Volume 6 - Opinions of Counsel SBEA No. 57
Aged exemption (income requirement) (social security - moneys received as representative payee of a student beneficiary) - Real Property Tax Law, § 467:
Moneys received from the Social Security Administration by a parent as representative payee of a student beneficiary pursuant to Social Security Administration regulations do not constitute income to the parent for purposes of section 467 of the Real Property Tax Law.
We are asked whether social security payments received by a parent on behalf of his son, a college student, should be considered as income for purposes of the aged exemption (Real Property Tax Law, §467).
Social security and retirement benefits are included within the definition of income for purposes of the exemption pursuant to paragraph (a) of subdivision 3 of section 467 (see, 4 Op.Counsel SBEA No. 99). Thus, we have stated that social security payments made to an aged couple for the support of their minor children must be included in determining their income for purposes of the exemption (2 Op.Counsel SBEA No. 51). We have also stated that social security benefits paid to an aged individual for the support of his retarded adult child are to be considered as income (4 Op.Counsel SBEA No. 64).
The determination of whether income has been received by an applicant is complicated by the disbursement of money for the benefit of a member of the household who is not the owner-applicant (e.g., a child or an incompetent). In these circumstances, the assessor must determine whether the owner-applicant is receiving money on his own behalf or as a trustee or guardian of a dependent resident of the household. For example, we have stated that where student beneficiaries receive social security payments directly, the payments need not be considered as income by the student’s parent who is seeking an aged exemption (5 Op.Counsel SBEA No. 51).
In a situation somewhat similar to the receipt of social security benefits, we stated that, “moneys received from the Veterans Administration by a guardian on behalf of an incompetent veteran ward, pursuant to the procedure set forth in Article 79 of the Mental Hygiene Law, do not constitute income to the guardian except for the portion of such moneys constituting his compensation for his duties as guardian” (5 Op.Counsel SBEA No. 67). That opinion concerns moneys paid to a woman as “guardian” or “committee” of her incompetent veteran son. Pursuant to the aforementioned Mental Hygiene Law, the guardian or committee is to keep the funds received by her in her capacity as guardian separate and distinct from her own personal funds. Additionally, she is expected to file annual accounts with the court reflecting the manner in which her ward’s moneys were used for his support and maintenance. Thus, the guardian or committee has limited control over the ward’s money.
In the case of social security payments made to a dependent member of a household, the Social Security Administration has adopted regulations (contained in the Code of Federal Regulations) which prescribe a procedure which is similar, in many respects, to that in the discussed article of the Mental Hygiene Law. Pursuant to 20 C.F.R. §404.905(n), the Administration determines whether a representative payment procedure will best serve the interests of an individual by reason of his incapacity to manage his benefit payments and also determines who shall be appointed as representative payee on behalf of the beneficiary.
The regulations setting forth the powers and duties of the representative payee (20 C.F.R. §404.1601 et seq.) are summarized in the following paragraphs.
Section 404.1602 provides that before any amount may be certified for payment to a relative or other person as representative payee on behalf of a beneficiary, such relative or other person must submit to the Social Security Administration evidence, which the Administration may require, of the relationship of such person or his responsibility for the care of the beneficiary, or his authority to receive the payment. Thereafter, the Administration may at any time require evidence of the continued existence of this relationship or responsibility. If the relative or other person fails to submit the required evidence within a reasonable period of time after it is requested, no further payments may be certified to him unless the default is excused by the Administration and the required evidence is thereafter submitted.
Section 404.1603, entitled “Responsibility of representative payee,” provides as follows:
A relative or other person to whom certification of payment is made on behalf of a beneficiary as representative payee shall, subject to review by the Administration and to such requirements as it may from time to time prescribe, apply the payment certified to him on behalf of a beneficiary only for the use and benefit of such beneficiary in the manner and for the purposes determined by him to be in the beneficiary’s best interests, (emphasis added)
Section 404.1605 provides that any payments not needed for current maintenance of the beneficiary shall be conserved or invested on the beneficiary’s behalf unless they are used pursuant to section 404.1607 (discussed below). Preferred investments are U.S. Savings Bonds, but funds may also be invested in accordance with the rules applicable to investment of trust estates by trustees. This section also provides in part, “[s]urplus funds deposited in an interest or dividend-bearing account in a bank or trust company, in a savings and loan association, or in a credit union, must be in a form of account which clearly shows that the representative payee has only a fiduciary, and not a personal interest in the funds.” (emphasis added)
Section 404.1609 provides that the representative payee shall file a written report in such form and at such times as the Administration may require. If the representative payee is a court appointed fiduciary, a copy of his annual accounting to the court is to be submitted to the Administration in lieu of a separate report. A failure to report can result in the cessation of payments to the representative payee.
Finally, section 404.1610 provides that where a representative payee has invested funds on behalf of the beneficiary, he must transfer such funds to a successor payee upon the direction of the Administration to do so.
The representative payee report (form SSA-623), referred to above, affords further evidence of the fiduciary interest of the representative payee. Likewise, a publication of the Department of Health, Education and Welfare entitled, “Your Duties as a Representative Payee” ((SSA) 77-10076) further supports this relationship. For example, on page 4 of the publication, it states:
Since you [i.e., the representative payee] may have to reimburse the beneficiary for any funds which you do not use for his or her benefit, ask at any social security office if you aren’t sure whether a proposed expenditure is proper. Even if you have used your funds for the person’s support before receiving checks, you cannot ordinarily use the payments to repay yourself later.
If the money is not all required for the person’s day-to day needs, the money must be either saved or otherwise invested.
On page 11 of this publication, it is stated:
As a representative payee, your relationship to the beneficiary is like that of a trustee. You must, upon request, fill out a form showing how you used the amounts paid to you for the person’s use.
We have been advised by the Social Security Administration that representative payee reports are generally required on an annual basis.
Accordingly, it is our opinion that payments made to an aged individual as the representative payee of another person in accordance with the above-described regulations are paid to the aged individual in a fiduciary capacity similar to that discussed in 5 Op.Counsel SBEA No. 67. However, the burden of proving that a fiduciary relationship exists in a certain aged individual’s case will be on that individual. Thus, where the aged person can prove that such moneys were received by him, not in his own right, but as representative payee of a beneficiary (e.g., by means of proof of submission of a representative payee report), amounts so received as representative payee should not be considered income for purposes of section 467. To the extent that 4 0p.Counsel SBEA No. 64 may have been otherwise interpreted, that opinion is hereby modified.
March 29, 1978