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Stephanie O Joy, Esq
Stephanie O Joy, Esq, Soc. Sec. Attorney
Category: Social Security
Satisfied Customers: 13544
Experience:  22+ years legal exp. - 12+ years owning/operating her own SSD Law practice.
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I have an SSA question. I have been receiving monthly

Customer Question

I have an SSA question. I have been receiving monthly benefits for my son in high school. Just got a letter from SSA saying I must return any unspent benefits.
JA: Because education law varies from place to place, can you tell me what state this is in?
Customer: California. I have been depositing all his benefits to his 529 plan.
JA: Has anything been filed or reported?
Customer: Every Time they asked I reported that the funds went into the 529.
JA: Anything else you want the lawyer to know before I connect you?
Customer: That's about it
Submitted: 8 months ago.
Category: Social Security
Expert:  Stephanie O Joy, Esq replied 8 months ago.

Hi, my name is***** have been practicing SS LAW full time for 10+ years and look forward to assisting you.

Expert:  Stephanie O Joy, Esq replied 8 months ago.

Do you have any unspent benefits you received on behalf of your son? Or did you spend it all on him over the years.

Also, is your son under 19 and still in HS?

Customer: replied 8 months ago.
My son is a high school senior and he turns 18 in a month. All contributions received for him are in his 529 college savings plan.
Expert:  Stephanie O Joy, Esq replied 8 months ago.

OK, first, you need to let SSA know that he is STILL in HS. Otherwise they may assume he is not and cut him off at 18. When in HS, he gets til 19, so that should keep him paid to end of school year.

Expert:  Stephanie O Joy, Esq replied 8 months ago.

Now, generally, all moneys not spend on child, but saved, are his and he gets them once he is 18. So, what needs to be determined is if this 579 account is holding moneys that have been spent on him (and not still yours to use) or if not, are they now HIS. THis seems to be a gray area and I don't see much SSA speak on this, but I'll see if any new word has been provided.

I'd add: You did a tremendous act by saving all his money for him in that 529. A true loving parent gesture - and depending on the child, lots of 18 year olds WILL blow the money if given access at 18.

I am going to see if there is word on whether a spending on the $ into a 529 MEANS there is NO unspent moneys - in which case you tell the SSA there is no unspent moneys because all WERE spent on him. (There are 2 lines of thought: 1) you used the SSA moneys as part of his share of the mortgage/rent/food/clothing/untilities/leisure activities for him, etc. AND the 529 moneys were YOUR other moneys that you graciously used for his 529. THus, his was SPENT on his needs when received --- non left......OR 2) As they came in they WERE spent for him after his needs were met, by putting them into a 529 and that belongs to him, not you (legally, though, that latter part may not be true - we'll see.)

I tend to think OPTION #1 is the "simplest" -- unless you filled out SSA reports over the years saying you were putting his moneys into a 529 - did you have to fill out reports on his moneys and how they were spent? Let me know!

Expert:  Stephanie O Joy, Esq replied 8 months ago.

I'll be handling appeals today, but will be back in later and will check back for your response, and look for additional confirming info from SSA.

Customer: replied 8 months ago.
Thanks for your response. All the contributions have gone, first into a custodial savings account, and from there to his 529. I have in fact in response to SSA inquiries (about three times over the years) stated that the funds were deposited into a Vanguard 529 plan.Documents like this made me assume that I was doing the right thing.He will go to college and the funds will be used for that purpose only (unless clawed back by the SSA).Thanks again,
Expert:  Stephanie O Joy, Esq replied 8 months ago.

OK, I just got back, so let me see if there is more I can find.

IN the meantime, know that if SSA forces a return, it will then be paid by SSA TO your adult child - it won't disappear... but the down side is if your child doesn't then respect your wishes as to where it should go.

And you definitely did the right thing, regardless of how it goes down.

I will do some look-see right now and get back to you.

Have a terrific Saturday.

Expert:  Stephanie O Joy, Esq replied 8 months ago.

OK, first, the link you reviewed is not really one that would apply to the question of whether you own the account or your child does (for the purpose of whether the money needs to go back to the SSA so the SSA can then send it to child).... That POMS concerns whether the account is a resource, and of whom, for purposes of counting assets to determine if one is poor enough for SSI - not your issue. And it is saying, however, that the parent tends to own it. So if that is the case, how to we make sure that despite that, the money of your child was SPENT on him - common sense would say, jee, it is in account in which he is beneficiary, so it HAS been spent on him. But, the SSA is not always logical.

Depending on how the SSA letter is worded, my first thought is that you can, to the best of your knowledge, say that there is no unspent money, so you don't push the issue about sending any back. On the theory that his money came in and you spent it on HIS 529... but they don't ask where or how, I'd not share. THe SSA may just be asking IF there is some to send back and if so, do it.

But I am stilll looking for confirmation or any SSA writes up where they make this clear or not.

Customer: replied 8 months ago.
OK, from your messages and from looking at the SSA letter again, I understand that the funds will be to my son's disposal in any case. SSA is just suspecting that I may be using his benefits to my personal advantage. I don't blame them for that, but I think that I can prove that that is not the case. I have attached the SSA letter, the 529 deposit statements, and the 529 account activities. I should also be able to demonstrate that the only withdrawals made from the Chase custodial account have been for transfers to the 529 plan. The SSA has been automatically depositing my son's benefits into this account. I once asked if they could send the benefits straight to the 529, but for some reason that was not convenient. There were about eight-thousand dollars in the Chase account before we started receiving the benefits.If this seems correct to you, my remaining question would be how to respond to the SSA.I certainly appreciate your rapid responses. Please let me know what I may owe you.Lars
Expert:  Stephanie O Joy, Esq replied 8 months ago.

Unfortunately, I don't analyze bank accounts, as 529s are state governed, generally - and I can't mix that. I can only provide those general thoughts on who typically is legal owner with power over the moneys and typically how they work. Not being an expert in 529s, I am not able to get terribly specifically.

The SSA letter says:

"While you were LH's payee, you may have saved some money
for him. If you have, you should return it to us unless you have already
made other plans with us for handling it." OK, so I am wondering if you can fight in on two basis: 1) If the 529 becomes owned by him (is that possible) than you will no longer have "saved" money for him, since HE has it... 2) if not, it is possible that an explanation and proof to the SSA of where the money is, and the financial loss (due to taxation of interest earned over the years) if that 529 money is removed and NOT sent to school in a away that is allowable under the 529 due to having to send it to the SSA, ask that this use of the money be considered SSA-acceptable "other plans" you make with the SSA. (As I generally understand it, there is taxation AND a 10% tax penalty....)

I would add that if we could turn back time, I'd use the child's money for bills (so it is "spent" for his needs) and then put X amount of my own money into the 529, and not do it the other way on paper, so this would not be an issue.

Customer: replied 8 months ago.
my next step should be to contact SSA and explain the situation?
Expert:  Stephanie O Joy, Esq replied 8 months ago.

I see the two choices described above. That would be #2 option.