Social Security is considered by many as one of the most important government programs in American history. Many people think of Social Security solely as a retirement program. According to the Social Security Administration (SSA), about 98% of children under age 18 would be eligible for survivor benefits if a working parent dies. Further, it is estimated over 4 million children under the age of 18 receive monthly benefits because one of their parents is either disabled, retired or deceased. Survivor benefits are available to any child for whom the deceased worker provided at least half of the child’s support.
This was not always the case. The original Social Security Act of 1935 did not allow for monthly awards of survivors benefits.
To be eligible for these benefits the child must be the biological child, adopted or a dependent stepchild of a qualified person. In some instances the child may be eligible for benefits based on a grandparent’s earnings.
The benefits will stop for the child when they turn 18 or if they marry prior to age 18. The benefits can be extended from age 18 to age 19 if the child is a full-time student in high school. In which case the benefits will stop when they graduate from high school or when they turn 19, whichever comes first.
The Social Security Administration will send the child a notice three months prior to their 18th birthday to forewarn them the benefits will end at age 18, unless the child is a full-time student enrolled in the 12th grade or lower grade. If the child is still eligible based on being a full-time student, they will be asked to notify SSA and complete a statement of attendance, which will need to be certified by a school official.
In order to apply, your client will need the child’s birth certificate (or other proof of birth) as well as the social security numbers of both parents. If the deceased was married at the time of death, a marriage certificate will be needed. Also, it may be necessary to have proof of U.S. citizenship or lawful alien status. If you are applying for benefits based on someone passing away, then your client will need a death certificate for the deceased. Your client will be asked for W2 forms or self-employed tax returns for the most recent tax year, because there is a delay in the posting by SSA.
The child will be eligible for up to 75% of the deceased parent’s basic Social Security benefit. However in the cases where multiple family members are eligible there is a limit to how much will be paid to a family, which is from 150% to 180% of the parent’s full benefit amount. If the sum of the benefits payable to family members is greater than this limit, the benefits will be reduced proportionately. There are some unique circumstances in which the family may receive more than the 180 percent.
The amount the child will be eligible to receive depends on the average lifetime earnings of the deceased parent. Similar to the retirement benefits, the higher the worker’s lifetime earnings have been the higher the survivor benefits will be. Basically the SSA makes a calculation in the same manner they would if the person were applying for retirement benefits.
There is also a very small lump-sum death payment of $255. This is normally paid to a surviving spouse who was living in the same household as the deceased worker when s/he died. If there is no eligible surviving spouse, then the lump-sum payment can be paid to eligible children of the deceased.
Generally, in order for your client’s children to receive survivor’s benefits, they must have 40 credits. This is the equivalent of 10 years of work. However, if a parent dies before age 32, fewer credits are required in recognition of the fact the parent had fewer working years. The number varies according to the parent's age at the time of death. The deceased parent must have earned at least six credits within three years of his death for his child to receive monthly survivor’s benefits.
Under a special rule, if your client has worked for only one and one-half years in the three years just before your death, benefits can be paid to your children and your spouse who is caring for the children. Similar to SSA’s rules for a retiree who is between age 62 and their full retirement age, if the child works, the SSA will reduce his/her monthly benefit by $1 for every $2 she earns above the annual limit set by the SSA. The annual limit is 2015 is $15,720.
An application for an ongoing monthly Social Security death benefit should be filed within six months of the worker’s death as no more than six months’ worth of benefits will be paid retroactively. If the deceased was married at the time of death, the surviving spouse is eligible for benefits on their own merits. Furthermore, a divorced spouse of the deceased person who has an eligible dependent child living with them could be eligible for benefits if they have not remarried.
Taxation is the same as for Social Security survivors’ benefits as Social Security retirement benefits. They are fully taxable to the extent of the current laws regarding Social Security taxation.
Jerry Love, CPA is the sole owner of Jerry Love CPA, LLC in Abilene, TX. Contact him at
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