The Miserly Social Security Death Benefit

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About a month ago, I wrote a column explaining what family members need to do when a loved one who was getting Social Security benefits dies. I primarily discussed what might need to be done about returning the last Social Security check (depending on the timing of the death). I also used that column to help a surviving spouse know what possible widow’s (or widower’s) benefits might be due and how to apply for them.

And I only briefly mentioned the $255 “death benefit” that is sometimes payable. I guess that was a mistake because I got lots of follow-up emails asking me about that most miserly of all Social Security benefits. It has an interesting history.

It didn’t start out as a death benefit, exactly—at least not in the context it is thought of today. It certainly was never meant to be a “burial benefit,” as many people call it.

As part of the thinking that went into the original Social Security Act passed in 1935, Congress realized that many of the new Social Security taxpayers would die before they ever had a chance to collect benefits. Or they would die without having earned enough “quarters of coverage” to be insured for survivor benefits for any dependents. So they decided to compensate the families of a loved one who died with some form of reimbursement for the Social Security taxes that the deceased had paid into the system. They set up a one-time benefit they called the “lump sum death payment.” And it was originally intended to reimburse the family with an amount equal to 3.5 percent of the money the deceased had paid into the system.

It was supposed to be a temporary benefit because Congress knew that as time passed, most workers would be paying a sufficient amount of money into Social Security that they would be insured for survivor benefits. In other words, when a taxpayer died, the widow or widower (and any minor children) would get monthly benefits—so this lump-sum payout would no longer be needed.

But as often happens with government programs, once you start paying a benefit, it’s hard to take it away. Over the years, there have been any number of proposals to eliminate the lump sum death payment. But as miserly as the benefit is, it’s a popular feature of the Social Security program, and politicians soon learned that to tamper with it meant an automatic loss in the next election. So the “temporary benefit” never went away.

But occasionally, Congress has made some relatively minor adjustments to the original law. In 1954, they capped the benefit at $255—and it’s remained at that level ever since. And in 1983, when politicians were looking for ways to save money in the Social Security system, they restricted the payment of the one-time death payment to a “spouse who was living with the deceased at the time of death.”

And that’s where we are today. We have an essentially meaningless “death benefit” paid only to a widow or widower. Perhaps 50 years ago, $255 paid the cost of a funeral. Of course, today it barely covers the price of the flowers. If I were the king of the Social Security world, I would do one of two things. I would raise the death benefit to something meaningful, such as $2,500. Or I would simply eliminate it.

But I’m a columnist, not a king. So all I can do it explain the law and answer any questions you might have about it. Here are a few.

Q: My wife recently died. She was a homemaker all her life, so she was getting spousal benefits on my record. Everything went fine with stopping her Social Security checks. But I have two questions: When will I get the $255 death benefit? And will my benefit go up to give me credit for the spousal share that was being deducted from my checks?

A: I’m sorry, but the $255 death benefit is only paid on the account of someone who had worked and paid Social Security taxes. It sounds like your wife never did that because she was just receiving spousal benefits, not her own Social Security. The money paid to a spouse is just an “add on” benefit. In other words, nothing was taken out of your retirement check to pay her. So your benefit rate will remain the same.

Q: My husband died 5 years ago when I was in my late 50s. I don’t ever remember getting the death benefit. Was it automatic?

A: No, it’s not automatic. You must apply for the death benefit. I’m not sure, but it might be too late to file for it now. To find out, call Social Security at 800-772-1213.

Q: My father died on Feb. 25. My parents were divorced, although they were still close friends. My mother applied for and started getting divorced widow’s benefits on his record. But I have two questions: Why did she have to return his February check? And why didn’t she get the $255 death benefit?

A: If you go back and read that prior column I mentioned earlier, you will learn why no one was due the proceeds of your father’s February Social Security payment. In a nutshell, it’s because Social Security benefits are not prorated. Because your father didn’t live the entire month of February, the check for that month had to be returned. But there is an upside to that: Your mother started getting divorced widow’s benefits for the whole month of February, even though she was a widow for only three days in that month.

As far the death benefit goes, the law says it can be paid only to a widow who was living with the deceased at the time of death. I assume your divorced parents weren’t living together. So that’s why the $255 can’t be paid to her.