DEFINITION of 'Representative Payee'

A long-term care facility that has been granted approval to accept federal benefit payments on a resident’s behalf. Representative payees can accept federal benefit payments from the Social Security Administration, Department of Veterans Affairs, Department of Defense, Railroad Retirement Board and Office of Personnel Management if the actual payee, the long-term care facility resident, is too mentally or physically impaired to manage the income.

BREAKING DOWN 'Representative Payee'

A representative payee is legally obligated to use the payments it receives on a resident’s behalf for the resident’s best interests. For example, it can use the money to pay legitimate (not fraudulent or inflated) bills from the facility.

Senior advocates recommend against making any long-term care facility a representative payee because of the potential for abuse. Instead, they recommend planning in advance: The ideal scenario is one in which the potential long-term care facility resident, while he or she is still of sound mind and body, chooses a representative, such as a trusted family member, to manage his/her finances should incapacity happen later on. There is still a risk of elder financial abuse with this option, but the idea is that it should be a lesser risk since the patient is making an informed and capable decision about whom they trust to manage their finances instead of letting a complete stranger gain the responsibility by default.

For example, suppose a nursing home resident has dementia and is incapable of paying her bills, but needs to do so in order to remain a resident of the nursing home. The resident did not give anyone financial power of attorney before she developed dementia. The nursing home could contact the Social Security Administration to apply to be a representative payee for that resident’s Social Security benefits. If approved, the nursing home will be required to maintain records of all the payments it receives on the resident’s behalf and how it spends them. It must place any unspent funds in a savings account that earns interest.

For more information about finances and long-term care read about 5 Ways to Protect Pensions from Nursing Homes.

  1. Nursing Home Resident Trust Fund

    A nursing home resident trust fund helps residents manage finances ...
  2. Long-Term Care Ombudsman

    A government official who oversees nursing homes and assisted ...
  3. Payee

    A payee is the party in an exchange who receives payment.
  4. Loss Payee

    The loss payee is the party to whom the claim from a loss is ...
  5. Loss Payable Clause

    A loss payable clause is an endorsement where an insurer pays ...
  6. Medicare Star-Rating System

    A method for evaluating and ranking nursing homes used by the ...
Related Articles
  1. Retirement

    5 Ways to Protect Pensions from Nursing Homes

    How to safeguard a patient's funds from shady or unscrupulous staffers.
  2. Managing Wealth

    Secrets to Finding the Right Nursing Home

    The wrong choice could mean inadequate – or even deadly – care.
  3. Retirement

    Don't Pick The Wrong Type Of Retirement Community

    The names sound similar – continuing care, assisted living – but retirement communities differ widely. How to tell them apart and what you'll need to pay.
  4. Retirement

    How to Find the Right Retirement Community

    You're going to be spending a lot of time there, so invest time and thought into which retirement community you pick – before you invest your money.
  5. Financial Advisor

    Alternatives To Nursing Homes

    There are many other options for elderly care other than nursing homes. Here are some of the options available and the costs associated with them.
  6. Insurance

    What Will Your Long-Term Care Look Like?

    As much as we don't want to talk about it, it's important to have a long-term care plan.
  7. Financial Advisor

    Long-Term Care: More Than Just A Nursing Home

    Learn what you can do now to keep your options open in the future.
  8. Insurance

    Long-Term Care Insurance: What You Need to Know

    Planning ahead for long-term care costs should be part of a financial plan.
  9. Taxes

    Tax Rules for Resident and Nonresident Aliens

    This article examines the definition and tax treatment of these types of non-U.S. citizens.
  10. Financial Advisor

    Top 10 States for Affordable Long-Term Care

    Every state varies on the average cost of long-term adult care. Here's a list of states where these types of services are the most affordable.
Hot Definitions
  1. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  2. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  3. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  4. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  5. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  6. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
Trading Center