Bielski Law Office, Ltd.

With Loopholes Closed What to Do About Social Security Now

In a surprise move Congress closed popular Social Security loopholes for married couples, but that does not mean that all Social Security strategies are gone.

The United States Congress takes a lot of heat for not doing very much. However, sometimes they do make important legislative changes. Recently while elder law and Social Security experts were not watching, Congress closed a couple of Social Security loopholes as part of a larger piece of legislation to ensure the nation does not default on its debts.

The loopholes, known as "file and suspend" and "restricted applications," are complex.

What did they do? They basically allowed married couples to accrue a little bit more money out of the system by carefully filing the appropriate paperwork in a specific order at specific times. The majority of Americans did not take advantage of the loopholes either for practical reasons or because they did not know about them.

That these loopholes have been closed does not mean Americans can no longer plan to maximize their potential Social Security income.

This was the point of a recent article in Time entitled "There's One Simple Social Security Strategy You Can Still Take to the Bank."

The strategy suggested is to delay receiving Social Security benefits for as long as you possibly can. The longer you delay benefits, the more benefits you will receive.

On the other hand, many people cannot afford to delay benefits for the maximum amount of time.

It would be prudent to consult an estate planning attorney to help you weigh your options or help you find appropriate experts in Social Security planning.

Reference: Time (Dec. 31, 2015) "There's One Simple Social Security Strategy You Can Still Take to the Bank."

States Continue to Ease up on Estate Taxes

State governments are rightfully concerned that wealthy elderly citizens will move to other states that have more favorable estate tax laws. In a clear trend this is causing more and more states to do away with or decrease their estate taxes.

State governments with revenue shortfalls face an interesting dilemma. While they can get much needed tax revenue by taxing the estates of wealthy citizens, there is nothing preventing those citizens from moving to different states with lower estate taxes before they pass away.

When such citizens move away that means these state governments with estate taxes do not receive income or capital gains taxes from those wealthy people. In the end, such states must determine which taxes are more important to them and their budgets.

Kiplinger's Personal Finance reports in "More States Giving Heirs a Break on Estate Taxes" that the majority of states have chosen to keep their citizens rather than impose an estate tax.

So, how many state still have an estate tax? At present, this number includes only 14 states and the District of Columbia. Tennessee is the latest state to do away with its estate tax and six other states have increased their estate tax exemptions recently.

Although it might be tempting to say this trend is clear evidence that estate tax revenue is not as important as other revenue, there probably is not enough definitive evidence to make that claim. The political controversy surrounding the estate tax might play some role in this trend amongst the states.

It will be worth watching if the states still imposing the tax continue to face pressure to repeal it to keep the wealthy from fleeing to other states in their retirement years.

Reference: Kiplinger's Personal Finance (February 2016) "More States Giving Heirs a Break on Estate Taxes"

Trump Under Fire Over Actions Surrounding Father's Estate

It is impossible to read a newspaper or watch the news on TV without hearing some mention of Donald Trump's campaign for president. The latest headlines illustrate how family feuds over estates can have unintended consequences.

Donald Trump is well known for his blunt, off-the-cuff comments. He does not seem to have an internal filter like most politicians. It is one of the reasons his supporters like him and his detractors do not.

Given this temperament it should come as no surprise that a challenge to his father's will caused Trump to act out of anger. Consequently, he is now having to answer questions about it.

Trump's older brother was not interested in the family real estate business. He instead became a pilot until alcoholism forced him out of the sky. He died from the disease in 1991.

When Trump's father passed away in 1999, Fred Trump III, Donald's nephew from his brother, spoke at the funeral. That night Fred III's child was born with cerebral palsy. Donald Trump pledged that the Trump family would take care of the child's medical needs.

However, when his father's will was read it was discovered that his brother's family was cut out of the will.

Donald Trump had helped create the will.

His nephew's family claimed Donald and his other siblings had unduly influenced their father who suffered from dementia. They challenged the will. This angered Trump and he cut off support for the child with cerebral palsy.

The Daily Mail has more on this story in "Donald Trump admits cutting off medical treatment for his nephew's sick baby after will dispute with alcoholic brother's family."

Undoubtedly this story will be used for political reasons as long as Donald Trump remains a presidential candidate.

There is, nevertheless, a non-political lesson in all of this.

When families feud over estates, the feuds have a way of affecting others, like the medical treatment of a sick child.

Reference: Daily Mail (Jan. 3, 2016) "Donald Trump admits cutting off medical treatment for his nephew's sick baby after will dispute with alcoholic brother's family."

These Pets Are Probably Richer than You

Leaving money in your estate for the care of a beloved pet is often a good idea. However, there are some people who have taken it to an extreme.

In recent years including pets in estate plans has become more and more popular. People want to know that both their human relatives and their pets will be okay when it comes to distributions from their estates.

Typically, only enough money is set aside in as estate plan to provide for a modest life for the pets. A few pets, however, have inherited extreme amounts of wealth.

Recently, Time published a list of some of these wealthy pets in "The 10 Richest Pets of All Time."

The list includes:

• Gunther III - A German countess left her dog her entire $80 million estate. The trustees of the estate have grown the fortune to $375 million that now belongs to Gunther's child, Gunther IV.
• Toby Rimes - This poodle inherited $40 million when its owner passed away in 1931. However, Toby died a few months later and the estate was divided between various charities.
• Tommaso - This Italian cat was a stray adopted by an elderly woman who left it her $13 million estate.
• Gigoo - A British publisher left his beloved chicken Gigoo a fortune worth approximately $15 million.
• Trouble - Leona Helmsley left her dog Trouble $11 million – although the inheritance was later reduced to a mere $2 million by a judge.

Of course, you do not need to leave a pet anywhere near the above amounts to make sure they are taken care of after you pass away. If you would like to include your pet in your estate, then visit an estate planning attorney to learn about your options.

Reference: Time (Oct. 5, 2015) "The 10 Richest Pets of All Time."

Elderly Poverty Could Rise

A steep decline in the number of elderly people living in poverty is one of the greatest social policy success stories of the 20th Century. If current trends do not change, the success might be fleeting.

The early decades of the 20th Century saw great advances in healthcare that prolonged the average lifespan of people in the developed world. However, as more people began living long enough to be considered elderly, many of them did so in poverty.

Throughout the developed world programs and policies were put into effect that severely reduced the number of elderly people in poverty. In the United States private pension plans, Social Security and convincing people to save for retirement have combined to make elderly poverty relatively rare.

That could change in the near future as the New York Times reports in "An Aging Society Changes the Story on Poverty for Retirees."

There are pressures on all three tools that helped lower elderly poverty.

Fewer and fewer people have private pension plans through their employers. People are not saving as much as they will need for retirement. Perhaps most importantly, an aging population creates stress on Social Security, which relies on current taxes on younger workers to make payments to the elderly. Fewer young workers per every hundred elderly people means there is less money in the system to meet obligations.

It would be a good idea to understand what these changes might mean for your own retirement and estate plans. If you want to leave money to your heirs, you need enough not only for your own retirement years, but also enough to leave in an estate.

Contact an estate planning attorney to help you.

Reference: New York Times (Dec. 22, 2015) in "An Aging Society Changes the Story on Poverty for Retirees."