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Elder Law Associates is happy to deliver to your inbox
the February issue of The Elder Law Report, a monthly
e-newsletter full of the latest legal developments and
other trends of vital interest to seniors and their
advocates. We hope you will consider Elder Law
Associates your own elder law resource and turn to us
for information or as a source to fulfill your elder law
needs.
We are pleased to share with you that partner Howard
S. Krooks recently appeared in the cover article of
USA Today entitled "Retirees Up Against
Debt." Howard was quoted about the many seniors
who live on fixed incomes and others who are
financially dependent upon their adult
children.
Click here to read the
article.
Please continue to send your comments and
questions to
Info@ElderLawAssociates.com. We love hearing
from you and would like to include your question in
an upcoming Reader Questions & Comments column.
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Make Sure Your Plan Beneficiary Choices Are Up to Date
Many people periodically update their wills or other estate plans, but don't remember to update who will receive distributions from their retirement plans (such as IRAs and 401(k)s) upon their deaths. Every year you should review your entire estate plan, and the review should include retirement plan "beneficiary designations" to make sure they aren't outdated. The following are some tips for naming a retirement plan beneficiary:
- It is important to name a beneficiary.Do not assume that your retirement plan will be distributed according to your will. If you don't name a beneficiary, the distribution of benefits may be controlled by state or federal law or according to your particular retirement plan. Some plans automatically distribute money to a spouse or children. While others may leave it to the retirement plan holder's estate, this could have negative tax consequences. The only way to control where the money goes is to name a beneficiary.
- You may want to designate a trust as your beneficiary. If your estate is more than the current estate tax exclusion ($2 million for 2007 and 2008) and a large portion of it consists of retirement plans, it may make sense to direct that the plans be payable to a trust rather than to the surviving spouse. The trust must be properly drafted to avoid tax consequences, so consult with an attorney before doing this. If you want your money to go into a trust for your children, be sure to designate the trust as the beneficiary. If you name your children, the money will go directly to them.
- If you have major life changes, be sure to keep your retirement plan updated. If you get married or have children, you may want to change your beneficiary. Also, if your spouse was your beneficiary and you get divorced, your former spouse will still be the beneficiary -- divorce does not automatically remove an ex-spouse as beneficiary. If you wish to remove a former spouse from the plan, you will have to fill out a new beneficiary designation form.
- Even if you don't have big changes, you should review your beneficiary designation periodically. Your beneficiary may not be who you remembered it to be or it may be outdated. For example, if you named a charity as beneficiary, you will want to make sure the charity still exists. A Change of Beneficiary form can often be downloaded from the Web site of the firm holding the plan assets.
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Coordinating Medicare and Employer Coverage
Many people continue working past age 65. According to the U.S. Census Bureau, in 2002 18 percent of men and 10 percent of women over age 65 were still in the civilian labor force. Often, these jobs provide health coverage. But age 65 also is the age at which most people enroll in Medicare. Should those with insurance through their employment also enroll in Medicare?
This depends on whether your employer insurance will be the "primary" payer or the "secondary," according to the Medicare Rights Center. A primary payer pays health bills first, while a secondary payer will sometimes pay a portion of the remaining balance after the primary payer. For people 65 and older, employer coverage is primary if the employer has 20 or more employees. Individuals with health coverage offered by such employers can delay enrolling in Medicare without a penalty (see below) at any time they still have group health coverage and for eight months after they lose group health coverage or stop working, whichever comes first. (This applies only to a group health plan based on current employment, not based on retirement benefits from employment.) Still, it may be worth paying the annual Medicare Part B premiums for Medicare to be your secondary payer. You should check with your employer's human resources department to find out.
If on the other hand there are fewer than 20 employees in the company, Medicare is the primary payer and you need to enroll in Medicare when you first become eligible. If you have not yet enrolled, you should enroll during your Initial Enrollment Period (a seven-month period including the three months before, the month of and the three months following your 65th birthday). If you delay, you risk having no coverage at all between the time your employer coverage ends and Medicare begins. This is so because you can enroll in Medicare only between January and March of each year, and your enrollment will not take effect until July. In addition, there is a 10 percent premium penalty for each year that enrollment is delayed. For example, if you enroll in Medicare in 2007 after having waited 3 years, your monthly Part B premium will be 30 percent higher than the current premium for your lifetime. Thus, to start out your monthly premium would be $121.55 rather than $93.50.
The Medicare Rights Center has published a booklet entitled, "Medicare and Employer Insurance: How They Work Together." To order a copy, go to: http://www.medicarerights.org/publicationssupplemental.html.
For more on the Medicare Rights Center, go to: http://www.medicarerights.org.
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Book Review: Boomer or Bust: Your Financial Guide to Retirement, Health Care, Medicare, and Long-Term Care
This book is a rarity – a fun read that also offers a wealth of financial guidance to hard-pressed members of the "sandwich generation" who are planning for retirement, helping their kids and worrying about aging parents.
Many books on the market cover similar territory, but few are as much of a delight as this one. Author Steve Weisman, an ElderLawAnswers member in Cambridge, Massachusetts, draws on his expertise as an elder law attorney and financial planner to uncover the latest tax, investment and planning opportunities and "loopholes" that will help boomers and their parents meet their long-term care needs.
All this could be eye-glazing stuff, but as was the case with his previous book, A Guide to Elder Planning, Weisman keeps the pages turning with an engaging style that includes occasional humor and references to cultural trivia that will be familiar to baby boomers, if not to their children.
In an explanation of how Social Security benefits are taxed, for example, Weisman finds a way to work in Mr. Lucky, a short-lived CBS show from the late '50s for which Henry Mancini wrote the theme music. Similarly, the chapter on "Retirement Investing" includes references to Yogi Berra, Robert Palmer the Platters, The Jeffersons, The Hunt for Red October, Johnny Carson and the board game Risk. Sugar like this helps the medicine go down easily. In this case, readers learn such valuable information as a rule of thumb for how much to withdraw from their portfolio each year and still have enough money to last a lifetime; the optimal ratio of stocks to bonds based on one's age; what target funds are; and how parents and grandparents can use "529 plans" to fund their own education later in life.
Weisman even makes his explanation of Medicare Part D a pleasure to read, which by itself should earn him a Pulitzer Prize. The chapter on "Age Discrimination" also is excellent, as is the discussion of tax deductions available for the care of aging parents. (And, as he wisecracks, which parent is not aging?) Other chapters include: "IRAs and 401(k)s," "Annuities," "Reverse Mortgages," "Home Care," "Long-Term Care Insurance," "Choosing a Nursing Home or an Assisted-Living Facility," and "Medicaid" (including a discussion of the new asset transfer rules).
For busy boomers who don't have a great deal of free time to read but who need practical advice conveyed simply and entertainingly, this is the book.
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Medicaid Recovery of Home Catches Many Families by Surprise
States are becoming more aggressive about collecting reimbursement for Medicaid nursing home care, and families of deceased recipients are often stunned to discover that the state has laid claim to the family home, according to a recent article in The Christian Science Monitor.
The article, on the federally mandated practice known as Medicaid estate recovery, reports that state Medicaid authorities often target the home because it's all that's left after beneficiaries have qualified for Medicaid coverage of nursing home care.
No estate recovery can take place until the death of the recipient's spouse, or as long as there is a child of the deceased who is under 21 or who is blind or disabled. Still, states go after assets like the home in a variety of ways, producing confusion, anger, and even lawsuits, according to the article. And the advance notice given to families that the home could later be seized if they accept Medicaid coverage is sometimes inadequate.
"It's fine that these programs are required by federal law, but people need to know the rules of the game," says Wendy Fox-Grage, policy adviser with the AARP Public Policy Institute. "We're concerned that families are not being notified."
AARP is so concerned that it has commissioned the American Bar Association to study consumer protections in this area, Fox-Grage says. Results are expected this spring.
Others worry that fears of losing their homes will discourage some from seeking health care. "Our concern is that people will say, 'I don't want my husband to go to the nursing home because then the government will take my house,' " says Tim Takacs, an elder law attorney in Nashville, Tennessee.
Medicaid recipients in Florida do not share the same concerns enumerated in the article due to the state’s constitutional homestead protection. If an individual has filed for homestead status in Florida, even Medicaid is not permitted to seek recovery against the home when the individual dies.
To read the Christian Science Monitor article, "A Flap over Recouping Costs of Medicaid," click here.
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New Reverse Mortgage Products to Hit Market Soon
Reverse mortgages are gaining in popularity, but if you are considering getting one, you might want to wait a little while. Better deals may soon be available as competition between companies entering the market heats up.
A reverse mortgage is exactly what it sounds like—instead of paying the bank money to build up equity, you use the equity in your home to take out a loan. You must be 62 years or older to qualify for a reverse mortgage, and the loan does not have to be paid back until you sell the house or die. The loan can be used for anything, including providing money for retirement or to paying for nursing home expenses.
Costs for reverse mortgages have traditionally been high, but more companies are beginning to offer reverse mortgages, and the competition is driving down costs, according to an article in the Chicago Tribune. In addition, companies are offering more options, such as flexibility in payment and higher loan amounts. All the changes mean that soon there will be more options for consumers. If possible, experts suggest waiting until late 2007 or early 2008 before getting a reverse mortgage.
Also, keep in mind that while reverse mortgages may look like no-lose propositions on the surface, they also have some significant downsides. For the Chicago Tribune article about the new options, click here.
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Elder Law Associates PA is a boutique elder law firm
that practices exclusively in Medicaid and long term
care planning; home and community-based waiver
services; Medicaid applications; nursing home
residents’ rights litigation; asset preservation
planning with a special focus on planning in light of
the Deficit Reduction Act of 2005, including
promissory notes and personal care agreements;
disability planning, including special needs trusts and
guardianship; estate planning, including wills and
trusts; long term care insurance; advanced
directives; and probate, which encompasses estate
and trust administration. We assist clients in planning
for the possibility of disability, incapacity, home
health care, assisted living and/or nursing home
placement. Our firm enables clients to avoid
impoverishment caused by the escalating cost of
long term care, to maintain their right to make health
care decisions and to avoid unnecessary medical
treatment.
We hope you have enjoyed The Elder Law
Report. If you have questions about something
you read, elder law matters or
issues concerning persons with disabilities, we
would be delighted to hear from you. We serve as an
elder law resource to many professionals and
organizations and want to become your elder law
resource as well. You can reach us at
Info@ElderLawAssociates.com.
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