U.S. Markets closed

The Strangest Social Security Benefit You Can Get

Dan Caplinger, The Motley Fool

The Social Security program pays out nearly $1 trillion in benefits every year, supporting older Americans and their families in retirement as well as providing a financial lifeline for those who become disabled during their careers. Tens of millions of American families rely on the monthly income that Social Security retirement benefits provide in order to make ends meet after the end of their careers, and for a huge number of them, no other income source comes close to giving them what they get from Social Security.

Over the course of a lifetime, the Social Security benefits that you and your family receive can add up to hundreds of thousands of dollars. That's why it's so odd that the Social Security Administration still makes good on its commitment to fulfill a little-known part of the law that recognizes a relatively tiny benefit for certain family members of workers covered by Social Security.

Brown stucco building with Social Security Administration on the side above glass doors.

Image source: Getty Images.

Social Security's lump sum death benefit

When a worker passes away, a surviving spouse or child can receive a lump sum death benefit from Social Security if they meet the required criteria. Typically, a surviving spouse can claim the benefit if the two spouses lived together or if the survivor either got benefits on the deceased spouse's work record or became eligible to do so at the deceased spouse's death. If the deceased person wasn't married or if the spouse wasn't eligible, then a child could claim the death benefit if that child received benefits or would qualify for benefits under Social Security after the death of the parent.

That's not an unreasonable provision, but what makes it a bit strange is its size. The death benefit is just $255, and unlike most of the benefits that Social Security pays out, it hasn't gone up very much at all since the program's inception more than 80 years ago.

The history of the lump sum death benefit

The Social Security Administration's own historians shed some light on the origins of the lump sum death benefit and its evolution over time. In the original 1935 legislation that created Social Security, there were no ongoing survivor benefits for family members after a worker passed away. Therefore, the lump sum death benefit was added, equal to 3.5% of the deceased worker's covered earnings. That worked out to a maximum amount of $315, although the average in the late 1930s was about $97.

When recurring survivor benefits got added to the program in 1940, the original variable lump sum death benefit was replaced with a one-time payment equal to six times the worker's primary insurance amount. The intent was that the payment would help surviving family members who weren't eligible for the new survivor benefits, and also to provide burial expenses for non-family members if there wasn't anyone in the family to claim the lump sum. Payments ranged from $64 to $274, with the average being about $146.

It wasn't until 1954 that the $255 cap on the lump sum death benefit was established. The reason had to do with the rise in monthly benefit payments, which would have greatly increased the death benefit without the imposition of a separate limit. At the time, most calculated death benefit amounts were less than $255, so the lower amount was paid. Even today, current law states that the benefit can be lower than $255 if that number is greater than three times the primary insurance amount for the deceased worker.

How to get the lump sum death benefit

To apply to receive the lump sum death benefit from Social Security, you'll need to file Form SSA-8. That form requires basic information about the deceased person, including name, date of birth, and date of death. You'll also need to fill in facts about the deceased worker's earnings, health history, military record, and family.

Along with the form, you'll need to submit supporting documents, including birth and death certificates, proof of your identity, and proof of the deceased worker's citizenship and military discharge status. The SSA will ask additional questions, such as whether a surviving spouse filed for benefits on the deceased worker's earnings record and whether that surviving spouse was previously married to someone else. Last, bring your banking information so the SSA can have the benefit deposited directly to your bank account.

The $255 payment isn't going to make a huge difference for most people, but every little bit counts. If you're entitled to Social Security's lump sum death benefit, it's worth the effort to claim it, even if it seems a bit like a historical relic from a long-gone era.

More From The Motley Fool

The Motley Fool has a disclosure policy.