Question of the Week

Question: If a deceased member receives payments from the Social Security Administration after death and the money is withdrawn by a joint or other party, are we liable for the entire amount?

Answer: You’re generally going to be on the hook for the entirety of those payments made after death unless you can claim limited liability for those payments. You can claim limited liability if you:

• Certify you did not have actual or constructive knowledge of the recipient’s death or incapacity at the time of the deposit of any post-death benefit payments,
• Return all post-death benefit payments it receives after it learns of the recipient’s death (but not post-death benefit payments it received before it learned of the death), and
• Respond to the Fiscal Service Form FS Form 133, “Notice of Reclamation” completely and adequately, so that it is received by the government disbursing office within 60 calendar days from the date of the notice.

For the purposes of this section, construction knowledge means that:

“A[n] RDFI has actual knowledge of the death or legal incapacity of a recipient, or the death of a beneficiary, when it receives information, by whatever means, of the death or legal incapacity and has had a reasonable opportunity to act on such information or … [the] RDFI would have learned of the death or legal incapacity if it had followed commercially reasonable business practices.

The phrase “commercially reasonable business practices” is a flexible concept since, for example, what is a commercially reasonable practice for a large bank may not be commercially reasonable for a small rural bank, and vice versa.

(Source: Green Book)

If you can prove limited liability, you are only liable for the 45-day ACH amount, which is the amount of all payments within 45 days following the date of death minus any unearned payments reclaimed from the estate or joint accountholders.

This liability may not prevent all losses, but it may remove some of your liability.

There’s some great illustrations in the Green Book that show your potential liability.