative of section 207 because it constitutes legal process that seeks to affect rights arising under the Act. "Identifiable Social Security benefits cannot be taken by judicial order, and in this case it appears that they have been." Id. (citing Woodall, 700 F. Supp. at 221). Moreover, in the state court process used here, the state court has taken upon itself the authority to decide who shall manage the child's Social Security benefits, and how they shall be managed. However, Congress has granted the power to make that selection exclusively to the Commissioner in section 205(j) of the Act, and the Commissioner's regulations and decisions issued thereunder are clearly to be given deference. See Washington Department of Social and Health Services v. Guardianship Estate of Danny Keffeler, 123 S.Ct. 1017 (2003). Because the state court's actions are contrary to the controlling Federal statute and the decision of the Commissioner issued thereunder, the state court's attempt to assume such authority must fail under the Supremacy Clause of the United States Constitution.2_/

As a matter of litigation policy, SSA does not get involved in section 207 issues that arise after payment to the beneficiary has been completed. Therefore, if any court action is to be taken at this time, Ms. R~, the person subject to the court's order, through her attorney, should take it.

Yvette G. K~
Acting Regional Chief Counsel, Region VII

By ______________
Thomas H. K~
Assistant Regional Counsel

1_/ On November 5, 2002, we issued an opinion stating the court order did not contravene SSA regulations.

2_/ "The Supremacy Clause of the Constitution, Article VI, cl. 2, states that the 'Constitution, and the law