What Is Fiduciary Liability
Fiduciary liability is the legal responsibility of someone managing money or benefits on your behalf to act in your best interests. In Social Security disability claims, this applies to representative payees, attorneys, and advocates who handle your case or manage your benefits.
If you receive SSDI or SSI, the Social Security Administration may appoint a representative payee to manage your benefits if they determine you cannot manage funds yourself. That payee has a fiduciary duty to use your money only for current maintenance and reasonable needs. They must keep records and file accounting reports with SSA annually.
How It Applies to Your Claim
Your disability representative, whether an attorney or non-attorney advocate, also carries fiduciary responsibilities. They must disclose any conflicts of interest, explain how they'll use your case funds, and not charge more than SSA allows. For SSDI cases, attorney fees are capped at 25% of back pay, with a maximum of $6,000 as of 2024. For SSI cases, attorneys can charge up to $6,000 total or 25% of past-due benefits, whichever is lower.
This matters during ALJ hearings because your representative's decisions affect the outcome. They decide which medical evidence to present, what experts to call, and how to challenge SSA's denial. Administrative Law Judges see about 600,000 cases yearly, with an average allowance rate around 42%. Your representative's preparation and credibility directly influence whether you're in that 42% or among the 58% denied.
Back Pay and Representative Fees
Back pay is the total benefits owed from your onset date to your approval date. SSA calculates this based on your eligibility month. If your representative mishandles this calculation or fails to recover all owed funds, you can file a complaint with SSA's Office of Inspector General or pursue a fiduciary liability claim against them.
- Representative must disclose fee arrangements before taking your case
- Fee must be approved by SSA before payment from your back pay
- If back pay exceeds $6,000, your attorney receives the cap amount only
- Remaining back pay goes to you or your payee, depending on your work history
Common Questions
- Can my payee use my benefits however they want? No. Payees must use benefits for your current needs and maintenance. SSA audits randomly and requires annual accounting. Misuse can result in replacement of the payee and potential fraud charges.
- What if my attorney makes a mistake in my case? You can file a complaint with your state bar association or pursue an errors and omissions claim. Mistakes might include missing deadlines, failing to submit required medical evidence, or inadequate ALJ hearing preparation.
- Who pays if my representative fails me? Your representative may carry professional liability insurance. You can also request SSA review the representative's handling and potentially reopen your case if the error caused a wrongful denial.