Getting the Most Out of Social Security Survivor’s Benefits

Social Security survivor’s benefits provide a safety net to widows and widowers. However, to get the most out of the benefit, you need to know the right time to claim. 

Although you can claim survivor’s benefits as early as age 60, if you claim benefits before your full retirement age your benefits will be permanently reduced. If you claim benefits at your full retirement age, you will receive 100 percent of your spouse’s benefit or, if your spouse died before collecting benefits, 100 percent of what your spouse’s benefit would have been at full retirement age. 

However, it is important to be aware of the differences in delaying survivor benefits and your own retirement benefits. If you delay taking your own retirement benefits past your full retirement age, depending on when you were born your benefit will increase by 6 to 8 percent for every year that you delay up to age 70, in addition to any cost of living increases.

However, unlike with retirement benefits, delaying survivor’s benefits longer than your full retirement age will not increase the benefit. 

You cannot take both retirement benefits and survivor’s benefits at the same time. However, you can take survivor’s benefits and delay your retirement benefits to a later time. Your choice to take survivor benefits does not need to be a permanent decision. When deciding which one to take, you need to compare the two benefits to see which is higher. In some cases, the decision is easy – one benefit is clearly much higher than the other. In other situations, the decision can be a little more complicated and you may want to take your survivor’s benefit before switching to your retirement benefit. 

To determine the best strategy, you will need to look at your own retirement benefit at your full retirement age as well as at age 70 and compare that to your survivor’s benefit. If your retirement benefit at age 70 will be larger than your survivor’s benefit, it may make sense to claim your survivor’s benefit at your full retirement age. You can then let your retirement benefit continue to grow and switch to the retirement benefit at age 70. 

Example: A widow has the option of taking full retirement benefits of $2,000/month or survivor’s benefits of $2,100/month. She can take the survivor’s benefits and let her retirement benefits continue to grow. When she reaches age 70, her retirement benefit will be approximately $2,480/month, and she can switch to retirement benefits. Depending on the widow’s life expectancy, this strategy may make sense even if the survivor’s benefit is smaller than the retirement benefit to begin with. 

Keep in mind that divorced spouses are also entitled to survivor’s benefits if they were married for at least 10 years. If you remarry before age 60, you are not entitled to survivor’s benefits, but remarriage after age 60 does not affect benefits. In the case of remarriage, you may need to factor in the new spouse’s spousal benefit when figuring out the best way to maximize benefits. 

The calculations are very complicated and there are many possible options. In fact, some experts believe that it is usually not possible to know what claiming strategy is most advantageous without the aid of a financial advisor, or at least benefit claiming software. To find out the strategy that would work best for you, consult with a financial professional, particularly if you have one with whom you already have a professional relationship. Although there is software which will help with the calculations, such as Maximize my Social Security or Social Security Timing, advice from a professional is generally the best way to go.

If you have questions about this topic in particular contact us by filling out our short online form and we’ll help point you in the right direction.  Just click here.

Caregiver Agreements in Pennsylvania

It is becoming more and more common, and encouraged, for those who are in increasing need of medical services to stay at home and receive the needed care in-home. What are the rules when someone is providing such care?

Anyone can provide care to an individual in need, but states have different rules for payment for such care depending on the relationship of the caregiver to the care receiver. Every state has such programs, but the rules vary by state.

For Medicaid purposes, in Pennsylvania, when a close family member such a child or sibling provides in-home care for a person who needs or may in the future need skilled nursing level of care, such as provided in a nursing home, the state presumes that care is provided out of love and affection, and the state will not recognize payments made to that care-giver for such care.

That rule can be very costly to a person who is applying for Medicaid to pay for skilled nursing level of care. However, there is an exception: if the caregiver and the care receiver have an appropriate written caregiver agreement, the state will approve payments under that agreement. 

Caregiver agreements need to meet certain criteria to pass muster for Medicaid. Essentially, they must be drafted the same as contracts for care between professional caregivers and care receivers. They should specifically and in detail spell out the services provided, such as room and board if the care receiver is living in the care-giver’s home, and specific services to be provided by the caregiver, such as meals, specific chores or tasks provided, and the like.

The agreement should also set out the time spent on each such service, and determine a value for, or an hourly rate at which, those services are provided, which cannot be any more than the rate that professional third party providers or agencies would charge for the same or similar services. The agreement needs to spell out the duties and responsibilities in a way which Medicaid will approve. Thus, it is important that such agreements are prepared by an attorney who is familiar with the requirements for Medicaid eligibility.

It is even possible to have a Medicaid-compliant caregiver agreement if the care receiver is giving a lump sum, and not a monthly payment, to the caregiver, such as, for example, when a parent gives a child a cash payment to add an addition onto the child’s house for the care receiver to live in, commonly known as “in-law quarters”.

However, these types of payments are tricky, and the caregiver agreement has to be carefully drafted to avoid having all or some of the payment disallowed by Medicaid, and a penalty imposed on the care receiver when he or she applies for Medicaid for skilled nursing level of care.  

Even non-professional third parties who provide care, such as loving friends or more distant relatives, should have a written caregiver agreement with the care receiver, to assure that, in the event that the care receiver applies for Medicaid, the payments made for such care will be approved, and not be considered benefit-delaying gifts. 

The importance of properly drafted caregiver agreements cannot be overstated, as a poorly or inadequately drafted agreement will result in penalties or delay in Medicaid benefits. Thus, if you are considering the need to provide care to someone in need of some level of care, you should consult with an attorney who is quite familiar with the requirements for Medicaid eligibility as early as possible to discuss the appropriateness of a caregiver agreement.  We can help!  Just fill out our short online form by clicking here and we’ll be in touch.

Jeffrey Bellomo, Esq.