Carlsbad CA Estate Planning

How Does Enrolling for Medicare Work with Social Security?

“Social Security and Medicare are social safety programs that Americans pay into during their working years through taxes.”

These two programs are interrelated and both will have a definite impact on your finances when you are retired, reports U.S. News & World Report in the article “How Social Security and Medicare Work Together.” Both were designed to help seniors and distribute wealth to the disabled and their families. Social Security was created to help with financial support, and Medicare helps with healthcare costs, like doctor visits, hospital stays and other treatment. They are separate but intertwined in some ways. Understanding how they work together can be helpful, when planning for retirement and while taking benefits.

Eligibility for Social Security and Medicare Both are federal programs managed by agencies within the government. The Social Security Administration determines who is eligible for Social Security benefits and who is eligible for Medicare. The SSA also carries out many administrative functions for Social Security, which can get people a little confused.

To be eligible for Social Security, you must earn enough credits during your working years. The minimum number is 40 credits. One credit is equivalent to $1,360 in earnings in 2019, and you can earn up to four credits per year.

To obtain Medicare benefits, you must be 65 or older, although it is sometimes available to younger people with disabilities and those with permanent kidney failure who require dialysis or a transplant. There are several different parts, including Part A for hospital or nursing home visits and some home health care, Part B for doctor services, outpatient care, and medical supplies, and Part D for prescription drugs. Medicare does not cover all needed health services, however, including long-term care, dental visits, eye exams and hearing aids.

If you are eligible for Social Security, you can start taking benefits at any time between age 62 and 70. However, the longer you wait, the higher your monthly benefit will be. If you start taking benefits before your full retirement age, you’ll get a reduction in your benefits. If you wait until full retirement age, you’ll get an increased benefit. If you wait until age 70, you’ll get the maximum benefit.

Medicare coverage for seniors begins when they celebrate their 65^th birthday. If you’ve taken Social Security by the time you turn 65, then you’re automatically enrolled in Medicare Parts A and B, when you turn 65. If you haven’t taken Social Security yet at age 65, then you’ll need to contact the SSA to apply.

Medicare has to be paid for by the individual. The amount owed is different for everyone. It is based on the person’s retirement income and the health plan they select. Most people don’t pay a premium for Part A, and Part B premiums are income dependent. Part D is also based on income.

The SSA looks at income listed on tax returns from two years before the person is enrolled in Medicare. If they got a big bonus in 2017 and retired in 2019, their Medicare premium may be increased. People have to let SSA know they retired and what their earned income is.

If you are receiving Social Security benefits and enroll in Medicare, note that your premiums will be deducted automatically from your Social Security payments. It’s easy and convenient. However, if you aren’t yet taking Social Security, you’ll receive monthly or quarterly bills for premiums.

Reference: U.S. News & World Report (December 4, 2019) “How Social Security and Medicare Work Together”

Microsoft’s Co-Founder Paul Allen’s Billions Estate

“Paul Allen intended to give away the majority of the $20 billion-plus fortune he accumulated as Microsoft co-founder, technology investor, real estate magnate and NFL and NBA team owner.”

It’s been a little more than a year since billionaire Paul Allen’s passing, but the course he charted to give away his fortune remains a private secret, described as a complicated work in progress by the Seattle Times in the article that asks and answers the question “What’s happening to Paul Allen’s billions? A year after his death, it’s complicated.”

There’s been some recent chatter that Jeff Bezos, founder of Amazon, was interested in buying an NFL team, and possibly the Seattle Seahawks. This has sparked renewed curiosity about what has happened to the Allen empire.

Paul Allen was a philanthropist and interested in many different endeavors, from sports to fine art, pop culture and nonprofits, real estate investing and science. What will be kept within the family, what will be sold and what shape will the promised philanthropy take?

The answer to the question of when all of this might happen, is perhaps the only clear answer: not yet, and maybe not for a while. Experts say that it can take years for such a vast empire to be unwound. His estate includes businesses, investments, properties, world-class fine art and other valuable assets.  Giving away what might be as much as $10 billion or more, is not something to be done quickly.

As to who is in charge, that is Jody Allen, trustee, sister, and along with her family, the sole heir. A biography on the website of Vulcan, the business that Paul and his sister Jody co-founded, says that she has the responsibility for preserving and implementing his vision for generations to come. Jody’s intentions are unknown, outside of a tight and protective inner circle.

A Vulcan spokesperson said that the company is committed to tackling the world’s toughest problems, but nothing more.

The expectations are great, based in part on the long and varied record of philanthropy from Jody and Paul Allen. He gave away $2 billion during this lifetime to business, scientific, and cultural entities.

One of the main channels for philanthropy is the Paul G. Allen Family Foundation, which has given away at least $575 million. At the end of 2018, the foundation had assets worth more than $931 million and made more than $48 million in contributions.

Vulcan, the company, and the family foundation will continue to exist for many years, putting their stamp on science, the arts, environmental causes and educational programs.

Reference: Seattle Times (November 26, 2019) “What’s happening to Paul Allen’s billions? A year after his death, it’s complicated”

Holiday Gatherings Often Reveal Changes in Aging Family Members

“It’s a common occurrence. Far flung family members return home to visit elderly relatives for the holidays. Upon arrival, they notice that things seem … off.

A look in the refrigerator finds expired foods and an elderly relative is asking the same questions repeatedly. The same person who would never let you walk into the house with your shoes on now, is living in a mess. The children agree, Mom or Dad can’t live on their own anymore. It’s time to look into other options.

One of the biggest questions, according to the Cherokee Tribune & Ledger-News’ article is “How to pay for long-term care.”

The first question involves the types of facilities. There are many different options but the distinctions between them are often misunderstood. Assisted living facilities provide lodging, meals, assistance with eating, bathing, toileting, dressing, medication management and transportation. However, a skilled nursing facility adds more comprehensive health care services. There’s also the personal care home, which provides assisted-living type accommodations, but on a smaller scale.

The next question is how to pay for the residential care of an elderly family. This weighs heavily on the family. That elderly person is often the one who did the caregiving for so many years. The reversal of roles can also be emotionally difficult.

There are a few different ways people pay for care for an elderly family member.

Long-term care insurance, or LTC insurance. Few elderly people have the insurance to cover their residential facility stay, but some do. Ask if such a policy exists, or go through the piles of paperwork to see if there is such a policy. It will be worth the search.

Veteran’s benefits. If your loved one or their spouse served during certain times of war, is over 65 or is disabled and received an honorable discharge, he or she may be entitled to certain programs that pay for care through the Department of Veterans Affairs.

Private pay. If your loved one has financial accounts or other assets, they may need to pay the cost of their residential facility from these assets. If they don’t have assets, the family may wish to contribute to their care.

Another route is to apply for Medicaid. An elder law attorney in their state of residence will be able to help the individual and their family navigate the Medicaid application, explore if there are any options to preserving assets like the family home, and help with the necessary legal strategy and documents that need to be prepared.

Meet with an elder law estate planning attorney to learn what the steps are to help your elderly loved one enjoy their quality of life, as they move into this next phase of their life.

Reference: Cherokee Tribune & Ledger-News (November 30, 2019) “How to pay for longterm care.”

Tips for Choosing a Fiduciary

“Being a fiduciary is a time-intensive and intellectually challenging task to put upon an individual.”

One of the important tasks in creating a complete estate plan is selecting people (or financial institutions) to represent you, in case of incapacity or death. Most people think of naming an executor, but there are many more roles, advises the article “What to consider when appointing a fiduciary?” from The Ledger.

Here are the most common roles that an estate planning attorney will ask you to select:

• Executor or personal representative, who is named in your will and appointed by the court to administer your estate.
• Agent-in-fact (under a durable power of attorney) who manages your financial affairs while you are living, if you are unable to do so.
• Health care surrogate who makes health care decisions on your behalf while you are living, if you are incapacitated.
• Trustee of a trust document; administers the trust that you have created.
• Guardian: a person who makes health care and financial decisions on your behalf, if the court determines that other roles, like health care surrogate or agent-in-fact, are not sufficient.
• Guardian for minor children: person(s) who make decisions for your children, if you are not able to because of death or a loss of capacity before the children reach adulthood.

The individuals or financial institutions who take on financial roles are considered fiduciaries; that is, they have a legal duty to put your well-being first. Their responsibilities may include applying for government benefits, managing and invest your assets and income, deciding where you will live and working with your attorneys, financial advisors and accountants.

Many people name their spouse or eldest child to take on these roles. However, that’s not the only option. A few questions to consider before making this important decision include:

• Does this person have the experience, skill and maturity to manage my financial affairs?
• Does this person have the time to serve as a fiduciary?
• Would this person make the same health care decisions that I would make?
• Can this person make a difficult decision for my health care?
• Does this person live near enough to arrive quickly, if necessary?
• How old is this person, and will they be living when I may need them?
• What kind of response will my family have to this person being named?
• Are my assets substantial enough to require a financial institution or accountant to manage?

These are just a few of the questions to consider when choosing fiduciaries or health care agents in your estate plan. Speak with your estate planning attorney to help determine the best decision for you and your family.

Reference: The Ledger (Oct. 16, 2019) “What to consider when appointing a fiduciary?”

Can You Tackle Elder Law on Your Own?

“The disadvantages of do-it-yourself elder law estate planning are costly errors, omissions and neglecting protections.”

What usually happens when people do their own estate planning or work on elder law issues, without a lawyer who has years of practice? They may not incur the costs on the front end, but the costs, in financial and emotional terms, often arrive just when the individual or their family is most vulnerable. That message comes through loud and clear in the article “Do-it-yourself elder law estate planning can be risky” from a recent article in the Times Herald-Record.

Let’s clarify the two different areas:

• Estate planning is about leaving assets to heirs with a minimum of court costs, legal fees and avoiding will contests.
• Elder law is concerned with protecting assets from the cost of long-term care and empowering people who will be able to make legal, financial and medical decisions on your behalf, if you become incapacitated.

Two of the most important documents in an elder law estate plan are the Powers of Attorney (POA) and health care proxies. If these forms are not prepared correctly, problems will ensue. In some states, like New York, the POA form is long and complicated. Banks and financial institutions will refuse to recognize the form, if they are not completed correctly.

A POA needs to include the “Statutory Gifts Rider,” which allows broad giving powers to the elder law attorney to save assets, even on the eve of the person being admitted to a nursing home. Someone who is not an elder law attorney is not likely to know what this is, or how to prepare it.

There will be similar issues to a do-it-yourself health care proxy. Here’s just one example of the many things that can go wrong: an agent may not make decisions about withholding certain extreme life support measures, even if they are in possession of a valid health care proxy. There needs to be a living will from the individual that explicitly states their wishes regarding withholding heroic means and/or artificial measures. Without the proper document, the person could remain on life support for months or years, even if this was not their wish.

A do-it-yourself approach leaves much to chance. As a result, the potential for problems is enormous. A far better solution that spares spouses and loved ones, is to work with an experienced estate planning lawyer. Can you put a price on peace of mind?

Reference: Times Herald-Record (Nov. 23, 2019) “Do-it-yourself elder law estate planning can be risky”

What If Only One Parent Is Willing to Plan?

“My parents are in their 70s and they don’t have anything planned. I’ve spoken with them about the importance of planning.”

Making matters much worse for one family, is the fact that while the mother is willing to speak with an estate planning attorney and make a plan for the future, the father won’t even discuss it. What should this family do, asks the article from nwi.com titled “Estate Planning: Can one spouse plan?”

Planning for your eventual demise and distribution of your worldly goods isn’t as much fun as planning a vacation or buying a new car. For some people, it’s too painful, even when they know that it needs to be done. There’s nothing pleasant about the idea that one day you won’t be with your loved ones.

 Although contemplating the reality is unpleasant, this is a task that creates all kinds of problems for those who are left behind, if it is not done.

Unfortunately, it is not unusual for one parent to recognize the importance of having an estate plan and the other parent does not consider it to be an important task or simply refuses. In that case, the estate planning attorney can work with the spouse who is willing to go forward.

Some attorneys prefer to represent only one of the spouses, especially in a case like this. Spouses’ interests aren’t always identical, and there are situations where conflicts can arise. When a couple goes to the estate planning attorney’s office and wishes the attorney to represent both of them, sometimes the lawyer will ask for an acknowledgment that the lawyer is representing both of them as a couple. In the event that a disagreement arises or if their interests are very different, some attorneys will withdraw their representation. This is not common, but it does happen.

The estate planning lawyer usually prefers, however, to represent both spouses. Married couple’s estates tend to be intertwined, with real property jointly owned as husband and wife, or husband and husband or wife and wife. Spouses are usually named beneficiaries of life insurance and retirement accounts. Even in blended family situations, this holds true.

If the father in the situation above won’t budge, the mother should meet with the attorney and create an estate plan. The problem is, she may not be able to plan effectively for the two most common and usually the most valuable assets: their jointly owned home and retirement accounts.

If the home is owned by the spouses as “entireties property,” that is, by the couple, she can’t make changes to the title, without her spouse’s consent. One spouse cannot sever entireties property, without both spouses agreeing. Some retirement plans are also subject to the federal law ERISA, which requires a spouse’s consent to change beneficiaries to someone other than the spouse.

Even with these issues, having a plan for one spouse is better than not having any plan at all.

The only last argument that may be made to the father, is that if he does not make a plan, the laws of the state will be used, and few people actually like the idea of the state taking care of their estate.

Reference: nwi.com (Nov. 17, 2019) “Estate Planning: Can one spouse plan?”

What Is Probate and How to Prepare for It?

“We have all heard the term ‘probate.’ However, we may not be exactly sure what this means. It may sound daunting, but don’t be intimidated by the phrase.”

The word probate is from the Latin word, meaning “to prove.” It is the court-supervised process of authenticating the last will and testament of a person who has died and then taking a series of steps to administer their estate. The typical situation, according to the article “Some helpful hints to aid in navigating the probate process” from The Westerly Sun, is that someone passes away and their heirs must go to the Probate Court to obtain the authority to handle their final business and settle their affairs.

Many families work with an estate planning attorney to help them go through the probate process.

Regardless of whether there is a will, someone, usually a spouse or adult child, asks the court to be appointed as the executor of the estate. This person must accomplish a number of tasks to make sure the decedent’s wishes are followed, as documented by their will.

People often think that just being the legally married spouse or child of the deceased person is all anyone needs to be empowered to handle their estate, but that’s not how it works. There must be an appointment by the court to manage the assets and deal with the IRS, the state, creditors and all of the person’s outstanding personal affairs.

If there is a will, once it is validated by the court, the executor begins the process of identifying and valuing the assets, which must be reported to the court. The last bills and funeral costs must be paid, the IRS must be contacted to obtain an estate taxpayer identification number and other financial matters will need to be addressed. Estate taxes may need to be paid, at the state or federal level. Final tax returns, from the last year the person was alive, must be paid.

It takes several months and sometimes more than a year to settle an estate. That includes distributing the assets and making gifts of tangible personal property to the heirs. Once this task is completed, the executor (or their legal representative) contacts the court. When everything has been done and the judge is satisfied that all business on behalf of the decedent has been completed, the executor is released from their duty and the estate is officially closed.

When there is no will, the process is different. The laws of the state where the deceased lived will be used to guide the distribution of assets. Kinship, or how people are related, will be used, regardless of the relationship between the decedent and family members. This can often lead to fractures within a family, or to people receiving inheritances that were intended for other people.

Reference: The Westerly Sun (Nov. 16, 2019) “Some helpful hints to aid in navigating the probate process”

 

Holiday Season Ushers in Thoughts of Family and Sharing

“As Thanksgiving approaches, it’s meaningful to reflect on the origin of the holiday–Native Americans and pilgrims sharing their bounty of food with each other. As you gather with your loved ones this year, perhaps you can think of ways to share not only your dinner, but also your financial bounty.”

For many families, the holiday season is a time to reflect on the joy of family and the fun of getting everyone together, even if these gatherings can only take place a few times a year. It’s also the time when families often consider sharing their good fortune, according to the article “Share your financial bounty with family” from The Independent. Following are some suggestions for families that can be used for all ages and stages of life.

• Make the gifts age appropriate. For little ones, the start of a savings account is a good way to teach them about the power of savings and time. You could even add a Thanksgiving tradition of checking the accounts to see how they have grown. Opening a 529 college account is a wonderful gift for the child’s future and permits you to retain control of the money, until the children are ready for the next step in their lives. There are also other accounts that can be opened, including a custodial account like a UGMA or UTMA. Check with your estate planning attorney to see if these make sense for you and the beneficiaries.
• Review your estate plan. While your first instinct may be to give all your assets to family members, you may also want to leave something to a charitable organization that has meaning to you. That means you’ll need an estate plan.
• Talk with an estate planning attorney. An estate planning attorney helps families create comprehensive plans that include planning for incapacity, creating a legacy and distributing assets before and after death. That will include a last will and testament, living power of attorney, health care directive and more.
• Talk with your family about your legacy. How do you want to be remembered? Does the family have the ability or desire to create a family legacy that will extend beyond one generation? This teaches your children and grandchildren about the value of money to do more than buy things but to make a contribution to the local or global community.

If you don’t yet have an estate plan, now is the time to make an appointment to meet with an estate planning attorney and discuss your plans for the future and your legacy.

Reference: The Independent (Nov. 9, 2019) “Share your financial bounty with family”