Spousal Benefits

Spouses are entitled to benefits if the marriage lasted at least 10 years. A spouse is entitled to an amount equal to one-half of the worker’s full retirement benefit. To receive this benefit, you must be at your full retirement age or caring for a child who is under 16 years old. In addition, your spouse must have filed for Social Security retirement benefits even if he or she isn’t receiving them.

If you could receive more from Social Security based on your own earnings record than through the spousal benefit, the Social Security Administration will automatically provide you with the larger benefit. If you have reached your full retirement age, you may also elect to receive spousal benefits and delay taking your benefits, allowing your own delayed retirement credits to accrue, and switch to your own benefit at a later date. However, you cannot elect to receive spousal benefits below your retirement age and later switch to your own benefits.

If you begin collecting your spousal benefit before your full retirement age, your spousal benefit will be permanently reduced.  But if your spouse retires early, but you wait until your full retirement age, you will still receive benefits based on one-half of his or her full retirement benefit.  

For more from the Social Security Administration on spousal benefits, click here.

Divorced spouses

An ex-spouse is also entitled to receive one half of the worker’s full retirement benefit as long as the marriage lasted at least 10 years. Unlike a current spouse, a divorced spouse can begin receiving benefits even before the worker has applied for benefits. The worker must be at least 62 years old and the divorce must have been final for at least two years.

For more from the Social Security Administration on qualifying for divorced spouse benefits, click here.

Survivor Benefits

If you are a surviving spouse at full retirement age, you are entitled to the worker’s full retirement benefits. If the worker delayed retirement, the survivor’s benefit will be higher. Survivors are entitled to benefits even if they are divorced as long as they had been married for at least 10 years. If you file for benefits before you are over age 60, but below full retirement age, you will receive a reduced percentage of the worker’s benefits. Surviving spouses who are younger than 60 receive benefits only in limited circumstances, such as cases of disability or caring for a disabled child.

For more from the Social Security Administration on the requirements for survivor benefits, click here.

In general, for a decedent dying in 2012, a net taxable estate valued at $892,865 or less will not be subject to Rhode Island’s estate tax. (In certain circumstances, the Rhode Island estate tax will not apply no matter the estate’s size: Rhode Island General Laws Chapter 44-22 provides full details on the computation of the tax, including such factors as the marital and charitable deductions.)

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.

A trustee’s duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. (For more information on a trustee’s duties, contact estate planning attorney Jill E. Sugarman) As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you have an obligation to act in the best interest of the beneficiaries at all times. It also means you will be held to a higher standard than if you were just dealing with your own finances.

A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney’s fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.

A trust can be administered without court involvement, but that doesn’t mean that the administration is simple. There are many areas where problems can arise — for example, if assets aren’t invested properly, taxes are late, or if proper records aren’t kept. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. Many couples have so-called “AB” trusts to take advantage of the maximum estate tax exemption; these trusts require special knowledge to determine whether the trusts are properly funded and the taxes filed. 

For more information about trusts, contact estate planning attorney Jill E. Sugarman, at JSugarman@McLaughlinQuinn.com or by phone at 401-421-5115 ext. 215.

The study, published in the October 5, 2011, issue of the Journal of the American Medical Association, found that in regions of the U.S. that tend to spend the most on end-of-life care, patients who have “advance directives” cost Medicare about $5,600 less per person.  (Advance directives allow patients to communicate their end-of-life wishes if they are unable to do so themselves.)  These patients’ quality of life also appeared to be better; they were more likely to receive hospice care and to be at home when they died.

But the differences in spending and care did not hold up in regions of the country with low- to average end-of-life expenditures.  The researchers speculated that in these areas, less aggressive care at the end of life is already the norm and more in line with what many patients want.  In high-spending regions, by contrast, an advance directive may embolden caregivers to go against the local norm of aggressive treatment and prolonged hospital care.   In 2006, treatment during the last year of life accounted for more than one-quarter of Medicare expenditures.  

Advance directives typically include a “living will” that gives instructions regarding treatment if the individual becomes terminally ill or is in a persistent vegetative state.  It may contain directions to refuse or remove life support in the event the individual is in a coma or a vegetative state, or it may provide instructions to use all efforts to keep the person alive, no matter the circumstances.  Most participants in the study who had advance directives specified that they wanted to limit treatment.

“[The study] absolutely highlights some of the reasons why you should both talk to family, friends and physicians about the type of care you might want to receive, should you be unable to make your own decisions,” said Lauren Hersch Nicholas, the study’s lead author and a health economist at the University of Michigan.

Second Study: Aggressive Treatment Doesn’t Prolong Life

A related study just published in the medical journal The Lancet has found that nearly one of every three Medicare beneficiaries had an operation in their last year of life. 

Operations were more likely in regions with a greater availability of hospital beds and higher levels of Medicare spending.  But the higher rates of surgery didn’t necessarily pay off.  The regions where doctors were more likely to operate had higher patient death rates.

“This level of surgical intensity doesn’t seem to be having much in the way of benefit for the population,” Dr. Ashish Jha, the study’s author and an associate professor of health policy at the Harvard School of Public Health, told ABC News. “Our sense is that there are probably lots of unnecessary procedures that go on at end of life.”

Each state has its own laws on advance directives.  Caring Connections, a site run by the National Hospice and Palliative Care Organization, offers state-by-state information on advance directives

Advance medical directives are an integral part of the estate planning services provided by elder law attorneys.  To speak with a qualified elder law attorney  and for more on health care decision-making, contact elderlaw attorney Jill E. Sugarman at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

According to the AARP, the Federal Trade Commission (FTC), and a number of state attorneys general, these high-pressure con artists have built an industry around older people’s fears that their estates could be eaten up by probate costs or taxes, or that the distribution of their assets could be delayed for years. The solution, they claim, is a living trust.

“What these fast-talking crooks don’t tell their clients,” AARP Volunteer Consumer Affairs Specialist Irma Swantner says, “is that the “living trust” they’re selling could become the buyer’s “living hell.”

The living trust is an estate planning device that eliminates the need for probate of the individual’s estate at his death. Assets are held in the trust and then distributed outside of probate at the time of death.

There is nothing wrong with a living trust or with trying to avoid probate. Attorneys may recommend a living trust as an estate planning device for some of their clients where it is appropriate for their particular needs. However, salespeople masquerading as professional estate planners are working the provinces trying to convince older Americans that such trusts are for everyone. Going door-to-door or using phone solicitation, they often greatly exaggerate the costs and delays of probate and are unlikely to mention that the vast majority of estates are not subject to federal or state estate taxes. Their products are “cookie-cutter” living trusts, sometimes in the form of living trust kits.

The problem is that many people don’t need a living trust, a trust from a kit may not meet a particular client’s needs, and often these companies charge more than the service is worth. In addition, according to the FTC, some companies are using the living trust concept merely as a way to gain access to consumers’ financial information and sell them other financial products, such as insurance annuities.

Among the dangers of “one-size-fits-all” living trusts, say AARP officials, is that in many cases they won’t make the grantor and spouse eligible for Medicaid reimbursement of nursing home costs. In addition some trusts improperly instruct the trustee to distribute property to beneficiaries immediately upon the death of the grantor. If creditors make a claim against the trust after asset distribution, the trustee becomes personally liable for any valid claims against the trust.

According to an AARP study published in 2000, about four million people older than 50 with less than $25,000 in annual income may have purchased costly, unnecessary, and potentially dangerous living trusts as a result of high-pressure sales tactics by firms masquerading as AARP affiliates. In fact, AARP is not associated with and does not endorse any company that markets or sells living trusts.

The Federal Trade Commission also reminds consumers of the “Cooling-Off Rule,” which provides that if you buy a living trust in your home or somewhere other than the seller’s permanent place of business (say, at a hotel seminar), the seller must give you a written statement of your right to cancel the deal within three business days.

To help older adults and families make better decisions about annuities, the Healthcare and Elder Law Programs Corporation (H.E.L.P.) has created a Web site, annuitytruth.org.

Or, better yet, seek the advice of a qualified elder law attorney, such as Jill E. Sugarman, before signing anything. You can contact Jill at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

What Is an IRA?
IRAs are personal savings plans that allow you to set aside money for retirement and create tax savings. The advantage of IRAs is that you may be able to deduct some or all of your contributions to an IRA from your taxes and also be eligible for a tax credit equal to a percentage of your contribution. Earnings in a traditional IRA are generally are not taxed until distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. Earnings in a Roth IRA are not taxed nor do you have to start taking distributions at any point, but contributions to a Roth IRA are not tax deductible. Any amount remaining in your IRA upon your death can be paid to your beneficiary or beneficiaries.

Rule Number One: Name Beneficiaries
From an estate planning perspective, the most important thing to remember with an IRA is to name a beneficiary. While a spouse is usually the logical choice for a beneficiary, you should be sure to name contingent beneficiaries as well. If you and your spouse died at the same time and there was no contingent beneficiary, then the IRA would go to your estate and be subject to probate (the legal process of administering the estate of a deceased person).

Stretching an IRA
If you don’t need the funds in your IRA for retirement and want to use them to provide for your beneficiaries instead, you may be interested in “stretching out” your IRA. To do this, when you reach 70 1/2, take only the required minimum distributions, leaving more assets in your IRA. When you die, your beneficiary can also stretch distributions out over his or her lifetime and then designate a second-generation beneficiary. It makes sense to name a young beneficiary because the younger the beneficiary, the smaller each distribution must be, which gives the funds in the IRA extra tax-deferred years to grow.

Trusts as Beneficiaries
In some cases, it may make sense to name a trust as a beneficiary. This is particularly true if you have minor children, children with special needs, or a beneficiary with poor spending habits. But the trust must be properly drafted to avoid negative tax consequences. If the trust is a “see-through” trust or “conduit” trust, then the distributions from the IRA to the trust after the participant’s death can be stretched out over the life expectancy of the oldest trust beneficiary. If you are planning to leave your IRA to a trust, you must consult with your attorney to ensure that the trust is properly drafted.

An IRA can be a valuable part of an estate plan, but the rules can be complicated. Consult with a qualified elder law or estate planning attorney, such as Jill E. Sugarman, Esq. to find out your options.  You may reach Attorney Sugarman at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

Find a strong insurance company. The first step is to choose a solid insurance company. Because it is likely you won’t be using the policy for many years, you want to make sure the company will still be around when you need it. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies.

What is covered. Policies may cover nursing home care, home health care, assisted living, hospice care, or adult day care, or some combination of these. The more comprehensive the policy, the better. A policy that covers multiple types of care will give you more flexibility in choosing the care that is right for you.

Waiting period. Most long-term care insurance policies have a waiting period before benefits begin to kick in. This waiting period can be between 0 and 90 days, or even longer. You will have to cover all expenses during the waiting period, so choose a time period that you think you can afford to cover. A longer waiting period can mean lower premiums, but you need to be careful if you are getting home care. Look for a policy that bases the waiting period on calendar days. For some insurance companies, the waiting period is not based on calendar days, but on days of reimbursable service, which can be very complicated. Some policies may have different waiting periods for home health care and nursing home care, and some companies waive the waiting period for home health care altogether.

Daily benefit. The daily benefit is the amount the insurance pays per day toward long-term care expenses. If your daily benefit doesn’t cover your expenses, you will have to cover any additional costs. Purchasing the maximum daily benefit will assure you have the most coverage available. If you want to lower your premiums, you may consider covering a portion of the care yourself. You can then insure for the maximum daily benefit minus the amount you are covering. The lower daily benefit will mean a lower premium.

It is important to determine how the daily benefit is calculated. It can be each day’s actual charges (called daily reimbursement) or the daily average, calculated each month (called monthly reimbursement). The latter is better for home health care because a home care worker might come for a full day, one day, and then only part of the day, the next day.

Benefit period. When you purchase a policy, you need to choose how long you want your coverage to last. In general, you do not need to purchase a lifetime policy three to five years worth of coverage should be enough. In fact a new study from the American Association of Long-term Care Insurance shows that a three-year benefit policy is sufficient for most people. According to the study of in-force long-term care policies, only 8 percent of people needed coverage for more than three years. So, unless you have a family history of a chronic illness, you aren’t likely to need more coverage. If you are buying insurance as part of a Medicaid planning strategy, however, you will need to purchase at least enough insurance to cover the five-year lookback period. That way you can transfer assets to your children or grandchildren before you enter the nursing home, use the long-term care coverage to wait out Medicaid’s new five-year look-back period, and after those five years have passed apply for Medicaid to pay your nursing home costs (provided the assets remaining in your name do not exceed Medicaid’s limits).

If you do have a history of a chronic disease in your family, you may want to purchase more coverage. Coverage for 10 years may be enough and would still be less expensive than purchasing a lifetime policy.

Inflation protection. As nursing home costs continue to rise, your daily benefit will cover less and less of your expenses. Most insurance policies offer inflation protection of 5 percent a year, which is designed to increase your daily benefit along with the long-term care inflation rate of 5.6 percent a year. Although inflation protection can significantly increase your premium, it is strongly recommended. There are two main types of inflation protection: compound interest increases or simple interest increases. If you are purchasing a long-term care policy and are younger than age 62 or 63, you will need to purchase compound inflation protection. This can, however, more than double your premium. If you purchase a policy after age 62 or 63, some experts believe that simple inflation increases should be enough, and you will save on premium costs.

For more information on long-term care insurance, contact Jill E. Sugarman, Esq. at 401-421-5115 ext 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

• Don’t be afraid to start the conversation. Whether you are a parent talking to your children, a husband talking to a wife, or an adult child talking to an aging parent, bringing up the topic of death and disability can be difficult, but it is an important conversation to have. A study by The Hartford found that parents were more willing to discuss estate planning issues than their children.
• Make sure you or your loved ones have done estate planning. All estate plans should include, at minimum, two important estate planning instruments: a durable power of attorney and a will. The first is for managing property during your lifetime, in case you are unable to do so yourself. The second is for the management and distribution of property after death. Revocable (or “living”) trusts can also help you avoid probate and manage your estate both during your life and after you’re gone. In addition, you or your loved ones should consult with an estate planning professional about the best way to minimize estate taxes. For more information on estate planning, contact Jill E. Sugarman, Esq. at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.
• Plan for the worst. You and your loved ones need to be prepared in the event that one of you becomes disabled and will no longer be able to make your own decisions. The durable power of attorney mentioned above is an important instrument. You will also need a health care proxy (sometimes called a health care power of attorney), which gives someone else the medical authority to communicate your wishes about medical treatment. For more information on medical directives, contact Jill E. Sugarman, Esq. at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.
• Make sure you or your loved ones draw up a list to help your executors carry out your estate plans. The list should contain information on the location of assets, such as bank accounts, property, and stocks and bonds; the location, keys, and passwords to any safe deposit boxes; the identity of important professionals who might have information about your estate; and the location of important records, such as loan, insurance, and tax documents. The list can also contain things you want done immediately after you die, such as calling relatives or notifying employers.
• Determine you or your loved ones’ wishes regarding funeral arrangements. You may want to pay for your funeral ahead of time to take the burden off of family, but you need to be careful and shop around. Contact Jill E. Sugarman, Esq. at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com for information and tips on making advance funeral arrangements. If you can’t make arrangements ahead of time, put your wishes in writing so the whole family knows what you want.
• Figure out who is going to get what personal property and heirlooms. Preparation and planning in advance can avoid family squabbles after you or your loved ones die. For more information contact Jill E. Sugarman, Esq. at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

But they must. Failure to do so can lead to burnout, injury or illness. If you are the caregiver, any of these results will harm your ability to care for your loved one.

Here are some ways to take care of yourself and make sure you can take care of your loved one. The list is adapted from New York Times columnist Jane Brody’s excellent Nov. 17, 2008, column, “Caring for Family, Caring for Yourself.”

1. Take a break every day. Make sure you have some down time to relax, whether it’s watching television, reading the newspaper, or calling a friend. Make sure you do at least one thing for yourself every day.
2. Take a break every week. If possible, get out of the house at least once a week to do something you want to do — go to the movies, have dinner with friends, whatever works for you. If you cannot get someone to cover for you, have friends over to your house.
3. Get respite. Take a break of at least a week at least once a year. You can hire help in the house or arrange for a respite stay at an assisted living facility or nursing home.
4. Get regular exercise. It’s necessary for your health and to moderate any stress you may be feeling. If you can’t get out of the house to exercise, buy or rent a stationary bicycle or other exercise equipment.
5. Eat well. Make sure you stay healthy and have sufficient energy to do what you need to for your loved one.
6. Get enough sleep. Lack of sleep will sap your patience and reserves, making it more difficult for you to provide the care you would like to give your loved one.
7. Join a support group. While you may or may not be in this alone, you’re not the only one in this situation. Others are going through similar experiences. Here are sources for finding support groups: the National Family Caregivers Association (www.nfcacares.org) and its Community Action Network (www.thefamilycaregiver.org), and the Family Caregiver Alliance and its online support group (www.caregiver.org).
8. Hire a geriatric care manager. An experienced geriatric care manager can help you determine whether your loved one is receiving the most appropriate care and what resources in the community are available to assist you. For more on geriatric care managers, click here.
9. Consult with an elder law attorney. In order to access many of the programs recommended by the geriatric care manager, your loved one will have to qualify financially. An elder law attorney can help you qualify for these benefits. In addition, make sure you don’t get hit with a double financial whammy of losing years of earnings while you’re caring for your family member and losing his or her assets due to squabbles with other family members or Medicaid estate recovery. Also, you may be entitled to some pay by the state for the care you are providing. To speak with a qualified elder law attorney, contact Jill E. Sugarman, Esq. at 401-421-5115 ext 217 or by e-mail at JSugarman@McLaughlinQuinn.com.
10. Lotsa Helping Hands. Check out www.lotsahelpinghands.com as a resource for getting volunteer help in your community and coordinating the help your family and friends already provide.In short, think of the care you are providing as a marathon, not a sprint. You need to pace yourself and conserve your energy for the long-term. Too much stress and exhaustion won’t help your loved one.

In short, think of the care you are providing as a marathon, not a sprint. You need to pace yourself and conserve your energy for the long-term. Too much stress and exhaustion won’t help your loved one.

In the first case, Estate of Lillian Baral v. Commissioner, Lillian Baral suffered from dementia and her doctor recommended that she get 24-hour-a-day care. Her brother hired caregivers to assist Ms. Baral with daily activities. On her tax return, Ms. Baral included a deduction for medical expenses for the payments to the caregivers. The IRS said the expenses were not deductible and asked for more money. Following Ms. Baral’s death, her estate appealed the matter to the U.S. Tax Court.

Under tax law, expenses for medical care may be claimed as an itemized deduction if they exceed 7.5 percent of adjusted gross income. (Note that this threshold will rise to 10 percent of adjusted gross income in 2012.) The definition of medical expenses includes the cost of long-term care if a doctor has determined you are chronically ill. “Chronically ill” means you need help with activities like eating, going to the bathroom, bathing, and dressing, or you require substantial supervision due to a severe cognitive impairment.

The Tax Court agreed with Ms. Baral that the payments to the caregivers for assisting and supervising Ms. Baral are deductible medical expenses. The expenses qualified as long-term care services even though the caregivers were not medical personnel because a doctor had found that the services provided to Ms. Baral were necessary due to her dementia.

In the second case, Estate of Olivio v. Commissioner, New Jersey resident Anthony Olivo provided nearly full-time care to his mother from 1994 to 2003, during which time he largely abandoned his practice as an attorney. After his mother died, Mr. Olivo became administrator of her estate.

Mr. Olivo filed a tax return for the estate and claimed a deduction of $1.24 million as a debt he said the estate owed him for the care he had provided his mother over the years. He claimed he had an oral agreement with his mother that after she died she would compensate him for his services. The IRS disallowed the deduction and Mr. Olivo filed a petition with the Tax Court.

The U.S. Tax Court agreed with the IRS that the estate is not entitled to the deduction. Applying the law in New Jersey, which presumes that services to a family member living in the same household are given for free (many states have similar laws), the court ruled that without a written agreement between Ms. Olivo and her son, it must assume that Mr. Olivo provided the services without any expectation he would be repaid.

Check with your CPA to determine if your long-term care expenses are deductible.