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An article titled “A Plan that Makes a Difference: How To Implement An ‘Effective’ Estate and Elder Care Plan” by Patricia Bave, Esq. was recently featured in Coming of Age Magazine in Westchester. Click here to download the article.
Should Seniors Who Lose Their Job During the Coronavirus Pandemic Claim Social Security Benefits Early?
In the wake of the coronavirus pandemic, unemployment is skyrocketing. Seniors who lose their jobs may be tempted to claim Social Security benefits early, but should they, given the resulting reduction in future benefits? The answer depends on your situation, but you may be able to claim and not sacrifice much in terms of future benefits.
While you can claim Social Security benefits as early as age 62, the better financial decision is usually to wait to take benefits as long as you are able. If you take Social Security between age 62 and your full retirement age, your benefits will be permanently reduced to account for the longer period you will be paid. Individuals who file at age 62 this year will receive 72 percent of their full benefit. On the other hand, if you delay taking retirement beyond your full retirement age, depending on when you were born, your benefit will increase by 6 to 8 percent for every year that you delay, in addition to any cost of living increases. This extra income could be very welcome, especially if you live into your 80s or beyond.
Unfortunately, many seniors who lose their job due to the coronavirus pandemic may find it necessary to apply for benefits early, potentially losing hundreds of thousands in future benefits. Before rushing to apply for early retirement benefits, you should consider all of your options. If you are lucky enough to have substantial savings, it may make sense to spend your savings rather than take benefits early. You may also be able to apply for unemployment benefits to allow you to further delay taking benefits.
If you do not have any savings or unemployment benefits to fall back on, your only option may be to claim benefits. However, if you do claim early and then go back to work, you may have the ability to increase those benefits. If you are able to stop the benefits within 12 months of starting, you can withdraw the application, repay the benefits collected, and then still be eligible for the higher benefit amount at full retirement age or older. It is essentially a one-year interest-free loan. For more information, click here.
If you take benefits early but are not able to stop the benefits within 12 months of starting, you can still suspend your benefits in order to earn higher benefits. For example, if you start collecting at age 62 but no longer need the income once you reach your full retirement age, you could suspend benefits until age 70. You won't get a complete do-over, but between your full retirement age and 70 you would earn delayed retirement credits, which would increase your ultimate benefit amount when you collect at age 70.
Whatever you decide, consider all of your options carefully before making any rash decisions.
For a New York Times article about taking benefits early, click here.
For more about Social Security, click here.
Attorney Doris Gelbman assists a client with a document execution. Photo: Megan Flowers
As the COVID-19 pandemic continues to spread through the country, more people are realizing the importance of getting their estate planning documents in order. Those over age 60 are particularly at risk for developing complications from the novel coronavirus infection. Having in place documents — including a durable power of attorney, a health care proxy, a medical directive, a HIPAA release and a will — is essential in the event that illness strikes.
Although planning one’s estate is a top priority, people don’t want to put themselves or others at risk while doing it. Elder law and estate planning firms across the U.S. are well aware of this concern – both for their clients and their own staff — and have devised creative solutions for clients to execute their documents while limiting or eliminating contact between participants. Strategies include the drive-up solution, taking special precautions with office meetings, and (in some states) executing the documents remotely.
The Drive-Up Solution
This method involves all parties driving to a parking area – perhaps a lot adjacent to the attorney’s office, the client’s driveway, or an assisted living facility parking lot. At a minimum, the attorney and client will need to be present, although witnesses and/or a notary may also be required, depending on the document being executed and state law. One person, usually a law firm staff member, takes documents from car to car so the parties can roll down their windows and sign with minimal contact. Everyone can bring antibacterial wipes with them to clean their hands after the document execution has been completed. It’s unorthodox but it works and keeps everyone safe.
The Charlottesville, Virginia, firm of Gelbman Law PLLC has started using the drive-up approach for signings (see photo). In Virginia, a will must be notarized and witnessed by two individuals, which could make for a crowded and unsafe condition if the signing is done indoors.
“We started thinking about how we could safely accommodate our clients, who are almost all elderly and at greater risk, and so the idea of drive-up will signings seemed like the safest move,” firm principal Doris Gelbman told The Daily Progress, a local newspaper. “I would say that, uniformly, our clients have been appreciative that we’re taking these safety measures.”
It's also possible to employ the drive-up method without an intermediary shepherding documents between vehicles. Patricia D’Agostino of the Massachusetts elder law firm of Margolis & Bloom described in a recent firm blog post the three-car process she used for a signing that required witnesses and a notary:
I served the notary from my car, [the two witnesses] were witnessing from their car and the client was in his car in the middle. We were all on our conference line to communicate. The client showed me his driver's license through the car window. We had already sent the original documents to the client by Federal Express and I had copies. After the client signed the documents, he placed them outside of his car and when he was back in his car, I got out and put them in my backseat. I’ll leave them there for a few days to be safe before we process them. Since our understanding is that the coronavirus dies out on all surfaces within three days, [the witnesses] will be able to witness the documents and I will be able to notarize them at a later date.
Some firms are using still another variation of the car method: the attorney drives to the clients’ house and from the car witnesses them signing the documents on their porch.
Meeting at the Office
In cases where the physical law office remains fully or partially open, some firms are executing documents in the office but taking precautions to social distance and to make the process go quickly.
The firm may use a large conference room – or perhaps several separate rooms – to prevent close contact between the parties. All surfaces are thoroughly sanitized, pens not shared, and careful hand-washing encouraged both before and after the document execution process. Gloves may be used by everyone to avoid contact.
Many firms spread out appointment times – perhaps even scheduling them in the evening or on weekends – to keep the number of people in the office at one time to a minimum. Key to safe in-office signings is for the clients to review the documents thoroughly and communicate any concerns by phone or video conference before physically meeting so the document execution can be completed as quickly as possible.
Like everything else these days – work, schools, doctor visits, birthday parties, and more – document execution is also going digital during the COVID-19 crisis. Details of elder law and estate planning documents can be worked out over the phone or through video conference calls or email exchanges. When everything has been prepared successfully, the actual document execution may be able to take place online. In some states, such as Florida, legislation has already been enacted to allow parties to conduct document executions virtually through Zoom, Google Duo, or other virtual platforms. In the wake of the pandemic, New York State now allows for video notarization. A number of other state legislatures are moving towards passing similar temporary laws so that clients can seamlessly execute their estate planning or other documents without endangering themselves or their attorneys.
No one wants to think about death or incapacity, and people come up with many reasons to put off planning their estates. But in this unprecedented health crisis, worries about the safety of executing essential documents should not be a factor in the decision.
With coronavirus dominating news coverage and creating alarm, it is important to know that Medicare and Medicaid will cover tests for the virus.
The department of Health and Human Services has designated the test for the new strain of coronavirus (officially called “COVID-19”) an essential health benefit. This designation means that Medicare and Medicaid will cover testing of beneficiaries who are suspected of having the virus. In order to be covered, a doctor or other health care provider must order the test. All tests on or after February 4, 2020 are covered, although your provider will need to wait until after April 1, 2020, to be able to submit a claim to Medicare for the test.
Congress has also passed an $8.3 billion emergency funding bill to help federal agencies respond to the outbreak. The funding will provide federal agencies with money to develop tests and treatment options as well as help local governments deal with outbreaks.
As always, to prevent the spread of this illness or other illnesses, including the flu, take the following precautions:
• Wash your hands often with soap and water
• Cover your mouth and nose when you cough or sneeze
• Stay home when you're sick
• See your doctor if you think you're ill
For Medicare’s notice about coverage for the coronavirus, click here.
For more information about Medicare, click here.
For more information about Medicaid, click here.
Medicaid law provides special protections for the spouses of Medicaid applicants to make sure the spouses have the minimum support needed to continue to live in the community while their husband or wife is receiving long-term care benefits, usually in a nursing home.
The so-called “spousal protections” work this way: if the Medicaid applicant is married, the countable assets of both the community spouse and the institutionalized spouse are totaled as of the date of “institutionalization,” the day on which the ill spouse enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. (This is sometimes called the “snapshot” date because Medicaid is taking a picture of the couple's assets as of this date.)
In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in assets (an amount may be somewhat higher in some states). In general, the community spouse may keep one-half of the couple's total “countable” assets up to a maximum of $128,640 (in 2020). Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order. The least that a state may allow a community spouse to retain is $25,728 (in 2020).
Example: If a couple has $100,000 in countable assets on the date the applicant enters a nursing home, he or she will be eligible for Medicaid once the couple's assets have been reduced to a combined figure of $52,000 — $2,000 for the applicant and $50,000 for the community spouse.
Some states, however, are more generous toward the community spouse. In these states, the community spouse may keep up to $128,640 (in 2020), regardless of whether or not this represents half the couple's assets. For example, if the couple had $100,000 in countable assets on the “snapshot” date, the community spouse could keep the entire amount, instead of being limited to half.
The income of the community spouse is not counted in determining the Medicaid applicant’s eligibility. Only income in the applicant’s name is counted. Thus, even if the community spouse is still working and earning, say, $5,000 a month, she will not have to contribute to the cost of caring for her spouse in a nursing home if he is covered by Medicaid. In some states, however, if the community spouse’s income exceeds certain levels, he or she does have to make a monetary contribution towards the cost of the institutionalized spouse’s care. The community spouse’s income is not considered in determining eligibility, but there is a subsequent contribution requirement.
But what if most of the couple's income is in the name of the institutionalized spouse and the community spouse's income is not enough to live on? In such cases, the community spouse is entitled to some or all of the monthly income of the institutionalized spouse. How much the community spouse is entitled to depends on what the Medicaid agency determines to be a minimum income level for the community spouse. This figure, known as the minimum monthly maintenance needs allowance or MMMNA, is calculated for each community spouse according to a complicated formula based on his or her housing costs. The MMMNA may range from a low of $2,113.75 to a high of $3,216 a month (in 2020). If the community spouse's own income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse's income.
Example: Joe Smith and his wife Sally Brown have a joint income of $3,000 a month, $1,700 of which is in Mr. Smith's name and $700 is in Ms. Brown's name. Mr. Smith enters a nursing home and applies for Medicaid. The Medicaid agency determines that Ms. Brown's MMMNA is $2,200 (based on her housing costs). Since Ms. Brown's own income is only $700 a month, the Medicaid agency allocates $1,500 of Mr. Smith's income to her support. Since Mr. Smith also may keep a $60-a-month personal needs allowance, his obligation to pay the nursing home is only $140 a month ($1,700 – $1,500 – $60 = $140).
In exceptional circumstances, community spouses may seek an increase in their MMMNAs either by appealing to the state Medicaid agency or by obtaining a court order of spousal support.
Contact your attorney to find out what you can do to make sure your spouse has enough income to live on.
The Centers for Medicare & Medicaid Services (CMS) has released the 2020 federal guidelines for how much money the spouses of institutionalized Medicaid recipients may keep, as well as related Medicaid figures.
In 2020, the spouse of a Medicaid recipient living in a nursing home (called the “community spouse”) may keep as much as $128,640 without jeopardizing the Medicaid eligibility of the spouse who is receiving long-term care. Known as the community spouse resource allowance or CSRA, this is the most that a state may allow a community spouse to retain without a hearing or a court order. While some states set a lower maximum, the least that a state may allow a community spouse to retain in 2020 will be $25,728.
Meanwhile, the maximum monthly maintenance needs allowance (MMMNA) for 2020 will be $3,216. This is the most in monthly income that a community spouse is allowed to have if her own income is not enough to live on and she must take some or all of the institutionalized spouse's income. The minimum monthly maintenance needs allowance for the lower 48 states remains $2,113.75 ($2,641.25 for Alaska and $2,432.50 for Hawaii) until July 1, 2020.
In determining how much income a particular community spouse is allowed to retain, states must abide by this upper and lower range. Bear in mind that these figures apply only if the community spouse needs to take income from the institutionalized spouse. According to Medicaid law, the community spouse may keep all her own income, even if it exceeds the maximum monthly maintenance needs allowance.
The new spousal impoverishment numbers (except for the minimum monthly maintenance needs allowance) take effect on January 1, 2020.
For a more complete explanation of the community spouse resource allowance and the monthly maintenance needs allowance, click here.
Home Equity Limits:
In 2020, a Medicaid applicant’s principal residence will not be counted as an asset by Medicaid if the applicant's equity interest in the home is less than $595,000, with the states having the option of raising this limit to $893,000.
For more on Medicaid’s home equity limit, click here.
Both workers and retirees may need to rethink some of their estate planning in light of the newest spending bill. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, part of the massive bill, makes major changes to retirement plan rules, including inherited plans.
Passed in December 2019, the SECURE Act changes the law surrounding retirement plans in several ways, but the biggest change eliminates “stretch” IRAs. Under the previous law, if you named anyone other than a spouse as the beneficiary of your IRA (or other tax-favored retirement account, such as a 401(k)), that beneficiary could choose to take required minimum distributions (RMDs) over his or her lifetime and pass what was left on to future generations (called the “stretch” option). The required minimum distributions were calculated based on the beneficiary’s life expectancy. This allowed the money to grow tax-deferred over the course of the beneficiary’s life and to be passed on to his or her own beneficiaries.
The SECURE Act requires that most non-spouse beneficiaries of an IRA withdraw all the money in the IRA within 10 years of the IRA holder’s death. In many cases, these withdrawals would take place during the beneficiary’s highest tax years, meaning that the elimination of the stretch IRA is effectively a tax increase on many Americans. This provision will apply to those who inherit IRAs starting on January 1, 2020.
Spouses who inherit an IRA are still able to treat the IRA as their own (and take distributions over their lifetime), and the following non-spouse beneficiaries are also treated like spouses:
• Disabled or chronically ill individuals
• Individuals who are not more than 10 years younger than the account owner
• Minor children. But once the child reaches the age of majority, he or she has 10 years to withdraw the money from the account.
Given these changes, those with retirement accounts need to immediately reevaluate their estate plans.
Look at Disclaiming
With regard to estates of certain people who died during 2019, there is a planning option for individuals who are inheriting a large IRA. Beneficiaries of large IRAs have the option of disclaiming them and allowing their beneficiaries to stretch their withdrawals. The disclaimer has to be done within nine months of the IRA owner’s death. Disclaimed property is treated as if the person inheriting it had actually died before the decedent.
For example, assume that Robert died on September 1, 2019, leaving a $1 million IRA to his wife, Stacy. The contingent beneficiaries are their three children. Stacy could choose to disclaim the IRA (or a portion of it) so that it passes directly to her three children. They then could stretch the withdrawals over their life expectancies, postponing the bulk of their withdrawals until they are older and presumably retired and subject to lower tax brackets. Stacy has to execute her disclaimer by March 31st so that it's within nine months of Robert's death. The window for this option will continue to narrow until it closes completely on October 1, 2020.
Review Your Conduit Trust
Your estate plan may have been designed to have your retirement plans pass into trust for the benefit of your spouse, your children, or others. If your spouse is the only beneficiary, your trust is fine because the SECURE Act did not change any of the rules for spouses inheriting IRAs. But the rules did change for just about everyone else in a way that could affect how the trust would work.
Under the previous rules, so-called “conduit” trusts were set up to pay out RMDs to the beneficiaries. Under the new law, RMDs are not required but the IRA must be completely withdrawn by the end of the 10th year after the owner's death, and if it's held by a conduit trust, it must be completely distributed to the trust beneficiaries. If you created the trust to protect assets in the event of divorce or bankruptcy, or simply so they will be professionally managed, the new rules could undermine the purpose of the trust by distributing all of the assets out of the trust. If your IRA names a trust as a beneficiary, you should review the trust with your estate planning attorney.
Check Your Special Needs Trust
Special needs trusts, unlike most other trusts, are usually drafted as so-called “accumulation” trusts. Unlike conduit trusts, accumulation trusts do not require that the RMDs be distributed. Instead, they can be retained by the trust and distributed as the trustees deem appropriate. Automatically distributing RMDs could undermine eligibility for public benefits the disabled beneficiary may be receiving.
Under the new law, disabled beneficiaries are deemed “eligible designated beneficiaries” and fall under an exception that permits them to continue to stretch withdrawals under the old inherited IRA age-based schedule. But the trust will only qualify for this treatment if the disabled individual is the only beneficiary of the trust during his or her life. If the trust also permits distributions to a spouse or children, it won't qualify and the IRA will have to be completely withdrawn under the 10-year rule.
One of the problems with the 10-year rule for accumulation trusts, as opposed to conduit trusts, is that the withdrawn funds if held by the trust will pay taxes at trust tax rates, which are much higher than individual tax rates in most cases. As a result, if your estate plan includes a special needs trust that could be a beneficiary of your retirement plan assets, it's important to review the trust with your estate planning attorney.
Join Patty and Joann for a complementary coffee and chat! We have answers to your questions and will address your concerns:
- What is the difference between Medicare and Medicaid?
- How do I qualify for each?
- What benefits do they cover?
- Can I have both?
Family and friends welcome!
When: Wednesday, September 11th 6:30-7:30pm
Where: Mamaroneck Public Library 136 Prospect Avenue, Mamaroneck, NY 10543
Register today! Phone: (914) 633-7400 or email: firstname.lastname@example.org
For more information, visit: www.mamaronecklibrary.org
Patricia A. Bave will participate in a panel discussion titled “Making a move? Where do I go from here?” at the Mount Kisco Public Library. The event takes place on September 12, 2019.
- Estate and Elder Care Plan Article by Patricia Bave, Esq.
- Should Seniors Who Lose Their Job During the Coronavirus Pandemic Claim Social Security Benefits Early?
- Law Firms Devising Creative Strategies to Help Clients Safely Execute Documents During Pandemic
- Important NYS Medicaid Updates
- Medicare and Medicaid Will Cover Coronavirus Testing