Map of 34 States Who Have Ended 'Orphan Tax' on Social Security

At least 34 states and the District of Columbia have moved to end or significantly alter a long-standing practice that allowed child welfare agencies to use Social Security survivor benefits received by children in foster care to cover the costs of their placement. This shift follows increasing pressure from the Trump administration, which has labeled the practice the “orphan tax.” Though not a formal tax, the term refers to the diversion of funds intended for children, often from deceased parents who contributed to the Social Security system, to offset public expenditures on foster care. The reforms gained momentum starting in 2025, with a key catalyst being a letter sent by Alex Adams, assistant secretary at the Administration for Children and Families (ACF), to U.S. governors in December 2023. Adams urged states to cease using Social Security benefits for foster care reimbursement, emphasizing that children in foster care should not bear the financial burden of their placement. His remarks were echoed in a January 2026 interview with NPR, where he stated, “There is no moral justification for why orphans should have to pay their own way. They are not in foster care by any fault of their own.” Federal guidelines issued in August 2023 by the Social Security Administration and the ACF clarified how child welfare agencies, acting as representative payees, should manage these benefits. According to the guidance, such funds must be used for the immediate needs of the child and preserved for future use if not immediately necessary. The policy aims to ensure that children retain control over their financial resources, particularly as they transition out of the foster care system. Social Security survivor benefits are available to children who lose a parent who contributed to the program. These benefits can amount to up to 75% of the deceased parent’s monthly payment, averaging around $1,179 per month as of July 2024. Historically, some states have redirected portions of these funds toward foster care costs, despite legal obligations to provide care for children in need. Critics argue this practice diverts essential resources away from children, potentially limiting their ability to secure housing, education, or other critical needs upon exiting the system. HHS Secretary Robert F. Kennedy Jr. emphasized the ethical concerns surrounding the issue in a July 15 statement, stating, “Those benefits are meant to help their child, not reimburse the government. Every state should protect these children instead of taking what their families earned.” The department has continued to push for compliance with the new federal standards, urging states to align their policies accordingly. Among the states that have adopted the changes, Oklahoma joined the list on July 15, followed shortly thereafter by Iowa, Montana, and Michigan. Maine became the most recent addition on August 5. Each state has implemented measures aimed at ensuring that children in foster care retain access to their Social Security benefits. Oklahoma Governor J. Kevin Stitt highlighted the importance of the reform, noting its potential to improve the financial stability of youth transitioning out of foster care. The movement to end the so-called orphan tax reflects broader efforts to address systemic inequities within the child welfare system. As more states adopt similar policies, advocates continue to monitor implementation and advocate for consistent enforcement across jurisdictions. The impact of these changes on children’s long-term financial security remains a focus of ongoing discussions among policymakers and child welfare experts.