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CareTips | Why Social Security Takes the Last C . . .
Why Social Security Takes the Last Check Back When a Beneficiary Dies
Social Security has important rules that affect what happens to a person's Social Security income at death. If family members don't understand how this works, and if they don't plan for the financial consequences, they can have some unpleasant surprises when someone receiving Social Security passes away.
Social Security benefits are always paid one month after the benefits have actually been "earned." For example, benefits earned for the month of January are paid to the beneficiary early in February. A beneficiary must be alive for the entire month to receive payment for the month in question.
So, whether a beneficiary passes away on January 1 or January 31, according to Social Security rules, the payment for the month of January was not "earned," because the beneficiary did not live through the entire month. The payment for January, which will arrive early in February, must be returned to Social Security.
If the deceased received Social Security payments by check rather than automatic deposit, the check for the month of death must be returned uncashed.
Many funeral homes will notify Social Security of someone's death as a "courtesy." Often families are shocked to discover that benefits paid into the deceased's bank account by electronic deposit have been "taken back" by Social Security even though the family had not yet notified Social Security of the death. This can cause some financial hardship if a widow or widower was counting on these funds.
Although no one can predict when someone will die, it is important to understand what must happen with a deceased person's last Social Security payment. Spending money that will have to be returned to Social Security will simply unnecessarily complicate an already difficult time. Social Security WILL reclaim their "overpayment" one way or another, whether by going back into the bank account themselves to retrieve the money, by receiving the check back from the deceased's estate, by withholding the overpayment from future payments to a widow or widower, or by seeking re-payment from the deceased's estate.