You asked whether titling a representative payee’s collective fiduciary account “Estate
Administrative Services (EAS) LLC, Client Trust Account” provides the specificity
that agency policy requires to assure individualized Federal Deposit Insurance Corporation
(FDIC) deposit insurance coverage of Social Security and Supplemental Security Income
(SSI) beneficiary funds and to protect those funds from seizure if the payee is sued
or declares bankruptcy?
No. The payee’s current account title will not guarantee protection against seizure
if the payee is sued or declares bankruptcy, nor does it provide sufficient likelihood
of individualized FDIC coverage. The payee should adopt one of the account title formats
that agency policy recommends: either (Name of Payee) for SSA/SSI Beneficiaries; or (Name of Payee), representative payee for Social Security Beneficiaries. In addition, since the payee’s account may include funds of Social Security and
SSI beneficiaries together with funds of non-beneficiary clients, the agency should
ensure that the payee can adequately account for all beneficiary funds.
Agency policy advises a representative payee to deposit funds not needed for the beneficiary’s
current maintenance in an interest-bearing or dividend-bearing account in a financial
institution that is insured under either Federal or State law. Program Operations
Manual System (POMS) GN 00603.010.A. The payee must deposit the funds in an account that is titled to show the payee
has only a fiduciary interest in the funds. Id.
If they obtain field office (FO) approval, payees who serve multiple beneficiaries
may hold benefit payments in one collective account. POMS GN 00603.020.A. The collective account title must show that the payee holds the account in a fiduciary
capacity on behalf of the beneficiaries. POMS GN 00603.020.B. The title must make clear that the payee is the manager of the account while the
beneficiaries are the owners of the account funds. Id.
The local FO is responsible for ensuring that the payee sets up the collective account
in accordance with SSA’s policies and procedures. POMS GN 00603.020.B.2. In performing this duty, a FO in Hawaii has expressed concern about the collective
account maintained by payee Estate Administrative Services, LLC (EAS).
The EAS website indicates that it provides a variety of financial services intended
“to make the administrative duties of personal representatives and trustees easier.”
See http://www.estateadminservices.com/main.html (last visited June 16, 2014). While the offered services are largely accounting and
financial, the individualized services may include household management services and
bill paying; presumably, the representative payee role arises in this context. See http://www.estateadminservices.com/services.html (last visited June 16, 2014).
EAS maintains a collective account entitled “Estate Administrative Services (EAS)
LLC, Client Trust Account” at First Hawaiian Bank (FHB). FHB Vice President and Service
Manager (VP) S~ expressed concern to the FO that EAS’s account was not a fiduciary
account and therefore had no safeguards against seizure if EAS was sued or declared
According to information you provided, FHB told the FO the following:
It is NOT a fiduciary account. [The bank] is aware that EAS uses it as a fiduciary
account, but for FHB’s purposes it is not. FHB would require specific documentation
to classify or title it as a fiduciary account. As an example she stated that if the
documentation indicated, “Acting as Successor Trustee” then they would consider it
a fiduciary account. In EAS’s situation, the fiduciary capacity is unclear.
The account is NOT protected against seizure if the payee is sued or goes bankrupt
because it is not clearly titled for a specific client – instead it uses the general
title of “Client Trust Acct”.
This information from the bank lead to your concerns about how the account is currently
titled and protection of the beneficiaries’ funds.
EAS maintains a collective account that it uses, at least in part, for funds received
on behalf of the Social Security beneficiaries it represents. A vice president for
the bank in which these funds are deposited advised the FO that this account is not
a fiduciary account both because the fiduciary status is unclear, and because EAS
has not provided the specific documentation necessary to classify it as a fiduciary
account. VP S~ reportedly further explained that this meant the account is not protected
against seizure if the payee is sued because it was not clearly titled for a specific
client. From this limited information, it is unclear whether the bank VP meant that
the account should identify a specific individual client or a specific type of client.
Irrespective, for the reasons explained below, in order to protect its beneficiaries’
funds from seizure and to ensure FDIC coverage, EAS should change its account title
to conform more directly to agency policy.
A. Legal Requirements under Federal and State Law
1. Agency policy requires that beneficiary funds be held in fiduciary accounts
The Social Security Act (Act), regulations, and agency policy require payees to use
the benefits they receive for the current needs of the beneficiary and in the beneficiary’s
best interests. Act §§ 205(j)(3), 42 U.S.C. §§ 405(j)(3), 1383(a)(2)(C); 20 C.F.R.
§§ 404.2035 – 404.2045, 416.635 – 416.645; POMS GN 00602.001.A.1, GN 00605.001.B.1. After the payee uses benefit funds to satisfy the beneficiary’s
immediate and reasonably foreseeable needs, the payee must conserve or invest any
remaining funds for the beneficiary. 20 C.F.R. §§ 404.2045(a), 416.645(a); GN 00602.001.A,
GN 00603.001.A. The agency’s preferred investments for conserved funds include deposits
in an FDIC or State insured interest or dividend paying account. 20 C.F.R. §§ 404.2045(b),
404.645(b); see POMS GN 00603.010.A.
Payees must deposit the funds into an account that is titled to show the payee has
only a fiduciary interest in the funds. 20 C.F.R. §§ 404.2045(b), 416.645(b); POMS
GN 00603.010.A. The agency’s preferred account title for an individual beneficiary
account is: (Name of Beneficiary) by (Name of Payee), representative payee. 20 C.F.R. §§ 404.2045(b)(2), 416.645(b)(2); POMS GN 00603.010.B. However, other account titles are acceptable if they clearly show that the payee
(1) has only a fiduciary and not a personal interest in the funds, and (2) holds the
funds in trust for the beneficiary. POMS GN 00603.010.B.1.
In addition to individual beneficiary accounts, under certain conditions, the FO may
approve collective checking and savings accounts that a payee establishes to hold
funds belonging to multiple beneficiaries. POMS GN 00603.020.B. As with individual beneficiary trust accounts, the collective trust account title
must show that the payee holds the account in a fiduciary capacity on behalf of multiple
beneficiaries. Id. The proper account title shows the payee as the manager of the account and the beneficiaries
as the owners: for example, either (Name of Payee) for SSA/SSI Beneficiaries; or (Name of Payee), representative payee for Social Security Beneficiaries. Id. (agency policy provides an exception for State/local government organizational payees).
While the agency prefers that the collective account contains only funds stemming
from Social Security or Supplemental Security Income (SSI) benefits, the agency will
permit different types of funds to be mixed in a collective account so long as it
meets certain conditions:
Preferably, the account should contain only Social Security or SSI funds received
by the payee on behalf of the beneficiaries. However, agencies often establish patient/client
trust accounts for the use of all patients/clients (beneficiaries and non-beneficiaries
alike). The FO may approve an account containing both beneficiary and non-beneficiary
money if it is a fiduciary account and the payee can adequately account for all beneficiaries
for whom it receives benefits.
POMS GN 00603.020.B (NOTE).
2. Federal Deposit Insurance will cover beneficiary funds held in fiduciary accounts
so long as the fiduciary relationship is clear from certain bank account records
The Federal Deposit Insurance Act (FDIA), 12 U.S.C. §§ 1811, et seq., and its enacting regulations allow a payee to obtain separate FDIC deposit insurance
coverage for each beneficiary’s interests in funds held in a collective fiduciary
account if the payee satisfies several requirements. See 12 C.F.R. § 330.7(c) (the FDIC treats accounts held by fiduciaries on behalf of two
or more persons as a joint ownership account); see also 12 C.F.R. § 330.9 (each co-owner’s interest in a qualifying joint ownership account
is separately insured). The FDIC recognizes a claim for insurance coverage based on
a fiduciary relationship only if the account titling and the deposit account records
expressly disclose or otherwise clearly indicate the existence of a fiduciary relationship.
12 C.F.R. § 330.5(b)(1).
FDIC insurance covers the owners of the funds, and not necessarily the depositor.
12 C.F.R. § 330.3(a) & (h). While legal ownership of deposited funds is a necessary
condition for FDIC insurance, it is neither sufficient for, nor decisive in, determining
coverage. Id. Rather, the FDIC generally relies on information contained in the bank’s records.
The FDIC presumes that the insured bank’s “deposit account records” indicate the correct
ownership of the deposited funds. 12 C.F.R. § 330.5(a)(1). “Deposit account records”
means the insured bank’s “account ledgers, signature cards, certificates of deposit,
passbooks, corporate resolutions authorizing accounts in the possession of the insured
[bank] and other books and records of the insured [bank], including records maintained
by computer, which relate to the insured [bank’s] deposit taking function.” 12 C.F.R.
§ 330.1(e). If the FDIC determines that the deposit account records clearly and unambiguously
describe the ownership of the deposited funds, the records are binding on the depositor.
12 C.F.R. § 330.5(a)(1). If the records are unclear or ambiguous in describing the
ownership of the deposited funds, the FDIC may consider evidence other than the deposit
account records to determine ownership, but is not required to do so. Id.
In sum, the FDIC and agency policy allow a payee to use a collective fiduciary account
to conserve beneficiary funds, and offers individualized insurance of those funds
if the payee establishes and maintains the account properly.
3. Hawaii law permits collective fiduciary accounts
Hawaii state law provides that “Hawaii financial institutions may open accounts and
accept deposits therein of any type generally accepted by financial institutions in
the United States.” Haw. Rev. Stat. § 412:4-101(a). Hawaii financial institutions
“may open accounts and accept deposits … in the name of one or more persons, in the
person’s own right or in a fiduciary or other representative capacity, in any form
of ownership not inconsistent with the laws of th[e] State.” Id. § 412:4-101(b). Hawaii law will not allow any bank to accept deposits unless those
deposits are insured by the FDIC. Haw. Rev. Stat. § 412:4-104. Thus, we can rely on
FHB’s operation under state law to conclude that it is an FDIC insured bank. The FHB
website also discusses and explains FDIC Deposit Insurance and how it applies to various
types of bank accounts. See https://www.fhb.com/en/fdic-insurance/ (last visited June 16, 2014).
As with the FDIA, Hawaii law allows accounts to be held in more than one name. Haw.
Rev. Stat. § 412:4-105. Hawaii law also allows banks to “open accounts and accept
deposits therein in the name of a person as a trustee, personal representative, guardian,
conservator, agent, custodian or other fiduciary for one or more other persons.” Haw.
Rev. Stat. § 412:4-106.
Thus, to the extent that the bank suggested that deposit insurance coverage did not
extend to collective fiduciary accounts, the suggestion is erroneous. A payee may
use a collective fiduciary account to hold beneficiary funds under Hawaii law, and
may assure individual FDIC coverage of each beneficiary’s funds by using the proper
account title and clearly describing the payee’s fiduciary nature and the ownership
of the funds in the deposit account records.
B. EAS’s account title does not clearly describe the account’s fiduciary nature or the
fund owners’ identity and thereby puts the funds at risk
EAS’s collective fiduciary account bears the title, “Estate Administrative Services
(EAS) LLC, Client Trust Account.” The title is similar to that used by attorneys to
hold client funds. However, the bank’s concern indicates that, unlike attorney-client
trust accounts, the relationship between Estate Administrative Services and its clients
is not clear to others. Thus, the beneficiary funds held in the account may be at
An attorney’s “client trust account” is a place where an attorney in possession of
client funds incident to the practice of law can maintain those funds separate from
the attorney’s own funds. See e.g. HI. R. Trust Accts. Rule 4; Haw. R. Sup. Ct. 11(B) (“With respect to all trust accounts,
the attorney or law firm shall comply with the Hawai’i Rules of Professional Conduct
and the Hawai’i Rules Governing Trust Accounting relating to preserving the identity
of funds and property of a client”). Thus, both the relationship between the attorney
and client and the reason for the attorney holding the client’s funds are clear.
In contrast, the relationship between an entity named “Estate Administrative Services”
and its clients is not clear. In part, this is because the term “estate” has multiple
meanings, none of which clearly show a client or fiduciary relationship, and the term “administrative service” is equally imprecise. EAS’s account title thus
offers no clarity on identity or status of the “clients” – including whether they
are alive or deceased, individuals or entities – or on either the nature of the deposits
held in the account or the type of service EAS provides. Similarly, the services that
EAS advertises on its website indicates that the bulk of its business comes from financial
advising and trust management related to estates of deceased persons, not payee services
for disabled beneficiaries. See http://www.estateadminservices.com/services.html. In light of the ambiguity inherent in EAS’s choice of account title, the bank’s
concern that the account does not necessarily protect against seizure if the payee
is sued or declares bankruptcy has some merit, particularly in light of potentially
related Hawaiian law.
Under Hawaii probate law, a “trust account” is “an account in the name of one or more
parties as trustee for one or more beneficiaries where the relationship is established
by the form of the account and the deposit agreement with the financial institution
and there is no subject of the trust other than the sums on deposit in the account;
[though] it is not essential that payment to the beneficiary be mentioned in the deposit
agreement.” Haw. Rev. Stat. § 560:6-101. The account could be viewed as a revocable type of trust
account with ownership held by EAS. Trusts used as testamentary substitutes (Totten
trusts) are tentative trusts only; the funds in the trust still belong to the “trustee”
until that person dies, and the trust may be revoked at any time. See POMS SI 01120.200.B.7 (describing Totten trusts and recognizing their revocability); see gen. In re Totten, 179 N.Y. 112, 125-26, 71 N.E. 748, 752 (1904) (“A deposit by one person of his own
money in his own name as trustee for another, standing alone, does not establish an
irrevocable trust during the lifetime of the depositor. It is a tentative trust merely,
revocable at will, until the depositor dies or completes the gift in his lifetime
by some unequivocal act or declaration, such as delivery of the passbook or notice
to the beneficiary.”)
Hawaii law confirms the tentative nature of such a trust:
Unless the financial institution has received written notice or has actual knowledge
that the beneficiary has a vested interest not dependent upon the beneficiary’s surviving
the trustee, payment may be made to the personal representative or heirs of a deceased
trustee if proof of death is presented to the financial institution showing that the
deceased trustee was the survivor of all other persons named on the account either
as trustee or beneficiary. A trust account may be paid, on request and according to
its terms, to the beneficiary upon presentation to the financial institution of proof
of death showing that the beneficiary or beneficiaries survived all persons named
Haw. Rev. Stat. § 560:6-111.
EAS’s account title is ambiguous because it does not clearly indicate the existence
of a fiduciary relationship to multiple beneficiaries. Rather, it states only the
name of a company and the phrase “client trust account.” The nature of the company
is not obvious, and its relationship to its clients is thus unclear. From our review
of Hawaii law, Hawaii does not require this type of business to have a client trust
account, but only mandates these accounts for lawyers, collection agencies, real estate
brokers, and travel agents. See Haw. Rev. Stat. §§ 443B-8 (collection agency client
trust accounts); 467-1.6 (real estate broker client trust accounts); 468L-23 (charter
tour client trust accounts); Haw. R. Sup. Ct. 11 (interest-bearing lawyer trust accounts).
Therefore, for purposes of serving as a payee for SSA/SSI beneficiaries, the account
title is inherently ambiguous. Further, the ownership of the funds is unclear from
the account title; it could be either the payee (as it would be in a Totten trust),
or the “clients” or, if the clients are deceased, some other person or entity.
Because the account title does not clearly and unambiguously identify the owner or
owners of the deposited funds, it does not protect those funds from the payee’s creditors.
Further, the FDIC only covers individual beneficiaries’ funds if it can determine
that the deposit account records clearly and unambiguously describe the ownership
of the deposited funds. 12 C.F.R. § 330.5(a)(1). A reviewing entity like the FDIC
could not determine the ownership of the deposited funds solely from the account title
EAS currently utilizes, and it is not required to review ownership documents beyond
the deposit account records. As a result, the account, as titled, does not ensure
FDIC coverage over the funds of each beneficiary, nor even protection against the
payee’s creditors. The bank’s concerns are well-founded.
Both collective and individual fiduciary accounts are protected against seizure and
covered by federal deposit insurance so long as all necessary regulatory requirements
are met. Here, the payee’s bank correctly observed that the payee’s account title
is not sufficiently specific to guarantee protection against seizure if the payee
is sued or goes bankrupt. Rather, the combination of the payee’s business name “Estate
Administrative Service” with the term “client trust account” creates a significant
ambiguity as to the relationship of the payee to its clients and the ownership of
the deposited funds. For all of these reasons, the payee’s account does not currently
comply with agency requirements.
In order to comply with its obligations to its beneficiaries, EAS should change its
account title to conform to the FDIC and agency policy or open a new account to further
segregate the funds of Social Security and SSI beneficiaries from other EAS clients.
Such an account could be titled either Estate Administrative Services, LLC, for SSA/SSI Beneficiaries; or Estate Administrative Services LLC, representative payee for Social Security Beneficiaries. POMS GN 00603.020.B. Further, because FHB previously indicated that EAS had not completed all of the
bank-specific paperwork necessary to qualify the account as a fiduciary account, the
FO should follow up with EAS and the bank to ensure that all fiduciary documentation
is properly completed.