Your death will have a devastating impact on your family in many ways. If you are the major breadwinner, your loved ones must deal with the loss of your income at a time when they are least able to cope. Understanding the Social Security survivor's benefits rules now is an important part of retirement planning and can make this transition less painful. Most people are aware that when they die, their surviving spouse will be eligible for Social Security survivor's benefits. Few realize that their dependent and disabled children, their dependent parents, and their former spouses may be eligible for survivor's benefits. Some of these benefits are listed on your Social Security statement and your spouse's statement, which you can find at http://www.ssa.gov/myaccount. Following is a more detailed explanation of the benefits that are available for your eligible dependents.
Part 3. Social Security Spousal Benefits.
In retirement planning, an overlooked source of income is the Social Security spousal benefit. During your lifetime, your spouse may collect social security benefits based on your earnings or benefits based on his or her earnings. If your spouse has low earnings or has never worked, the spousal benefit will most likely be higher than his or her own benefit. The same rule applies to you. You may collect spousal benefits based on your spouse's earnings rather than collecting your own benefit. You and your spouse also have the option of collecting spousal benefits and then collecting your own benefits at a later age. Before filing for benefits, both you and your spouse should review the following: 1) the benefits that you are entitled to collect based on your earnings at various ages; 2) the spousal benefits that both of you are entitled to collect, based on the earnings of the other spouse; 3) your plans to continue working before or after full retirement age (currently age 66); and 4) some options for filing, such as "file and suspend", which allows your spouse to start collecting spousal benefits while you continue to work. Analyzing these options will enable you and your spouse to maximize the benefits that both of you can collect.
Advising a young couple to enter into a pre-nuptial or post-nuptial agreement is uncomfortable. Basically, I am asking them to plan for divorce. But the divorce statistics are compelling. More than two million people divorce every year in the United States, with a 52% divorce rate for first marriages and a 60% divorce rate for second marriages. Older couples are now divorcing. Baby boomers are looking at twenty-five or thirty years of marriage after retirement. Many are now opting for divorce, with the hope of finding someone new to share their retirement years.
If you and your spouse have decided that a Pe-Nupital or Post-Nupital Agreement should be part of your estate plan, it can be difficult to start the process. I like to refer my clients to the "Commitment Conversation" at www.equalityinmarriage.org/cc.pdf (a Guide to the Most Improtant Discussion of Your Relationship.) It is worthwhile for any couple, whatever their marital status and stage in life, to go through this exercise. Each member should fill out the detailed questionnaire separately and compare their answers. They most likely will be surprised by each other's answers. Doing this before marriage is ideal, but it's a good idea to do this exercise every few years after the wedding. People change, particularly as they grow older. When the children are grown and have families of their own, a couple's goals will necessarily change. If the couple is approaching retirement, a discussion about goals and expectations is critical. I have seen marriages fall apart when spouses who have worked fulltime are suddenly spending all of their time together after retirement. Each spouse may have very different expectations about what will happen during retirement and what their relationship will be.
Social Security Retirement Benefits
What You Don't Know About Social Security Retirement Benefits
Recently, I represented the parents of a young woman who had died suddenly, without a Will. After her parents were appointed as Personal Representatives of her estate, they started the search for her assets. She was a successful website designer, doing well financially, but her parents could find no bank or investment statements or bills. Their daughter had gone "paperless". Luckily, her parents could access her e-mail account, where they found notices about overdue payments and online statements. But without usernames and passwords, locating, accessing and dealing with her online accounts was difficult. What should have been a simple estate turned into a two year ordeal.
Many Seniors who live alone need help, not a move to a nursing home. Due to a physical disability, they may be unable to go grocery shopping, run errands, pick up prescriptions, cook, do laundry, shower or take a bath safely, or keep their home clean. With a little (or a lot) of help, they can remain in their homes. Their children, other family members or friends may not live close enough to help on a day to day basis, or they may not be aware that help is needed. Many Seniors reach a crisis point, when their doctor files a report with the local Elder Services Agency that their living situation is not safe. The good news is that the Elder Services Agency is there to help Seniors remain in their homes. The agency will send a Social Worker to visit the Senior in his or her home to evaluate the situation and determine what services are needed. These services include:
Reverse Mortgages - Pros and Cons
If you believe Fred Thompson and Henry Winkler in the TV ads for reverse mortgages, they are too good to be true. While a reverse mortgage is a good option for some low income seniors who need funds for living expenses, it is not the only solution. An equity credit line, which has far lower closing costs, should be explored first, as well as subsidized senior housing, assisted living, or downsizing to a smaller home or condo. If you need funds for home health aides, you can apply for MassHealth or Veterans Aid and Attendance benefits. See my Elder Law page and Veterans Aid and Attendance Benefits article. If you don't qualify for a credit line and need funds to stay in your home, you should consider a reverse mortgage.
As much as you want. There are no federal or State laws that restrict the amount you can gift to children, grandchildren or anyone else. Many clients have announced to me "I can give $10,000 (or $12,000 or $14,000) to my children". Their accountant told them, or their hairstylist or a friend. In the context of federal gift tax laws, the correct statement is "I can gift $14,000 to each of my children (or grandchildren or friends) as a tax-exempt gift each year". The current federal tax-exempt gift of $14,000 can be given to an unlimited number of people, no matter how they are related to you. You may make these tax-exempt gifts every calendar year. There is no need to file a Gift Tax Return to report the gifts and there is no gift tax imposed. In addition, you can gift $5,340,000 during your lifetime without paying gift taxes. In both cases, the person receiving the gift does not have to pay any type of tax on the gift or report it on their income tax return. In another context, gifting matters very much. If you are looking at a long stay in a nursing home, the gifts you made in the last five years may disqualify you for medicaid (MassHealth) benefits to pay for your care.