My daughter just turned 18 and I completed the paperwork to receive benefits until she graduates. I got confirmation that benefits will continue, but they are sending the checks directly to her instead of direct deposit. I had been putting the money received into a 529 college savings program for her. I also received a letter asking that I return any saved money back to Social Security. I don't understand this, at all. We did without so that we could put that money into a good college fund. Can they do this. Please help if you can. Thank you.

Hi,

You wouldn't have to return any conserved benefits that are being held in an account in your daughter's name. I believe that the important distinction is the title and ownership of the funds. If the fund designates your daughter as sole owner of the funds, then Social Security doesn't need to be involved. However, if you are legally listed as sole or co-owner of the funds, then the account would either need to be retitled or you would likely be responsible for returning the funds to Social Security to be transferred to your daughter. I'm not familiar with the specific type of fund you referred to, though, so you may want to check with Social Security to see what they say.

This may seem like bureaucratic nonsense, but it is an important protection for the beneficiary involved. For example, if you were holding your daughter's conserved funds in an account listing you as co-owner and you were sued or declared bankruptcy, all of the funds in that account could be lost.

The reason this is happening now is because under Social Security and federal law a child is legally considered to be an adult upon attainment of age 18. Therefore, they are assumed competent and paid benefits directly at that point, as opposed to paying their benefits to a representative payee to handle on their behalf as is the case with minor children. Also, an 18 year old is assumed capable of managing their own funds, so any funds that were conserved from their Social Security benefits by their representative payee are required to be returned to Social Security so that they can be reissued to the 18 year old in question.

Best, Jerry