Then that would absolutely be illegal.

If it was backpay for the kids benefits, I would think/hope they would consider that differently. I would look at that as paying back the parents for expenses they had alreay outlayed for each child, but if this is about the child's SSI money....that money is for the child's living expenses, so unless they had a rental agreement and the kid 'owes' them, I think they could be in big trouble with SSI.