A growing number of U.S. states are moving to change long‑standing policies that allowed child welfare agencies to take Social Security benefits belonging to children in foster care, following a federal warning that the practice may violate the intent of federal law and harm some of the nation’s most vulnerable youth.
All but 11 states have been allowed to divert foster youths’ earned Social Security survivor benefits to reimburse state foster care costs.
With an estimated 30,000 kids eligible in foster care eligible for Social Security benefits, several states have routinely used that money to offset costs of caring for these children. Critics have argued that diverting those funds have left them at a disadvantage when they age out of the system because they don’t have that financial support available to them. The Donald Trump administration has criticized it as an “orphan tax.”
Since the Trump administration came out against the funds being used to cover care, several states have taken steps—through legislation, executive orders, or policy changes—to ensure that Social Security benefits are preserved for foster children rather than absorbed into state budgets.
Why Foster Youth Receive Social Security Benefits
While Social Security benefits are commonly associated with retirees, thousands of children also receive them. Foster youth may qualify for Social Security survivor benefits if a parent has died after paying into the system, or Supplemental Security Income (SSI) if they have a qualifying disability.
According to a Social Security Advisory Board estimate cited by federal officials, about 27,000 children in foster care receive Social Security or SSI benefits, representing more than 5 percent of all foster children nationwide.
Under federal rules, these benefits belong to the child. When a child cannot manage the funds, a “representative payee” is appointed to use the money for the child’s current needs and to conserve any unused funds for the child’s future. In many states, child welfare agencies have appointed themselves as the payee and used the money to offset foster care costs.
Federal Officials Call for an End to the Practice
Department of Health and Human Services (HHS) officials argue that while the practice may be technically legal under existing regulations, it undermines the purpose of the benefits and disproportionately affects children who are already among the most disadvantaged.
In its December letters, the Administration for Children and Families (ACF)—a division of HHS—told governors that state agencies are routinely intercepting benefits earned through a deceased parent’s work history and using them to reimburse state expenses rather than preserving them for the child.
“Every earned benefit dollar belongs to these foster youth, not the government agencies or bureaucrats,” ACF Assistant Secretary Alex Adams said in the agency’s announcement.
Adams described the practice as morally indefensible. In an interview with NPR, he said there is “no moral justification for why orphans should have to pay their own way,” emphasizing that states are already legally obligated to cover foster care costs regardless of whether a child receives federal benefits.
Which States Are Changing Social Security for Foster Kids?
In January, Nebraska Governor Jim Pillen, a Republican, signed an executive order barring state agencies from diverting foster youths’ survivor benefits to cover the cost of care. The order directs Nebraska officials to preserve benefits administered by the Social Security Administration, the Department of Veterans Affairs, and the Railroad Retirement Board for foster youth, making the state the 12th in the nation to formally end the practice.
State officials said Nebraska had retained approximately $1.4 million in survivor benefits in the most recent fiscal year and identified about 128 foster children receiving such payments, according to the Nebraska Examiner.
Nebraska is not alone in the push to change how Social Security funds are managed for foster youths. Multiple states are now reconsidering or revising their approaches to foster youth benefits in the wake of federal pressure.
In Mississippi, lawmakers passed HB 1758 in early March and sent it to Republican Governor Tate Reeves, who signed it into law on March 13. The law prevents Social Security benefits from being diverted away from foster youth who are entitled to them unless the child needs supplemental support beyond what Child Protection Services (CPS) normally covers. So, funds can’t be used for food, housing or supervision, which the state is legally required to provide.
The law requires CPS to place the funds into appropriate accounts and provide records of the funds to the child when they reach the appropriate age. CPS must also create a plan that would disperse funds to eligible children at key milestones, including getting a driver’s license, graduating from high school, or going to college.
Legislators in Washington also passed a bill limiting the state’s ability to use Social Security benefits to pay for foster-care services for some recipients. Beginning January 1, 2027, the state is required to assess whether a youth in the system may be eligible for benefits and bars the state from using those payments for youths aged 18-21. It does not prohibit the agency from using the funds designated for younger kids.
Advocates say the changes could help reduce homelessness, unemployment, and incarceration among young adults aging out of foster care by giving them access to financial resources they otherwise would never see.
In California, a bill going through the legislature would prohibit “counties serving as the representative payee for a foster youth receiving federal Social Security Administration (SSA) benefits, from using those funds to offset the cost
of foster care placement”
Of the states considering changing their rules for Social Security benefits for foster youths, California has the highest share of people that would be impacted. While there’s no firm number for how many youths would be impacted, it’s estimated that about 10-20 percent of foster youths aging out of the system are eligible for benefits, according to the state’s Department of Social Services.
What Happens Next
Social Security benefits for kids in the foster care system will depend on what each state decides to do in terms of regulating how the funds are used. However, with pressure from the HHS, it’s possible more states pass legislation to restrict what funds can be used for and how they’re managed.