Married Couples Can Maximize Their Social Security Benefits Using File and Suspend

Are you married, with one spouse wanting to retire but the other one prepared to keep working? If so, you should take a close look at the “file and suspend” strategy to maximize your Social Security benefits.

Spouses are entitled to Social Security benefits on their husband or wife’s work record if the marriage lasted at least 10 years. If the spouse who is not working or who wants to stop working is at full retirement age or caring for a child who is under 16 years old, he or she is entitled to an amount equal to one-half of the working spouse’s full retirement benefit. If the non-working spouse takes the working spouse’s benefits before his or her own full retirement age, the amount will be reduced.

In order to receive the spousal benefit, the worker must have filed for Social Security retirement benefits. The file and suspend strategy allows the working spouse to file for benefits and then immediately suspend those benefits. The worker must be at full retirement age in order to do this. Once the worker suspends benefits, the non-working spouse can begin receiving spousal benefits while the worker continues to work. The longer the worker delays retirement the more delayed retirement credits he or she will get. Social Security benefits can increase by as much as 8 percent a year (depending on date of birth) if a worker delays retirement beyond full retirement age. 

Example: Husband and wife are at full retirement age. Wife wants to start collecting benefits and husband wants to continue working. If husband retired now, he would receive $2,000 a month. Husband files for benefits and immediately suspends. Wife files for spousal benefits. She receives $1,000 a month on his work record. Husband continues to work and retires at age 70. When he retires, he can get as much as $2,800 a month in benefits.

This strategy can work either if you, as the non-working spouse, are retiring early or if you are retiring at your full retirement age, but for it to be to your advantage you must receive lower benefits on your own record than on your spouse’s record. If you retire before your full retirement age, Social Security will automatically give you whichever benefit is higher–your own benefit or the spousal benefit. If you retire at full retirement age, you can choose which benefit to take. This allows you to take a spousal benefit while your worker’s benefit accrues delayed retirement credits.

Example: Husband and wife are both at full retirement age. Husband’s benefit is $2,000 a month. Wife would receive $900 a month in benefits if she received benefits on her own work record. Husband files and suspends. Wife receives $1,000 a month of spousal benefits on husband’s work record. At 70, wife can claim on her own record which, because of delayed retirement credits, will have grown to more than $1,000 a month.

While it may sound complicated to file for worker benefits, apply for spousal benefits, and then suspend worker benefits, it can be done in one visit to your Social Security office. For more information about suspending benefits, click here.

For more information about Social Security benefits, click here.

This isn’t the best strategy for everyone. To find out if will work for you and/or to discuss other elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Women Will Pay More for Long-Term Care Insurance

Long-term care insurance will soon be getting more expensive for women. The country’s biggest provider of long-term care insurance has announced plans to introduce gender-based pricing.

Life insurance has long had gender-specific pricing, but long-term care insurance has always been gender neutral. This is changing now that Genworth Financial has decided to charge more for policies purchased by single women. Other insurers will likely follow suit.  Genworth hasn’t said how much it will raise rates for women, but according to the American Association for Long-Term Care Insurance (AALTCI), women will likely end up paying 20 to 40 percent more than men.

The reason for the increase in pricing is that women tend to live longer than men and file more long-term insurance claims. About two-thirds of payouts for claims are made to women, according to the AALTCI. Not only do women claim more often, but they also live longer on a claim.

Genworth’s new rates won’t apply to existing policyholders or married couples who apply for joint insurance. Insurance companies usually give married couples a discount on rates. Genworth is waiting for approval from state regulators, so the new rates will likely go into effect throughout the spring and summer. Several other companies also have gender-specific pricing requests on file with state regulators. Unlike Genworth, the other companies may also charge more to a married woman who outlives her spouse.  The increase in rates will be on top of recent rate hikes for long-term care insurance policyholders. Premiums in general have gone up between 30 and 50 percent over the past five years.  

Gender-specific pricing can be controversial. The Affordable Care Act mandates gender-neutral pricing for health insurance policies, but it doesn’t cover long-term care insurance. Customers in Colorado and Montana will not be affected by the new pricing because both states have laws requiring unisex rates.

For more information on the rate increase, click here.

For more information on long-term care insurance, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Federal Government Is Getting Rid of Popular Reverse Mortgage Option

The federal government is eliminating its most popular reverse mortgage. Soon homeowners will no longer be able to get a lump-sum payment if they apply for a reverse mortgage under the Home Equity Conversion Mortgage (HECM) Standard program.

A reverse mortgage allows a homeowner aged 62 or older to receive a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. The loans do not have to be repaid until the last surviving borrower dies, sells the home, or permanently moves out. The HECM is the only reverse mortgage program insured by the Federal Housing Administration (FHA), and the FHA sets a ceiling on the amount that can be borrowed against a single-family house.

As of April 1, 2013, the federal government is no longer going to allow home owners to apply for a HECM Standard fixed-rate, lump-sum reverse mortgage. Borrowers still can apply for a line of credit or monthly payments at an adjustable interest rate under the HECM Standard program.

The reason for the change is that there were more defaults with this type of loan as opposed to other loans. While it isn’t possible to default on a reverse mortgage payment, home owners must make timely payments of property taxes and homeowner’s insurance in order to keep the loan in place. If taxes and insurance aren’t paid, the loan can default. The high number of defaults on these types of loans indicates that homeowners in serious financial trouble may have been using the loans as a last resort rather than as part of a financial plan.

Borrowers will still be able to get a lump-sum loan using the HECM Saver program, which pays out a smaller percentage of a home’s value compared to a Standard loan.

For more information on reverse mortgages, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Five Myths About Medicaid’s Long-Term Care Coverage

While Medicare gets most of the news coverage, Medicaid still remains a bit of mystery to many people. The fact is that Medicaid is the largest source for funding nursing home care, but there are many myths about exactly who qualifies for it and what coverage it provides.  Here are five myths followed by the real story.

1. Medicare will cover my nursing home expenses. Medicare’s coverage of nursing home care is quite limited. Medicare covers only up to 100 days of “skilled nursing care” per illness. To qualify, you must enter a Medicare-approved “skilled nursing facility” or nursing home within 30 days of a hospital stay that lasted at least three days. The care in the nursing home must be for the same condition as the hospital stay.
   
2. You need to be broke to qualify for Medicaid. Medicaid helps needy individuals pay for long-term care, but you do not need to be completely destitute to qualify. While in general a Medicaid applicant can have no more than $2,000 in assets to in order to qualify, this figure is higher in some states and there are many assets that don’t count toward this limit. For example, the applicant’s home will not be considered a countable asset for eligibility purposes to the extent the equity in the home is less than $536,000, with the states having the option of raising this limit to $802,000 (in 2013). In all states, the house may be kept with no equity limit if the Medicaid applicant’s spouse or another dependent relative lives there. In addition the spouse of a nursing home resident may keep one half of the couple’s joint assets up to $115,920 (in 2013). For more information on Medicaid’s asset rules, click here. 
3. To qualify for Medicaid, you should transfer your money to your children. Medicaid law imposes a penalty on people who transfer assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid, and the length of the penalty period is determined, in part, by the amount of money transferred. The state will look at all transfers made within five years before the application for Medicaid. That doesn’t mean that you can’t transfer assets at all — there are exceptions (for example, applicants can transfer money to their spouses without incurring a penalty). However, before transferring any assets, you should talk to an elder law attorney. For more information on Medicaid’s asset transfer rules, click here. 
4. A prenuptial agreement will protect my assets from being counted if my spouse needs Medicaid. A prenuptial agreement only works to keep property separate in the event of death or divorce. It does not keep your property separate for purposes of Medicaid eligibility. 
5. I can give away up to $14,000 a year under Medicaid rules. You can give away up to $14,000 a year without incurring a gift tax. Under Medicaid law, a gift of $14,000 or any other significant amount could trigger a penalty period if it was made within the five-year look-back period.

Before applying for Medicaid, it is crucially important to obtain legal advice.  To discuss Medicaid or other elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

When Is a Hospital Stay Not a Hospital Stay? Bill Aims to Fix Costly Medicare Loophole

Sen. Charles E. Schumer (D-NY) is introducing a bill to change Medicare law so that elderly patients are not charged unfairly for receiving needed nursing home care after being hospitalized. 

In a press release, Sen. Schumer said the plight of Isadore “Ike” Cassuto, an 88-year-old retired tax attorney and former WWII pilot, is typical of the cases of thousands of elderly Americans who have been unreasonably denied Medicare coverage for required care.

After breaking his pelvis in November, Mr. Cassuto spent four days at an Albany, N.Y., hospital before being transferred to a nursing home for three weeks of rehabilitation.  Medicare covers such nursing home stays entirely for the first 20 days, but only if the patient was first admitted to a hospital as an inpatient for at least three days.  It turned out that, unbeknownst to him, Mr. Cassuto had spent his four days in the hospital merely under “observation” without actually being admitted.  This meant that he was entirely responsible for his subsequent $6,000 nursing home bill.

As ElderLawAnswers has reported, more and more Medicare recipients are getting hit with this sort of sticker shock.  In part due to pressure from Medicare to reduce costly inpatient stays, hospitals are increasingly not admitting patients but rather placing them on observation to determine whether they should be admitted – often for the duration of their hospital stay. The consequence is that if the patient moves to a nursing home after being “released,” the patient must pick up the tab for the nursing home stay — Medicare will pay none of it. The bills can run between $200 and $500 a day. 

Under Sen. Schumer’s Improving Access to Medicare Coverage Act, which is being co-sponsored by Sen. Sherrod Brown (D-Ohio), “observation” stays will be counted toward the three-day mandatory inpatient stay for Medicare to cover rehabilitation post-hospital visit.

“If you are holed up in a hospital bed for days on end, it shouldn’t matter what your billing status is, and this plan will save . . . seniors thousands,” Sen. Schumer said.

Similar bills were introduced in 2011 by then-Sen. John Kerry (D-MA) and Rep. Joe Courtney (D-CT), but the bills went nowhere.

The Cassutos’ story appeared in the Albany Times Union in December, and Mr. Cassuto’s wife, Thalia, mailed the article to Sen. Schumer along with copies of the couple’s Medicare appeal letters.  Mrs. Cassuto, 82 and a retired teacher, said the couple was stunned when hospital officials told them Medicare would not pay for rehab.

“What do you mean it can’t be paid?” Mrs. Cassuto later reported her reaction to the Times Union. “He’s 88 years old. He’s flat on his back. He’s been paying for Medicare since it was invented.”

The Cassutos doubt they will be reimbursed the $6,000 spent on rehab. “We are battling this now because it is so unfair and so unreasonable,” Mrs. Cassuto told the Times Union. “We are battling this for other people.”

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Social Security Switching to All-Electronic Payment System

No more paper checks in the mail. Starting March 1, nearly everyone who receives Social Security must switch to the government’s new electronic payment system. Beneficiaries will be able to have their checks directly deposited into their bank account or put on to a debit card. 

The government is switching to electronic payments in order to save money and to provide a more reliable method of delivering payments. The move to paperless payments will save the government close to $1 billion dollars over the next 10 years. It also eliminates the problem of checks that get lost in the mail or are delayed due bad weather.

Currently, around 93 percent of payments are made electronically, but about 5 million checks are still being mailed each month. If you are among those who haven’t converted to electronic payments, the following are your options:

• You can have the checks deposited directly into your bank account. This option allows flexibility with withdrawals and you will be subject to the bank fees and limits you already have in place.
• If you can’t afford a regular checking or savings account, you may be able to open a special low-cost bank account called an electronic transfer account (ETA). ETA fees are low and you are allowed four free withdrawals a month. However, not a lot of banks have joined the ETA program.
• You can have your payment put on a Direct Express debit card. The debit card does carry some additional fees if you are planning to withdraw cash. You get one free withdrawal a month and then a $0.90 fee (or more depending on the bank) applies every time you make a subsequent withdrawal that month. You can also use the card like a MasterCard to make purchases directly without fees.

Some individuals are exempted from the requirement to switch to paperless payments. If you are over age 90, live in a remote area that doesn’t have electronic payment options, or have a mental impairment that doesn’t allow you to manage finances, you may not have to switch to an electronic payment system.

To make the switch, call 1-800-333-1795 or visit www.GoDirect.org.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

‘Fiscal Cliff’ Deal Brings Changes to Estate Taxes and IRAs

Congress finally came to an agreement to avoid the “fiscal cliff,” and the agreement includes some changes to federal estate taxes and Individual Retirement Accounts (IRAs). The American Taxpayer Relief Act sets a permanent estate tax rate and provides a tax break for cash donated to charities from an IRA.

The new law makes only minor changes to the federal estate tax. The amount that you can transfer tax-free either during life or at death will remain the same as it has the past two years. The law permanently sets the estate tax exemption at $5 million for an individual (now $5.12 million due to inflation) and $10 million for a couple (now $10.24 million).  (With new inflation adjustments, the exemptions are estimated to rise to about $5.2 million and $10.4 million.)  The lifetime gift tax exclusion – the amount you can give away without incurring a tax – also remains the same at $5.12 million.  But you can still give any number of other people $14,000 each per year without the gifts counting against the lifetime limit. 

Under the new law, the gift and estate tax rate will increase from 35 percent to 40 percent. This means that if you transfer more than $5.12 million either during your life or upon your death, your estate will be taxed at 40 percent. The new law also makes permanent the “portability” provision currently in place. This allows a surviving spouse to add the unused portion of a deceased spouse’s exclusion to his or her own. Note that portability is not automatic — the estate must file an estate tax form when the first spouse dies even if no tax is owed.

The new estate tax rates and rules are “permanent,” but only until Congress decides to revisit them and the President agrees to the changes.  But keep in mind that the new law does not address state estate taxes, which many states have. 

The fiscal cliff deal also brings back a tax provision called the IRA charitable rollover that had expired in 2011. The law extends the provision through 2013. This allows investors aged 70 ½ or older to transfer as much as $100,000 a year from an IRA directly to a charity without counting it as taxable income. Non-Roth IRA owners are required to take yearly minimum distributions from their IRAs starting at age 70 1/2, and the charitable donation can count toward the taxpayer’s minimum required distribution for the year.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.