The Place of Social Security in Estate Planning

On Behalf of | Feb 2, 2022 | estate planning in Indiana

When TD Wealth released the results of its annual survey of estate planning professionals, 89% of the attorney and trust officer respondents reported that their female clients had been especially negatively impacted by job losses, with the biggest concerns involving:

  • prolonged life expectancies
  • increase in healthcare costs
  • dealing with blended families
  • family conflict and divorce
  • dealing with tax law changes (and anticipated future changes)

At Geyer Law, we realize that those same factors relate to our senior clients’ decisions about Social Security benefits:

Life expectancies
U.S. life expectancy is considerably longer than it was when the Social Security system was designed. As longevity increases, lifetime benefits increase as well, with a “disproportionate increase in lifetime benefits for higher-earning individuals,” ssa.gov admits, because individuals with low lifetime earnings also tend to claim retirement benefits earlier than do individuals with higher lifetime earnings, and benefits claimed prior to full retirement age are adjusted by an actuarial reduction factor for each month by which the claiming age precedes full retirement age. As our Indiana estate planning clients plan both lifetime and post-death gifts and inheritances, life expectancy factors need to be considered.

Healthcare costs
People with Medicare can face significant health-related out-of-pocket costs, KFF.org reports, including:

  • out-of-pocket costs
  • premiums
  • deductibles
  • costs for services not covered by Medicare

In planning for gifts to both family members and charities, clients must be sure to allow for these health-related costs of living during their own life expectancy..

Divorce, remarriage and blended families
If you remarry and your former spouse is alive, your former marriage will no longer be considered by Medicare when determining your Part A premium costs. If you remarry and your former spouse passes away, you will be eligible for free Part A on your former spouse’s record (if you remarried after age 60). As a now-single Medicare recipient, your Part A premiums may be based on the record of any of your former spouses.

Tax law changes
Individuals with income from wages, self-employment, interest, and dividends will need to pay tax on up to 85% of their Social Security benefits. Again, planning gifts to others must take these tax liabilities into account.

As we remind our Geyer Law clients, social security benefits are an important part of the equation as you plan your estate.

– by Cara Chittenden, Associate Attorney at Rebecca W. Geyer & Associates