Social Security Death Benefits after the Death of a Beneficiary

Social Security death benefits will terminate upon death, and sometimes upon marriage or divorce. Before you setup monthly benefits via direct deposit in a bank account, make sure you understand the rules and regulations that the bank will follow in specific circumstances. For example, what will the bank do in specific situations that involve the events which will terminate Social Security benefits? The Social Security rules determine what types of events cause the termination of benefits.


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According to the Social Security rules, benefits terminate the month before the month of the occurrence of the terminating event. For example, if a beneficiary dies in the month of September, the benefits terminate in the month of August. As you may know, Social Security benefits are paid in arrears. This means that the payment received in September is actually for the month of August. As such, the beneficiary is fully entitled to receive the payment deposited in the month of September. In the case of a beneficiary who dies in September, the check or direct deposit that may be received in October must be returned. In other words, funds received (in October) for the month of death (September) and later must be returned to Social Security.

However, a bank may have their own rules regarding a direct deposit for Social Security or similar benefits from any organization or the government. The bank may reverse a direct deposit made after the death of the beneficiary and return the funds to the sending organization, such as the U.S. Treasury whether the beneficiary is entitled to receive the payment or not. As in the example above, a beneficiary who dies in the month of September is entitled to receive the payment received in September since it is actually for the month of August. However, a bank is likely to return the payment to the sending organization, such as Social Security, since the direct deposit was made after the death of the beneficiary.

This discrepancy between the Social Security rules and banks rules can cause of great deal of frustration and anxiety for family members. For example, a surviving spouse may be shocked when he or she discovers that a bank reversed a direct deposit for Social Security benefits made after the death of his or her loved one even though, according to the Social Security rules, the family of the beneficiary was entitled to the deposit.

What makes this type of situation even more distressing is the fact that in many cases, the banks do not know the rules regarding Social Security death benefits. They will mistakenly reverse deposits and return the funds to the U.S. Treasury. Even the bank manager will insist that the beneficiary is not entitled to a direct deposit made in the month of death. The bank manager is incorrect. As described above, Social Security benefits are paid in arrears. This means that the payment received in the month of death is actually for the previous month. As such, the beneficiary is fully entitled to receive the payment deposited in the month of death.

This situation is a perfect example of how difficult it can be to deal with certain banks and bank representatives and how important it is to understand the rules that a bank may follow in specific circumstances, such as with Social Security death benefits, and your rights and responsibilities under these rules. If you have a problem with a bank, you may contact the Federal Reserve for help or to file a complaint.

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