disability

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

Social Security in 2021

Issues for Social Security in 2021 include the annual cost-of-living adjustment (COLA) for benefits to be 1.3%, which is a small but significant increase for millions of beneficiaries. They’ll see a raise in their monthly payments beginning in January 2021. However, the benefits increase isn’t the only change coming next year, according to AARP’s October article entitled “Biggest Social Security Changes for 2021.” Some of the biggest changes affecting Social Security recipients in 2021, including the average monthly benefits in 2021 (+ difference from 2020):

  • Retired worker: $1,543 (+$20)
  • Retired couple: $2,596 (+$33)
  • Widow or widower: $1,453 (+$19)
  • Widow with two children: $3,001 (+$39)
  • Disabled worker: $1,277 (+$16)
  • Disabled worker w/ spouse, children: $2,224 (+$29)
  • SSI for individual: $794 (+$11)
  • SSI for couple: $1,191 (+$16)

The 1.3% COLA that starts in January was calculated based on the year-over-year rate of inflation. It’s the difference between the Consumer Price Index for Urban Wage Earners (CPI-W), a government measurement of prices typically paid for a basket of goods and services, in the third quarter of 2019 and the third quarter of 2020. The modest increase signals the relatively low rate of inflation over the past year. When there’s no change in the index, or if prices have fallen year over year, there’s no COLA.

For the average retired worker, the monthly Social Security in 2021 benefit will go up by $20 to $1,543 in January from $1,523 this year. For the average retired couple who both collect benefits, the payment will rise by $33 to $2,596, up from $2,563, and for the average disabled worker, monthly benefits will increase by $16 to $1,277 from $1,261. The maximum Social Security check for a person retiring at full retirement age will rise to $3,148 a month in 2021 from $3,011 — an increase of $137.

The payroll tax that funds Social Security in 2021 is set at 12.4% on eligible wages. Employees pay 6.2%, and employers pay the other half. Self-employed workers pay the whole 12.4%. The money paid in by today’s workers goes to cover current benefits, with any excess going into the Social Security trust fund.

A recent change in law states that the new Medicare premium will be less than previously projected, which preserves part of the COLA for most beneficiaries. Initially, higher emergency Medicare spending due to COVID-19 was expected to lead to very high Medicare premiums in 2021. Most beneficiaries would have seen their COLA wiped out by Part B premium increases, if the law hadn’t been changed.

Those who get Supplemental Security Income (SSI) that helps some individuals with little or no income meet basic living needs, will also see a 1.3% rise in their monthly benefits. For the average individual, that means $11 more a month, to $794 from $783. The average couple gets $16 more a month, to $1,191 from $1,175. SSI is funded by general tax revenue, not Social Security payroll taxes.  These are just a few of the changes for Social Security in 2021.

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Reference: AARP (Oct. 28, 2020) “Biggest Social Security Changes for 2021”

Suggested Key Terms: Disability, Social Security, Supplemental Security Income, Social Security Disability Insurance

When Parents Move In

When parents move into someone else’s household, 14% of the homeowners were the parent of the head of household in 2017. That number is an increase from 7% in 1995, according to the Pew Research Center.

“While the rise in shared living during and immediately after the recession was attributed in large part to a growing number of millennials moving back in with their parents, the longer-term increase has been partially driven by a different phenomenon: parents moving in with their adult children,” according to the Pew report.

US News and World Report’s recent article entitled “When Your Elderly Parents Move In With You” says that if your children also return home after college, you might wind up supporting your children and your parents at the same time.

The critical thing to do is to make a plan. Discuss your goals, the finances and the possibilities, which includes in-home care or nursing home care. Let’s look at how to care for aging parents in your home.

Get Financially Prepared. When parents move in, it will add new costs to your budget. In addition to health care for aging parents, the most disruptive implications are often the financial cost of supporting another dependent and having the space to accommodate them in the household. Talk about whether your parent will be contributing Social Security income or other retirement assets toward household expenses.

Think About Hiring Extra Help. Caring for a parent with significant health problems who needs help with basic living tasks can quickly become overwhelming for an adult child with children and work responsibilities. An aging parent might need around-the-clock care. A home health aide could be brought in during work hours or there’s also adult day health care services. However, these costs can add up. It’s not uncommon for the child who is caring for a parent to scale back his or her own career to accomplish both tasks.

Plan Before They Move In. Begin the discussion about the transition as early as you can. It can be doubly stressful to be executing a move in the middle of a crisis or urgent situation, like a health emergency or the death of a parent.

Remember that when parents move in, it often means you may need to schedule their activities and medical appointments. This can take time away from normal family routines.

Let us help you plan your estate.

Reference: US News and World Report (Aug. 30, 2020) “When Your Elderly Parents Move In With You”

Suggested Key Terms: Elder Law Attorney, Disability, Supplemental Security Income, Elder Care, Caregiving, Elder Care

Special Needs Trusts

The most frequently used tool to protect and care for children with special needs after both parents has passed is a special needs trust (SNT), says Forbes in its article entitled “Making Trusts for Special Needs Children.” An SNT is a legal instrument used to provide benefits to an individual with special needs, while also maintaining that person’s ability to receive state or federal benefits assistance. The trust is usually created by a parent or guardian, with the special needs child as the beneficiary.

A third-party trustee is often appointed. That person or institution has authority to make disbursements from the assets in the trust on behalf of the beneficiary. This trust lets parents make sure that their child with special needs has his or her needs met after the parents pass away.

Some government benefits used by a person with special needs—such as Supplemental Security Income (SSI) and Medicaid are “means tested.” That means they are only available to those who themselves have limited income or assets. If a parent wants to provide support to a child with special needs after the parent’s death, those assets must pass correctly to ensure that the assets don’t cause that child to directly own the assets and thereby lose their government eligibility for the benefits.

Again, any assets left directly to the beneficiary without use of an SNT could disrupt the beneficiary’s receipt of benefits, taking money and support away from the beneficiary.

The most common of these trusts is a third-party SNT. This trust is funded by family members of the beneficiary to make certain that there are specific assets set aside for the beneficiary’s utility bills, education, entertainment, or most other regular expenses.

There are also first-party trusts, where the trust is established with the assets owned directly by the child with special needs. This can result when the child with special needs receives an inheritance, life insurance payout, or personal injury settlement directly, which may impact their existing benefits.

There are also pooled trusts, which are trusts that are managed by a nonprofit organization. With a pooled trust, the grantor doesn’t have to name a trustee, especially one who may not have experience in managing trust assets. Consequently, the assets are held for the benefit of the child with special needs, but they are managed by an organization with expertise in doing just that.

An ABLE account is another option. They’re not trusts, but they allow up to $15,000 a year to be earmarked for the benefit of a person with special needs. The distribution rules are similar to those of a SNT.

There is significant complexity with the laws surrounding SNTs, so you should work with an experienced estate planning attorney or elder law attorney.  Let us help you design a special needs trust.

Reference: Forbes (Sep. 10, 2020) “Making Trusts for Special Needs Children”