Social Security Switching to All-Electronic Payment System

February 11, 2013

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

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

February 2, 2013

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.