Major Changes to Social Security in 2016
Budget negotiations between Congress and President Obama have resulted in some significant changes to Social Security that will take away some of the strategies that married couples can use to increase their benefit payouts. The “File and Suspend” strategy will be gone by May, 2016. Under this option the higher wage earner files for his/her benefits at full retirement age (currently 66) and then immediately suspends the claim. This allows the benefit amount to continue to increase by 8% until age 70 at which point the wage earner reclaims the benefit, netting a higher amount. By filing and suspending at 66 the lower earning spouse can collect spousal benefits, usually one-half of the amount at age 66. The rule change will eliminate this option so that no one will be able to collect when a claim is suspended. Anyone currently receiving benefits under this strategy will be grandfathered and will continue to collect. This strategy is also still an option for those considering it until the change becomes effective, probably in May, 2016. The file and suspend strategy also has been a way to collect benefits retroactively. In the normal instance, Social Security does not permit going back more than
I Just Got a Rate Increase on my Long Term Care Insurance Policy (Part 3)
Last week I was reviewing with you Jim’s dilemma. He received a notice of a rate increase frin his long term care insurance company. I went through with you the options outlined in that letter. For some people in Jim’s situation Option B may be the way to go, redesigning their policy. For example, if you have a policy that, with the inflation rider, covers $450 a day for lifetime you probably have more coverage than you need. A simple solution would be to reduce the daily benefit and switch from lifetime coverage (which most companies don’t offer anymore) to a lifetime cap of 4 or 5 years. In many cases that could dramatically reduce or entirely eliminate the rate increase you face. There is, however, another concern to be aware of. There are far fewer insurance companies offering the type of traditional long term care insurance that Jim has than there were 10 or 20 years ago. As rate increases for these policies become more commonplace healthier policyholders are more likely to look to switch to other ways to pay for long term care. As I have talked about in previous posts on this blog, there are some
I Just Got a Rate Increase on my Long Term Care Insurance Policy (Part 2)
Last week I was telling you about a call we get with increasing frequency. Jim received a letter notifying him of a rate increase of 60% on his long term care insurance premium. He wanted to know what he should do. The letter explained that the increase is not based on a change in Jim’s age, health, claims history or really anything specifically about Jim. The reason for the increase is that the insurance company underestimated the number of claims and the amount paid out on those claims when it set the premium at the time Jim purchased the policy. In other words, it must raise the premium to be sure it will have enough money to cover future claims. The insurance company can’t do this unilaterally. It must get approval first from the New Jersey’s Department of Insurance. Often times, the State will approve a smaller increase or will grant the desired increase but spread over a period of several years. The State also requires the insurance companies to offer their policyholders options rather than simply raising the premiums. Let’s go back to Jim’s letter. He currently has a policy that provides a benefit of $300 per day
I Just Got a Rate Increase on my Long Term Care Insurance Policy
It’s a call we are getting with increasing frequency. Jim just received a letter from his long term care insurance company that they are increasing his premium by a whopping 60%. If that’s not bad enough, the letter warns that he should expect further increases in future years. Jim is 71 years old and healthy. While he doesn’t have a crystal ball to look into the future, he is currently healthy and has no idea if or when he’ll need long term care. How many rate increases could he face - and will he be able to afford them – before he ever starts to receive benefits under the policy? The letter Jim received gives him options. One of course is to pay the 60% rate increase and keep his benefits the way they are. A second option is to reduce his daily benefit – the amount paid per day for care – or to reduce or eliminate the inflation protection that raises the daily benefit each year to keep pace with the rising cost of care. A third option is to keep a more limited benefit for long term care. In that case Jim does not have to
Estate Planning – Changing as We Age (Part 4)
Last week I was telling you why the New Jersey probate process can be easy but the tax waiver system designed to protect the State’s ability to collect estate and inheritance tax can tie up your money for years. That’s because the law requires financial institutions to freeze ½ of your account until the tax is paid – or your estate satisfies the State of New Jersey that it owes no estate or inheritance taxes. In many cases, an estate and/or inheritance tax return must be filed even though no taxes are due, simply because the State wants to determine for itself that there are not taxes owing before it will allow the funds to be “unfrozen”. The tax waiver is proof that New Jersey has given it’s “OK”. The problem is that the State doesn’t work quickly so assets can be frozen for a period of years. So, how can you avoid this? The tax waiver system applies to any accounts that were in the decedent’s (the person who has died) name. That includes probate assets and non-probate assets. An account which is payable on death to another is a non-probate asset. Its distribution is not governed by what
Estate Planning – Changing as We Age (Part 3)
Last week I was talking about what we call senior estate planning and something called a tax waiver. New Jersey probate – the process of administering an estate after someone dies – is easy in some respects but not so easy in others. Let’s go back to Jack and Diane. Upon Jack or Diane’s death, their will must be presented to the surrogate, that elected official charged with overseeing the probate process administratively. Unless there is a dispute over the will’s validity, there is no need to appear before a judge. The will is accepted and the executor named in it is appointed as the official representative of the estate, charged with gathering the assets together, paying the debts and taxes if any and distributing the assets according to the instructions in the will. It’s a very easy process. However, the estates of New Jersey residents are potentially faced with 2 types of taxes after death – New Jersey inheritance tax and estate tax. To insure that the tax is paid, the State has put in place something called a tax waiver system. Here’s how it works. By law, New Jersey requires financial institutions to freeze ½ of the