One of the draws of Social Security is that it provides security, no matter what age a retired person lives to. Any other retirement fund, into which a person pays a certain amount during their career, is often budgeted by year based on a person’s life expectancy. Social Security, on the other hand, never expires; it continues to be paid as long as a person continues to live.
Unfortunately, this creates a perverse incentive for family members of a recently deceased elderly person on Social Security. The Social Security Administration is not likely to find out on its own that a Social Security recipient has died. It relies on family members to inform it. However, informing the agency of a relative’s death means that their Social Security payments will dry up. Some unscrupulous families have tried to game the system by neglecting to inform the government of a parent’s death, meaning that the Social Security checks will continue to come. However, this rarely ends well.
Whoever is authorized to act on behalf of a deceased person’s estate is considered to be the “executor,” or the “administrator” if the deceased did not leave a will behind. In either case, the person handling the deceased person’s estate has a legal obligation to inform the IRS and the Social Security Administration of the death, so that it can collect any tax liabilities. Technically, failing to do this could be considered a violation of the executor’s fiduciary duty, potentially landing them in hot water with the government. However, even if an heir is not the executor, they could still face problems down the road.
Traditionally, debts to the U.S. government have taken priority over any of the estate’s other debts. If the government is made aware of the death before the will has been executed, it can claim whatever it is owed from the deceased’s assets. If, however, the government is not informed until the estate has already been passed on, it can retroactively claim what it is owed from the heirs.
It is important to remember that a deceased person’s debts are not typically passed down to their heirs. For example, if a parent dies with debts exceeding the value of his or her assets, the heir would not be responsible for paying the debt after the existing assets have been claimed. However, if the government does not learn of a death until after the assets have already been split, it can confiscate these assets, even after they have been awarded. The government can also collect interest or penalties on the debts, potentially increasing them.
For families that did not expect to suddenly owe money to the government, this is obviously unpleasant. Therefore, it is always a good idea to inform the IRS of a deceased relative’s death. The same process applies to Social Security. If the Social Security Administration sent out any checks after the date of death, they will want them back.
Trevor Filseth is a current and foreign affairs writer for The National Interest.