Legal and Financial Planning for Those with Alzheimer’s and Their Caregivers

November 1, 2023

If you or a loved one is diagnosed with Alzheimer’s or dementia, then there are certain things that you will need to plan for legally and financially. An estimated 6 million Americans have Alzheimer’s, and it is currently the seventh leading cause of death in the United States. Alzheimer’s is a brain disorder that slowly decreases memory and thinking skills, while dementia involves a loss of cognitive functioning; both cause more and more difficulty for an individual to perform the most simple tasks. Though a diagnosis can be scary, the right planning can help individuals and their families feel more at ease.

Putting Legal Documentation in Place

Christopher Berry, Founder and Planner at The Elder Care Firm, recommends three main disability documents that should be in place.

First, there needs to be a financial power of attorney, a document that designates someone to make all financial decisions once an individual is unable to do so for themselves. If an individual lacks a trusted loved one to make financial decisions, then designating a financial attorney or bank is an option.

The next document that needs to be in place is the medical power of attorney that designates someone to make medical decisions for an individual. In many cases, it may be appropriate to appoint the same person to be the financial and medical power of attorney, as long as that person is well-trusted by the individual. In the event that something happens to the original power of attorney(s), successor (or back-up) agents for power of attorney(s) should also be designated.

The last document is the personal care plan, which instructs the financial and medical power of attorney(s) on how best to care for the individual in need. For instance, those entrusted to the care of an individual will need to make sure they sign medical records release forms at all doctor’s offices; copies of the power of attorney or living will should also be given to healthcare providers.

These three documents provide a foundation to make decisions for the individual diagnosed with Alzheimer’s or dementia when they no longer can themselves. It’s ideal to include the individual in these conversations in the early stages of their diagnosis, so that they may be a part of the decision-making process and appoint people that they will feel most comfortable with during their care.

How to Pay for Long-Term Care

Since Alzheimer’s is a progressive disease, the level of care an individual needs will increase over time. Care costs may include medical treatment, medical equipment, modifications to living areas, and full-time residential care services.

The first thing a family can do is to use their own personal funds for care expenses. It’s important for families to remember that they will also pay in their time, as many children of loved ones with Alzheimer’s or dementia will become the main caregivers. It may be wise to meet with a financial planner or sit down with other family members, such as your spouse and siblings, to determine how long some of you may be able to forgo work in order to provide full time care.

When personal funds get low or forgoing work for a period of time becomes difficult, long-term care insurance can be a lifesaver. The key to relying on long-term care insurance though is that it needs to be set up ahead of the Alzheimer’s or dementia diagnoses, so considering these plans as one ages may be smart.

Veterans can make use of the veterans benefit, or non-service-connected pension, which is sometimes called the aid and attendance benefit. This benefit can help pay for long-term care of both veterans and their spouses.

Finally, an individual aged 65 or older can receive Medicare, while those that qualify for Medicaid can receive assistance for the cost of a nursing home. If someone’s income is too high to receive Medicaid, then the spenddown is one strategy to know; under spenddown, an individual may subtract their non-covered medical expenses and cost sharing (including Medicare premiums and deductibles) from their available income. With the spenddown, a person’s income may be lowered enough for them to qualify for Medicaid.

Minimizing Risk Factors During Care

Research published recently in the journal Alzheimer’s & Dementia found that nearly half of patients with Alzheimer’s and dementia will experience a serious fall in their own home. Author Safiyyah Okoye, who was at John Hopkins University when the study was conducted, recommends minimizing risks such as these by safeguarding homes early on in diagnoses. “Examining the multiple factors, including environmental ones like a person’s home or neighborhood, is necessary to inform fall-risk screening, caregiver education and support, and prevention strategies for this high-risk population of older adults,” she states.

The good news is that since the progression of Alzheimer’s is often slow, families have plenty of time to modify the home for increased safety.

In addition to fall prevention modifications, other safety measures may include installing warning bells on doors to signal when they’re opened, putting down pressure-sensitive mats to alert when someone has moved, and using night lights throughout the home. Coats, wallets, and keys should also be kept out of sight, because at some point, leaving the home alone and driving will no longer be safe. Conversations about these safety measures, such as when an individual will have to stop driving, are ones that caregivers should have early on with their loved ones. Including individuals in their future planning while they are still cognitively sound will help both them and their caregivers feel more comfortable with the journey ahead.

Insureyouknow.org

It’s important to remember that even though receiving an Alzheimer’s or dementia diagnosis can be devastating, it is not the end. People with Alzheimer’s can thrive for many years before independent functioning becomes difficult. Both patients and caregivers will feel more calm through planning ahead. Insureyouknow.org can help caregivers stay organized by storing all of their important documents in one place, such as financial records, estate planning documentation, insurance policies, and detailed care plans. Above all, there is hope for those with Alzheimer’s; research is happening every day for potential therapies and future treatments.

The Pros and Cons of Living with Children in Retirement

August 1, 2023

Combining households can be a positive experience for everyone. In order to ensure that every member of the family is comfortable with living together, it will be important to talk it out. Communicating about any concerns before moving in together and then regularly thereafter will ensure that everyone remains happy with the decision to cohabitate. Amy Goyer, an AARP family expert, tells children of retirees to embrace the chance. “Look at this as an opportunity,” she adds. “You have a chance to enjoy your mom or dad in their later years. This is a way for children to know their grandparents in a way they wouldn’t otherwise.”

Before combining households, retirees and their children should consider all of the pros and cons of living together during retirement beforehand.

The Pros of Living With Children During Retirement:

1. Retirees can be a big part of their grandkids’ lives. Many parents choose to live with their children during retirement so that they can be a major part of their grandkids’ lives. Some parents want to help their children raise their kids, such as picking them up from school, helping with meals, or taking their grandkids to their extracurriculars after school. Parents who were busy with work while their own children were growing up may feel that they can now make up for lost time.
2. Your family will have a strong support system in place. While you may want to help your children with their needs, they may also need to help you. This can range from needing a ride to a doctor’s appointment to needing care after surgery or during an illness. Either way, living together will enable each of you to be more available to one another in times of need.
3. Combined expenses may make living together more cost effective for both of you. Having a real financial talk with your children before you decide to combine households may prove that it could save each of you a lot of money. Coming up with a budget of shared expenses can actually help family members thrive both as a whole and individually. With the right budget, retirees shouldn’t have to dig into their retirement as much every month, while their children will be able to save up more of their monthly income.

In addition to communicating with one another about finances and caretaking roles, make sure everyone is allotted their own personal time. For instance, grandparents may opt to have their friends over while their grandkids are in school and their children are at work. Working together to ensure that every member of the family gets space from one another from time to time will help prevent anyone from feeling stifled. Retirement expert Nancy K. Schlossberg, author of Too Young to Be Old: Love, Learn, Work and Play as You Age, says, “If you do your emotional work upfront, you’re more likely to be satisfied with your final decision.”

The Pros of Living With Children During Retirement Could Also be the Cons:

1. Retirees may not want to become full-time babysitters. If your children have children, and you’re disinterested in being a full-time babysitter to the grandkids, setting boundaries upfront about what you do and don’t want to do will be extremely important. Also, consider day-to-day life with young children and maybe pets. “If you have no tolerance for noise, do you want to move into a house with children or teenagers?” asks Jennifer Prell, president of Illinois elder-resource network Silver Connections.Be realistic about what you will and won’t be able to handle on a daily basis.
2. Children of retirees may not want to become full-time caretakers either. Children of retirees may not be prepared for the burden of caring for their own parents.Again, establishing what everyone is comfortable with will be imperative. Contemplate the worst-case scenarios before moving in together. “Even if Mom moves in relatively healthy, that could change overnight,” elder-law attorney Kerry Peck points out. “Families generally underestimate the amount of care that Mom is going to require.”
3. Retirees (or their children) may end up footing the bill for everyone. If retirees or their children become overly reliant on one another, then moving in together may become more expensive for one party than remaining apart. Having an honest talk about financial responsibilities and emergency savings before moving in together should help prevent unexpected expenses for either one of you down the road. “So many families run into trouble when something bad unexpectedly happens,” says Jill Schlesinger, author of The Dumb Things Smart People Do With Their Money. “That’s why it’s so important to talk to your kids about the What-Ifs,” said Schlesinger.

Consider Alternatives to Living Together

If you decide that joining households may not be the best option for your family, there are alternatives. Simply living closer to one another can reap the same benefits of living with children during retirement while removing the downsides.

While there’s an appeal to living ten minutes from one another, one of you may feel as if some of your independence has been lost. Talk to your children, and decide how close is too close. If in the end, you decide to live farther away from your children, planning reciprocal visits or spending part of the year with them may turn out to be the best of both worlds.

If you do decide to remain independent during retirement, make sure there’s plenty of room in your home for your children to visit or stay overnight. If you have more than one child, factor in enough space for all of them and their families, so that each of your children may visit you simultaneously.

Insureyouknow.org

In the end, living with your children during retirement should be beneficial for both of you. Insureyouknow.org can help your family keep the peace. When combining households, keeping the budget, financial information, healthcare records, and even family schedules in one easy-to-access place can help everyone work together to keep the household running smoothly. Since communication will be the key to living happily together, it will be important for everyone to be in the know.

Ask or Be Asked: Executor of an Estate

March 2, 2022

An executor of an estate is someone called upon to settle a deceased individual’s financial affairs. In your will, you may name a close relative, friend, accountant, attorney, or financial institution to act as executor of your estate. You also may designate co-executors—more than one person to handle your affairs. If you are asked to be an executor, consider it a great honor. But at the same time, keep in mind that it is also a great responsibility.

You should select an executor with integrity and good judgment. The law requires an executor to act in the estate’s best interest—known as “fiduciary duty”—even if they are also an heir, which is often the case. You’ll need to make sure they understand and are prepared for the job. 

The Duties of an Executor of an Estate

An executor’s responsibilities can vary depending on the complexity of your estate, and the decisions you designate in your will. Following are some of the duties an executor of an estate performs.

• Locate the last will and file it in probate court
• Obtain certified copies of the death certificate
• Notify the state department of health of the death if a funeral home, crematorium, hospital, or nursing facility has not
• Distribute assets to beneficiaries
• Pay creditors
• Issue notices of death to banks, government agencies, and insurance companies
• File final tax returns
• Maintain property until the estate is settled
• Arrange care for any pets
• Make court appearances on behalf of the estate
• Notify current employer, if applicable
• Notify the deceased’s beneficiaries of the probate hearing
• Keep accurate records
• File the final accounting with the court and close the estate

As an executor, you may discover you need to hire a professional such as an accountant or attorney to help value and distribute certain assets, including:

• Assets with disputed ownership
• Business interests
• Royalties
• Out-of-state assets
• Complex investments

Ambiguities in a will and substantial bequests to a minor also may require a professional’s expertise, which your estate will pay customarily.

The Decision to Serve as an Executor

If you are asked to serve as an estate’s executor, realize that it is a great honor and a great responsibility. Consider your decision carefully before you agree. Think about the time commitment as well as the skillset and temperament required to perform the duties. Find out why the person asked you to serve as an executor and discuss his expectations for you to fill this role.

With this disclosure, you should be able to decide if you are qualified for the job and your fulfillment of an executor’s duties will be appreciated.

Compensation Considerations

Many executors perform their duties without compensation, especially if they are one of your estate’s beneficiaries. But executors can get paid for their work, and this arrangement is more common if the executor is a person outside your family or if settling your estate requires significant expenses such as travel, filing court documents, or overseeing the sale of your real estate.

Another option for you is to limit in your will the fees to a specific dollar amount. Or you may specify the payment of reasonable fees based upon state law.

Typically, executors can expect to get paid once the estate is settled. If they incur out-of-pocket expenses, such as utilities, property taxes, insurance, and storage fees before the estate is settled, they can usually reimburse themselves during their estate administration. But again, compensation is a subject that should be spelled out before you accept an executorship. Spending down any estate monies can be an area of great sensitivity, especially if heirs believe their inheritance was reduced because of your executorship.

InsureYouKnow.org

When you select an executor of your estate who accepts the responsibility to carry out your wishes regarding your estate upon your death, ask yourself the following five essential questions. Let the executor know if the answers can be found on your InsureYouKnow.org portal.

1. Where is your original will? If you keep your will in your house, be specific about where to find it. If you filed it with your attorney, provide contact information. Don’t store it in a safe deposit box, where it may be difficult to access after your death. You should share your InsureYourKnow.org access credentials with the executor of your estate to be able to find a copy of your will online.
2. Who should be notified? Compose a list of people and organizations with contact information for your executor to contact. If you keep this list at InsureYouKnow.org, you can update it regularly.
3. What are your passwords and access codes? Let your executor know how to retrieve your passwords and access codes for email, social media, other media accounts, cellphones, and computers. Store and keep this data current at InsureYouKnow.org.
4. Who will receive your possessions? If you have nonfinancial items such as family recipes, photos, heirlooms, and memorabilia, keep details with designated recipients at InsureYouKnow.org.
5. Do you have any secret items? Let the executor or another person you trust know if you possess personal items that need to be dealt with on a confidential basis. Such items may include correspondence, photos, or documents personal in nature. You can keep a secure list of these items at InsureYouKnow.org.

Selecting a trusted executor to carry out your will is an important part of estate planning. Experts recommend updating your will every few years to make sure it still reflects your chosen executor and decisions to be carried out after your death. If you need to create or update your will, you can file copies at InsureYouKnow.org.

Whether you are the person asking or are the person being asked to be an executor of an estate, carefully consider and execute the responsibilities and duties required.

Resolve to Go Paperless in 2022

December 30, 2021

In January, follow the example of the U.S. government that has committed to moving to a paperless archival system by December 31, 2022. The Office of Management and Budget’s (OMB) directive for government agencies to transition to electronic records has prompted them to take steps in their modernization journeys.

The government faces multiple challenges with paper records, such as burdens on the workforce and high costs to manually create, use, and store nonelectronic information. As an individual, you may face similar dilemmas in dealing at home with your printed files, insurance records, and other important documents that would be difficult to replace if damaged or destroyed by natural disasters or accidents.

As government agencies transition to electronic records, many are experimenting with new technologies to sort through electronically stored information. Universities and businesses also have guidelines for storing electronic records in online repositories that they strive to:

• Back up regularly
• Comply with all privacy and security requirements
• Allow for shared access through a network or a cloud-based program
• Organize in such a way that records can be identified and purged appropriately
• Set up to migrate content to a new system upon replacement
• Maintain through regular software updates

InsureYouKnow.org

After you review the electronic storage practices of the government, universities, and businesses, establish your own ground rules for storing your important records at InsureYouKnow.org. Keep in mind the following tips:

• A systematic plan for keeping track of important documents can save you hours of anxious searching for misplaced items. It also can help you reduce the number of nonimportant papers cluttering your home.
• It is important to carefully store valuable papers which would be difficult or time-consuming to replace. Original hard-to-replace documents are ideally kept in a safe deposit box or a fire-proof, waterproof, burglar-proof home safe or lockbox. Scanned copies can be stored at InsureYouKnow.org where they will be readily accessible.
• Electronically stored records must be legible, readable, and accessible for the period of limitations required. It is important to back up electronic files at InsureYouKnow.org in case of a computer malfunction in your home office.
• Wherever you live, there is always a risk of fires, floods, and other disasters, and your home and important documents could be destroyed. If you have stored photographic images, you’ll have records accessible whenever you need them, including keeping peace of mind knowing documents are indestructible at InsureYouKnow.org.

Valuable papers can be sorted into two types: those needed for day-to-day use and those needed occasionally.

Examples of valuable papers used frequently include:

• Drivers’ licenses
• Credit cards
• Health insurance cards
• Bank account records
• Identification cards
• Special health documentation such as COVID-19 vaccinations, allergies, disabling conditions, prescriptions, and blood types for family members

Examples of valuable papers used occasionally include:

• Birth, marriage, and death certificates
• Deeds, leases, and property records and titles
• Income and employment records
• Passports
• Contracts
• Insurance policies
• Income tax records
• Military papers
• Divorce decrees
• Social Security records
• Retirement and pension plans
• Wills

Regular filing and reviewing of paper and electronic documents are important. Making decisions on when to discard old, printed files and purge electronic versions may be difficult but worth the effort to keep accurate, up-to-date records.

Death (of a Spouse) and Taxes

November 16, 2021

In a “normal” year, about 1.5 million Americans become widows and widowers, but the COVID-19 pandemic has significantly increased that annual statistic. According to a recent article in The Wall Street Journal, the National Center for Family and Marriage Research at Bowling Green State University estimates that about 380,000 of the more than 700,000 people in the United States who have died from COVID-19 were married.

Under “normal” circumstances, it may be difficult to comply with tax requirements and deadlines; filing as a widow(er) presents additional challenges. This is a complex topic with the following issues to consider.

Filing the First Year

The IRS stipulates that the year that your spouse dies:

• You can still file a joint return if you didn’t remarry and the executor approves the joint return.
• If either spouse was a nonresident alien at any time during the year, the surviving spouse can’t file a joint return.
• If you do file jointly, include all your income and deductions for the full year, but only your spouse’s income and deductions until the date of death.
• If the deceased spouse owes any taxes that the estate can’t pay, you as the surviving spouse may be liable for the amounts owed.

Filing in the Next Two Years

For two tax years after the year your spouse died, you can file as a qualifying widow(er). This filing status gives you a higher standard deduction and lower tax rate than filing as a single person. You must meet these requirements:

• You haven’t remarried.
• You must have a dependent (not a foster) child who lived with you all year, and you must have paid more than half the maintenance costs of your home.
• You must have been able to file jointly in the year of your spouse’s death, even if you didn’t.

Notifying the IRS
If you are a widow(er) who qualifies to file a joint return, take the following steps:

• Across the top of your IRS Form 1040 tax return for the year of death—above the area where you enter your address, write “Deceased,” your spouse’s name, and the date of death.
• When you’re a surviving spouse filing a joint return and a personal representative hasn’t been appointed, you should sign the return and write “filing as surviving spouse” in the signature area below your signature.
• When you’re a surviving spouse filing a joint return and a personal representative has been appointed, you and the personal representative should sign the return.
• A decedent taxpayer’s tax return can be filed electronically. Follow the specific directions provided by your preparation software for proper signature and notation requirements.
• The deadline to file a final return is the tax filing deadline of the year following the taxpayer’s death.
• If you are a surviving spouse filing a joint return alone, you should sign the return and write “filing as surviving spouse” in the space for your deceased spouse’s signature.
• If a refund is due, there’s one more step. You also should complete and file with the final return a copy of Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Although the IRS says you don’t have to file Form 1310 if you are a surviving spouse filing a joint return, you probably should file the form to prevent possible delays.

Other forms and documents you may need include:

• W-2s, 1099s and other tax forms for the year of death, reporting income or expenses paid before the person died.
• Death certificate to prove the date of death in the tax year being reported.
• Form 56 filed by a trustee, executor, administrator, or other person to let the IRS know who is responsible for the person’s estate.
• Form 1041, “U.S. Income Tax Return for Estates and Trusts” reports receipt of more than $600 in annual gross income (such as dividends, interest, proceeds from the sale of assets) after the person died.
• IRS Publication 559, “Survivors, Executors and Administrators” provides more information about legal requirements.

Note: You can’t file a final joint return with your deceased spouse if you as the surviving spouse remarried before the end of the year of death. The filing status of the decedent in this instance is married filing separately.

Filing an Estate-tax Return

The current estate- and gift-tax exemption is $11.7 million per individual, so not many estates owe tax—only about 1,900 did for 2020, according to the Tax Policy Center. Executors don’t need to file a return if the decedent’s estate is below the exemption.

They may want to file one, however, because then the surviving spouse can have the partner’s unused exemption and add it to their own in many cases.

Estate taxes are normally due nine months after the date of death. But the IRS allows executors to claim the unused exemption for the spouse up to two years after the date of death, in many cases.

Selling a Home and Resulting Exemptions

Survivors who sell a home may take up to $500,000 of home-sale profit tax-free if they haven’t remarried and sell within two years of the partner’s date of death. If they sell later, the exemption drops to $250,000, the standard amount for single filers.

Dealing with Retirement Accounts

Surviving spouses can roll over inherited retirement accounts such as 401(k)s and IRAs into their own names, and financial advisers routinely recommend this move.

A new widow(er) should carefully consider options. It’s possible to divide retirement accounts such as IRAs, and to roll over some but not all assets into the survivor’s name. This would leave the remainder in an inherited IRA available for penalty-free payouts to younger spouses.

Either way, heirs of retirement accounts should be sure to name new heirs of their own.

Heirs of these accounts who will face higher taxes as single filers may also want to convert assets to Roth IRAs, which can have tax-free withdrawals—especially if they can convert while still eligible for joint-filing rates and brackets.

Cashing U.S. Savings Bonds

There’s a special rule for U.S. Savings Bonds, from which income generally accrues tax-free until the bonds are cashed in. When the bond owner dies, the accrued interest may be treated as income in respect of a decedent.

In that case, the new owner of the bonds becomes responsible for the tax on the interest accrued during the life of the decedent. (The tax isn’t due, however, until the new owner cashes in the bonds.)

Alternatively, the interest accrued up to the date of death can be reported on the decedent’s final income tax return. That could be a tax-saving choice if he or she is in a lower tax bracket than the beneficiary. If that method is chosen, the person who gets the bonds only includes in income the interest earned after the date of death.

Reporting Deductions

All deductible expenses paid before death can be written off on the final return. In addition, medical bills paid within one year after death may be treated as having been paid by the decedent at the time the expenses were incurred. That means the cost of a final illness can be deducted on the final return even if the bills were not paid until after death.

If deductions are not itemized on the final return, the full standard deduction may be claimed, regardless of when during the year the taxpayer died. Even if the death occurred on January 1, the full standard deduction is available.

Inheriting Property and Money

For deaths that occurred in years other than 2010, the tax basis of any property a taxpayer owns at the time of his or her death is “stepped up” to its date-of-death value. Since the basis is the amount from which any gain or loss will be figured when the new owner ultimately sells the property, this means that the tax on any appreciation that occurred during the taxpayer’s life is essentially forgiven.

The person who inherits the property—a house, say, or stocks and bonds— would owe tax only on appreciation after the time of death. It’s important that you pinpoint date-of-death value as soon as possible—the executor should be able to help—to avoid hassles later on when you sell it. If assets have lost value during the original owner’s life, the tax basis is stepped down to date-of-death value.

Money you inherit is generally not subject to federal income tax. If you inherit a $100,000 certificate of deposit, for example, the $100,000 is not taxable. Only interest on it from the time you become the owner is taxed. If you receive interest that accrued but was not paid prior to the owner’s death, however, it is considered income in respect of a decedent and is taxable on your return.

InsureYouKnow.org

The death of a spouse not only presents emotional distress resulting from the loss of a loved one, but it also forces a widow(er) to deal with income tax issues never before faced. By keeping at insureyouknow.org, copies of a spouse’s death certificate, medical bills, income records, property assessments, and wills, you’ll be able to access required documents when you file your income tax return following the death of a spouse.

Save with a Health Savings Account

April 27, 2021

A Health Savings Account (HSA) is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs.

An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual’s tax return whether or not the individual itemizes deductions. Employer contributions aren’t included in taxable income and distributions from an HSA that are used to pay qualified medical expenses aren’t taxed.

High Deductible Health Plan

One way to manage your health care expenses is by enrolling in a High Deductible Health Plan (HDHP) in combination with opening an HSA. While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have an HDHP—generally a health plan that only covers preventive services before the deductible. For plan year 2021, the minimum deductible is $1,400 for an individual and $2,800 for a family. (The term “minimum deductible” refers to the amount you pay for health care items and services before your plan starts to pay.) Maximum out-of-pocket costs (the most you’d have to pay if you need more health care items and services) are $7,000 for an individual and $14,000 for a family.

Contribution Limits in 2021

For calendar year 2021, the annual limitation on deductions for an individual with self-only coverage under an HDHP is $3,600. The annual limitation on deductions for an individual with family coverage under an HDHP is $7,200. The IRS announces annually the HSA contribution limit that applies each calendar year. You can review IRS Publication 969 each year to determine the current limit. 

HSA funds roll over year to year if you don’t spend them. An HSA may earn interest or other earnings, which are not taxable.

Some health insurance companies offer HSAs for their HDHPs. Check with your company to see if you are eligible. You also can open an HSA through some banks and other financial institutions. If you are interested in enrolling for healthcare coverage through the U.S. Department of Health and Human Services’ Health Insurance Marketplace®, you can check to see if specific plans are “HSA-eligible.”

It’s also important to note that there is an aggregate limit that applies to both your own contributions as well as any money your employer puts into your account. This is different from 401(k) rules, where an employer’s matching funds do not affect your ability to contribute to your account. If your employer puts $2,000 into your HSA and you have self-only coverage, you would be allowed to contribute only $1,600 before reaching the 2021 contribution limit. 

Catch-up Contributions

HSA account holders who are 55 and older are entitled to make an additional catch-up contribution valued at $1,000 on top of contribution caps. Because of the HSA catch-up contribution rules, in 2021 the self-only coverage limit is $4,600 and the family coverage limit is $8,200  

Catch-up contributions are intended to help older Americans who may incur outsized medical expenses, or who may not have saved enough for a secure retirement and want to boost their contributions to tax-advantaged accounts as they near the end of their careers. 

Older Americans may want to make catch-up contributions because healthcare costs tend to rise with age and because an HSA can be a valuable type of retirement savings account. HSAs work as a retirement savings plan because money can be withdrawn penalty-free for any purpose, not just medical expenses, after age 65. Once an HSA account holder turns 65, distributions not used for medical costs are taxed at their ordinary income tax rate, the same as distributions from a 401(k) or traditional IRA.                                  

HSA Funds and Taxes

Because HSA contributions can be made with pre-tax funds, you can deduct the amount you’ve contributed from your taxable income in the year you make the contribution.

The fact that HSA contributions are tax deductible means any money you contribute reduces the income you’re taxed on, which saves you money on the taxes you pay to the IRS. It also means your take-home pay declines by a smaller amount than what you actually contributed. 

For example, if you have $50,000 in taxable income and make a $3,600 deductible contribution to an HSA, you will be taxed on only $46,400 in income due to your contribution.

The specific amount you save due to your HSA contribution will depend both on how large your contribution is and on your tax rate. Those who are taxed at a higher rate and those who make larger contributions will realize more savings. 

Contributions are tax-deductible up to HSA annual limits, and money can be withdrawn tax-free to cover qualifying medical expenses.

Money in an HSA can be invested and can be withdrawn for any purpose after age 65 without penalty, although you’ll be taxed at your ordinary income tax rate for distributions not used for covered medical costs.

HSA Distributions

The IRS provides a comprehensive list of medical and dental expenses that qualify in Publication 502 and include the following categories:

• Prescription medications
• Nursing services
• Long-term care services
• Dental care
• Eye care, including eye exams, glasses, and contact lenses
• Psychiatric care
• Surgical expenses
• Fertility treatments
• Chiropractic care
• Medical equipment
• Hearing aids

Under the CARES Act, which passed in March 2020, you can now use your HSA funds to pay for a variety of over-the-counter (OTC) items without a prescription. The rules are retroactive to Jan. 1, 2020, so if you purchased these items with non-HSA funds, you can still submit your receipts for reimbursement. 

Telemedicine or remote healthcare can be covered by HSA plans at no charge, even if you haven’t met your deductible, through the end of 2021.

The following items also have been made HSA-eligible by the 2020 CARES Act:

• Acid reducers
• Acne treatment
• Allergy and sinus medications
• Anti-allergy medications
• Breathing strips
• Cough, cold, and flu medications
• Eye drops
• Feminine hygiene products
• Heartburn medications
• Insect repellant and anti-itch creams
• Laxatives
• Lip treatments for cold and canker sores
• Medicated shampoos and soaps
• Nasal sprays
• Pain relievers
• Skin creams and ointments
• Sleep aids
• Sunscreen and OTC remedies to treat the effects of sun exposure

The Bottom Line on HSAs

HSAs give you the opportunity to set aside money so you can pay for medical care with pre-tax dollars. But because you can invest and grow these funds as well as hold them in cash, HSAs offer much more than just a way to save on medical care. If used as a long-term investment vehicle, your HSA account could help you save on healthcare costs in retirement while reducing your tax bill in the meantime.

InsureYouKnow.org

During each calendar year, you can keep track of all your HSA contributions, expenses, and tax-accounting details at insureyouknow.org.

 

Planning to Retire? Find Answers to Social Security Questions

January 27, 2021

Social Security provides benefits to about one-fifth of the American population and serves as a vital protection for working men and women, children, people with disabilities, and the elderly. The Social Security Administration (SSA) will pay approximately one trillion dollars in Social Security benefits to roughly 70 million people in 2021. Almost eight million people will receive Supplemental Security Income (SSI), on average, each month during 2021. Beyond those who receive Social Security benefits, about 178 million people will pay Social Security taxes in 2021 and will benefit from the program in the future. That means nearly every American has an interest in Social Security, and SSA is committed to protecting their investment in these vital programs.

Social Security payments are adjusted each year to keep pace with inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. The 1.3 percent Social Security cost-of-living adjustment for 2021 is down from 1.6 percent in 2020. The average monthly Social Security benefit in January 2021 was $1,543. The maximum possible monthly Social Security benefit in 2021 for someone who retires at full retirement age is $3,148.

The most convenient way to get information and use online services from SSA is to visit www.ssa.gov or to call SSA at 800-772-1213 or at 800-325-0778 (TTY) if you’re deaf or hard of hearing. SSA staff answers phone calls from 8 a.m. to 7 p.m., weekdays. You can use SSA’s automated services via telephone, 24 hours a day.

What is the best age to start your benefits?

There is no one “best age” for everyone. Ultimately, it’s your choice. You should make an informed decision about when to apply for benefits based on your personal situation.

Your monthly benefit amount can differ greatly based on the age when you start receiving benefits.

• If you start receiving your benefits as early as age 62, before your full retirement age, your benefits will be reduced based on the number of months you receive benefits before you reach your full retirement age.
• At your full retirement age or later, you will receive a larger monthly benefit for a shorter period. If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive delayed retirement credits for each month you delay filing for benefits. There is no additional benefit increase after you reach age 70, even if you continue to delay starting benefits.
• The amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life.

What should you consider before you start drawing benefits?

• Are you still working? If you plan to continue working while receiving benefits, there are limits on how much you can earn each year between age 62 and full retirement age and still get all of your benefits. Once you reach full retirement age, your earnings do not affect your benefits.
• What is your life expectancy? If you come from a long-lived family, you may need the extra money more in later years, particularly if you may outlive pensions or annuities with limits on how long they are paid. If you are not in good health, you may decide to start your benefits earlier.
• Will you still have health insurance? If you stop working, not only will you lose your paycheck, but you also may lose employer-provided health insurance. Although there are exceptions, most people will not be covered by Medicare until they reach age 65. Your employer should be able to tell you if you will have health insurance benefits after you retire or if you are eligible for temporary continuation of health coverage. If you have a spouse who is employed, you may be able to switch to their health insurance.
• Should you apply for Medicare? If you decide to delay starting your benefits past age 65, be sure to go online and file for Medicare. You will need to apply for Original Medicare (Part A and Part B) three months before you turn age 65. If you don’t sign up for Medicare Part B when you’re first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage. Even if you have health insurance through a current or former employer or as part of your severance package, you should find out if you need to sign up for Medicare. Some health insurance plans change automatically at age 65.

How can you get a personalized retirement benefit estimate?

Choosing when to retire is an important and personal decision. The best way to start planning for your future is by creating a my Social Security account. With your personal my Social Security account, you can verify your earnings and use SSA’s Retirement Calculator to get an estimate of your retirement benefits.

What happens to Social Security payments when a recipient dies?

• If a person who was receiving Social Security benefits dies, a payment is not due for the month of his death.
• In most cases, funeral homes notify SSA that a person has died by using a form available to report the death.
• The person serving as executor of the decedent’s estate or the surviving spouse also can report the death to SSA.
• Upon the death of a Social Security recipient, survivors are generally given a lump sum payment of $255.
• Survivor benefits may be available, depending on several factors, including the following:
• If the widow or widower has reached full retirement age, they can get the deceased spouse’s full benefit. The survivor can apply for reduced benefits as early as age 60, in contrast to the standard earliest claiming age of 62.
• If the survivor qualifies for Social Security on their own record, they can switch to their own benefit anytime between ages 62 and 70 if their own payment would be more.
• An ex-spouse of the decedent also might be able to claim benefits, as long as they meet some specific qualifications.
• For minor children of a person who died, benefits also may be available, as well as to surviving spouse who is caring for the children.

How can you start receiving Social Security benefits?

• To start your application, go to SSA’s Apply for Benefits page and submit your application online.
• After SSA makes a decision about your application, you’ll receive a confirmation letter in the mail. If you included information about other family members when you applied, SSA will let you know if they may be able to receive benefits from your application.
• You can check the status of your application online using your personal my Social Security account. If you are unable to check your status online, you can call SSA at 800-772-1213 (TTY 800-325-0778) from 8 a.m. to 7 p.m., weekdays.
• You can do most of your business with SSA online. If you cannot use these online services, your local Social Security office can help you apply. Although SSA offices are closed to the public during the COVID-19 pandemic, employees from those offices are assisting people by telephone. You can find the phone numbers for your local office by using the Field Office Locator and looking under Social Security Office Information.

What if you want to withdraw your application?

After you have submitted your application, you have up to 12 months to withdraw it. You will be required to repay any benefits you’ve already received. Learn more about Withdrawing Your Social Security Retirement Application.

InsureYouKnow.Org

At insureyouknow.org, you can keep track of applications you submit to SSA and responses you receive for Social Security benefits. You also can file statements and notices you get from SSA throughout the years ahead during your retirement.

Does Life Insurance cover the coronavirus?

May 18, 2020

The checkbox on new hire paperwork about life insurance, may start to seem a little more important during the days of COVID-19. For many it was an obvious choice when the employer was giving something for “free.” Professionals have a safety net policy to help their family members for a short time. For consultants, self-employed and business owners, life insurance was a security blanket. A new stress has emerged as the media has suggested that the coronavirus cause of death would not be covered – this is not a true statement. 

The most common causes of death – heart disease, cancer, and accidents, are still present and affecting all age groups. 74% of deaths in America stemmed from 10 causes, and the coronavirus may make it on the top-10 list. The CDC reports that about 647,000 Americans die from heart disease each year, while nearly 600,000 people die annually from cancer. Currently the increasing numbers of people affected by the virus are resulting in changes in all kinds of data. Insurance companies will be a valuable additional source of data as they collect this information. The Yale School of Public Health recorded an estimated 15,400 excess deaths in the United States from March through early April, twice as many as were publicly attributed to COVID-19. Life insurance companies are receiving higher numbers of applications as end-of-life conversations and preparedness are emerging as necessary, not taboo topics.

Reviewing your Life Insurance coverages

This is a good time to review the safety net or security blanket policies that you may have. You will come across many different types of life insurance policies when you start shopping––and not all of them are available from every company.  

When you narrow down a policy, reviewing the type of insurance you have against your current lifestyle and needs may be advantageous. New applications are being accepted, and many companies have extended the time needed to complete the medical exam to 120 days, or 4 months. News9, an Oklahoma based news outlet, reported that individuals shopping for new policies may notice that e-signatures are now acceptable.

According to Glen Mulready, Oklahoma Insurance Commissioner, older individuals may have more trouble finding coverage.Insurance companies view older applicants as high risk and with the current economy, some have decided to limit exposures. Fortunately, there are a variety of life insurance companies, so there is a policy type for all. Finding an agent that is affiliated with multiple providers may be advantageous and save time when reviewing rates.

Accessing your Life Insurance

Upon your death, your next of kin will need to make a claim to access the life insurance policy or policies that have been created for you. These people may or may not be your beneficiary. There are three steps that need to take place before any money is released.

• Locating the policy. This involves finding the name of the company or companies that you purchased life insurance from. The NAIC, has an online life insurance policy locator service – https://eapps.naic.org/life-policy-locator/#/acknowledgment
• Connecting with the agent. The agent from the company will assist with the timeline process, provide the policy number, and necessary forms to be completed.
• Completing the Paperwork. Fill out the forms, order the death certificate and mail the forms to the company without delay. Often there is a choice to pick a lump sum or installment payouts.  

Typically, the insurance money is released within a few weeks––but there are exceptions. According to Marketwatch, an insurer might deny a claim for a coronavirus death if the policyholder submitted an inaccurate or incomplete application. With this in mind, it may be worth spending a few minutes reviewing your paperwork for gaps.

As you work through the process of applying for your life insurance, reviewing your coverages or submitting a claim for a loved one, document all your findings and notes on InsureYouKnow.org – an online information storage site that allows you to access documents, and files remotely relating to your affairs. There are various levels of access to allow your family members, caregivers or business associates insight into the documents, as needed. There is even a reminder feature to help you update or revisit the policy from time to time.

Building Trust

February 25, 2020

The English language is such that for every rule, there is an exception or a way to break the rule and still be understood. Childhood rhymes or mnemonics are created to help memorize the rules: “i before e except when c…. “ (friend vs. receive),the letter “q” is always followed by “u” (queen, quilt), except for 78 words that came to English from other languages like Qatar and qi. Other confusions include words that are spelled the same, pronounced the same but have different meanings based on context. Examples – orange and orange, wave and wave, bat and bat. The name for this is a homograph.

A homograph that is particularly relatable to my work is the word trust. Trust can be used as verb or noun and the definitions are: 1. Trust – to have faith/confidence in truth, and 2. trust – a legal arrangement usually due to money. Interestingly you cannot have a legal trust, without having trust.

There are many layers in the formation of a trust:

Trust the process. You are not the first person to create a trust – and there are friends, family and google to help you through. There are step by step guidelines to be followed and they vary by state. In order for your trust to be a legal agreement, it needs to follow the checkboxes. These include taking stock of your assets (read my blog post on this step) and thinking about the people in your life that would be included, excluded and notified about your trust. To hold your hand and walk you through the process – an advisor can be the first formal step.

Trust the advisor. Find someone you like and that you feel like you can relate to. How do they organize the meeting? Where do you meet and what is their demeanor, and the personalities of the team? We all have preconceived expectations about what we want, and we are investing our energy, money and intimate details with the advisor. The advisors have varying expertise and may be able to assist with other to-do items as well as the trust.

Trust yourself.  It is easy to second-guess or be unsure of your decisions and choices as you put together the documentation. This is a legal document and though the steps can be completed in a few days or weeks, the peace of mind when this is done right will last your lifetime. Trust yourself to complete the tasks and create a trust is yours. You can be guided by the process, standards and the advisor but ultimately this is your trust and can be notarized and funded on your timeline and comfort level.

Trust InsureYouKnow.org. It’s a safe place to store all the information in case you need to access it remotely – or from the comforts of your own home. The documents are password protected and utilize Amazon cloud encryption to secure and protect each password encrypted account. Your password is not known to the site. Only you, or someone you share the password with, can ever access your account.

Regaining trust – whether it is the confidence or the legal agreement kind – takes work and immense heartache, so getting things right the first time is advantageous to your mental, physical and financial health.

Who is the record keeper?

September 17, 2019

 

Do I really need to keep this? …yes….Now where should I keep this? In the information age it seems like there is more to keep track of – but when we come down to basics there are still basic documents that we all have and need, and need to be able to find. There is a lot of information online – bank statements, mortgage payments, bills, paystubs – but what happens when your circumstances change or the information system shuts down. Is there a way for you to get what you need – or your family members?

• Weeks. Paper receipts. The grocery store, gas, eating out. These receipts are not necessarily for long term record keeping – but they help when the credit card statement and balancing the checkbook routine comes. According to Experian research – the average U.S. consumer has an average balance of $6,354 on their credit cards. Without the paper receipts to verify transactions – the extra $100-$300 in excess charges or fraud may not be detected. After the monthly verification – the paper receipts can be discarded. Preferably in the shredder.

 

• Years. The ones that come to mind are the tax returns, mortgage payments and warranties. These are usually in a drawer or stuffed in a cupboard – “somewhere” and may not be accessible in an easy way. The ones that slip the mind and can be difficult to keep track of are the medical bills and plans. Even if you have changed employers, doctors or plans – there is no record of your medical history and payments other than you. Pre-existing conditions or the blood-test that didn’t get sent to the insurance company can come back years later when you interact with the same providers again. Suze Orman has an article on other documents that we should have in our record box.

 

• Forever – These are the one that we mention on most of our blogs and the things that are, hopefully, in our safe places. Give yourself time to get these together. Your birth certificate (and those of your household), Marriage License(s),(it is key to continue to keep the marriage license of previous marriages even if they have been officially annulled),  the Adoption papers and Death certificates. Wills and Death certificates (of anyone that may be connected to your life and could have influence in your future holdings). To get a copy of most of these documents – you need to make a request at the county where the event occurred. This can be tricky when a person is born or dies in a place other than their usual place of residence. If you are unable to physically go to the county clerk office – there are third-party groups that, for a processing fee, will be able to help you get the documents you need.

As you hit the deadlines of storage – don’t forget to dispose of your paperwork carefully. Saving the planet by utilizing the recycling bin is all in good nature, but identity theft is real and has happened to 1 out of every 15 Americans. Consider investing in a home shredder that can be used on a daily basis. Alternatively there are often community shredding services multiple times a year when you can take boxes of paperwork to be safely shredded. For a fee, local office supply stores will also shred important documents.

As you reach to begin the record keeping process and shred those papers, remember InsureYouKnow.org product offerings may be your answer. It’s a safe place to digitally store all the information in case you need to access it remotely – or from the comforts of your own home. Taking stock of your records, memories and your current resources with an annual plan, may provide the peace of mind you’ve been looking for.