January 1, 2016No Comments

grandfather-and-grandchild-1365226773XdVParents used to be able to count on leaving their hard-earned wealth to their children. However, more and more often, families end up paying most or all of their life savings to a nursing home. If the time comes when you or your parents have to avail yourselves of nursing home care, any gifts or other transfers of cash or property for FIVE YEARS prior to entering the nursing home can cause you to incur serious penalties if you find yourself in need of Medicaid.

However, by utilizing proper estate planning and specialized Medicaid planning techniques, we can protect your savings and allow you to give as much of your money and property as possible to your loved ones, instead of to the nursing home.

  • Putting your home into a trust will protect it from a nursing home.
  • Even if your loved one is already in a nursing home, we can protect your family’s money.
  • We can draft trusts that will allow you to make gifts to your family without worrying about the five year lookback.
  • Trusts avoid probate, which means that your family will be able to access your property immediately, without the expense and delay that occurs with probating an estate.
  • We can custom draft powers of attorney that will allow you protect your assets.
  • You can legally pay your children to take care of you using a custom drafted Personal Care Agreement.

Your existing Last Will and Testament of Powers of Attorney may be useless if you or your loved one has to go into a nursing home. Protect your family estate and make sure it is there for your family.

If you would like to talk about Medicaid planning and asset protection, give us a call today. (256) 713-4383

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

December 28, 2015No Comments

gears

A trademark is a brand name. A trademark or service mark includes any word, name, symbol, device, or anycombination, used or intended to be used to identify and distinguish the goods/services of one seller or provider from those of others, and to indicate the source of the goods/services.  Although federal registration of a mark is not mandatory, it has several advantages, including notice to the public of the registrant’s claim of ownership of the mark, legal presumption of ownership nationwide, and exclusive right to use the mark on or in connection with the goods/services listed in the registration.

There are three different types of trademarks that can be registered with the USPTO:

  1. Standard Character Format consists of the plain text spelling of the trademark, such as “NBC” in reference to the National Broadcast Corporation
  2. Stylized/Design Format consists of the design, graphical, or logo elements of the trademark, such as the NBC Peacock logo.
  3. Sound Mark consists of a sound that is commonly associate with a brand, such as the NBC chimes.

When a client requests a trademark, we will initially do a search to ensure that the mark is available for registration. Assuming the trademark is available for registration, we can file an application to register the mark. The application is reviewed by an examining attorney at USPTO over a period of anywhere from three to six months to ensure that it complies with all requirements in order to be entitled to registration. If the application runs afoul of any requirement, the examining attorney will request that our firm address certain issues or refusals prior to registration of the mark. After the examination of the mark has concluded with no issues to be addressed or if we have responded adequately to an examining attorney’s concerns, the application will be published for opposition, and provided that no third-party opposes the registration of the mark during the opposition period or the opposition is ultimately decided in the applicant’s favor the mark will be registered.

The trademark application process can be  long and confusing. It is important that you have an experienced attorney guide you through the process and who can respond appropriately to any issues that may arise.

If you would like to discuss trademark registration or other intellectual property matters, please contact our office today!

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

December 21, 2015No Comments

iStock_000005909034XSmall

Often times our clients feel the need to do estate planning, but they aren’t clear about what that involves or what they can expect to achieve. We find that the following definition outlines exactly what most clients want or should expect out of a comprehensive estate plan:

“My estate plan should allow me to control my property while I’m alive, care for me and my loved ones if I or they become disabled, give what I have to whom I want, the way I want, and when I want, and if possible, I want to save every last tax dollar, professional fee, and court cost legally possible.”

Articulated this way, we can see that estate planning is about more than just distributing property after we die; it is a tool we can use to prepare for a variety of circumstances that might arise before and after our death. It is about planning for our own illness or incapacity, and making sure that our loved ones are taken care of regardless of what happens to us. Distributing property and wealth is certainly a part of estate planning, but it shouldn’t necessarily be the primary focus. However, we do want to make sure that when we pass away, our loved ones receive as much of our wealth as is legally possible and don’t suffer unexpected tax burdens.

Comprehensive and thoughtful estate planning should address all of these issues. In the coming days, we will elaborate on these topics in more depth, so stay tuned!

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

December 14, 2015No Comments

iStock_000005538767XSmallLimited Liability Companies (LLC)

A limited liability company is authorized by the Alabama Limited Liability Act, and is a popular choice of entity for small business because it offers a great deal of flexibility in how the business can be managed, favorable tax status, and a statutory limit on liability for the proprietors.

Single member LLC’s are allowed in Alabama, which means that a sole proprietorship isn’t the only choice for a single-member company. Alabama law authorizes the LLC to adopt of an operating agreement that governs how the business is managed. The LLC can be managed similarly to a traditional corporation, or the operating agreement can authorize more innovative or creative internal structures. The IRS typically regards an LLC as either a disregarded entity or as a partnership, depending on the number of members. However, an LLC can also elect to be taxed as a Subchapter-S or Subchapter-C corporation.

One of the foremost reasons business owners elect to form an LLC is because the Act limits the liabilities of members. This means that the members of an LLC won’t typically be personally responsible for the debts or acts of the LLC. Subject to a few exceptions, the Act states as follows:

“…a member of a limited liability company is not liable under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, manager, agent, or employee of the limited liability company.”

However, this isn’t an all encompassing guarantee of limited liability, so it is important to consult a knowledgeable attorney about how you can maintain your LLC’s limited liability.

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

December 7, 2015No Comments

vet2As a nation we celebrated Independence Day, and we hope you enjoyed gathering with friends and family with a grateful heart towards our military men and women. In keeping with this theme, we will focus our attention this time on Service Pension benefits, which are available to qualifying Veterans. This is a valuable benefit that many Veterans and their families are unaware exists.

General Requirements for Basic Service Pension
In order to qualify for Basic Service Pension, Veterans must meet several criteria.

The first requirement has to do with the amount of time Veterans were in active duty and whether they served during wartime. Prior to September 1980, Veterans are required to have at least ninety (90) days of active duty with at least one day being during a wartime period. See “Wartime Periods” chart. After 1980, Veterans must have generally served at least 24 months (or the full period for which they were called or ordered) of active duty with at least one day being during a wartime period. Second, Veterans must not have been dishonorably discharged.

Third, Veterans must meet one of the following criteria:
• sixty-five (65) years of age or older;
• permanently and totally disabled;
• in a nursing home receiving skilled nursing care;
• receiving Social Security Disability Insurance; or
• receiving Supplemental Security Income.

In addition, Veterans’ worth must not be excessive and their countable family income must be below a yearly limit set by law.

Service Pension Benefits
Unmarried, low-income Veterans meeting the requirements stated above, may qualify for a monthly pension of up to $1,072 in 2015. Veterans with one dependent (including a spouse) can qualify for up to $1,404. These figures increase annually at the same rate as Social Security benefit increases.

Veterans who are eligible for the basic service pension discussed above, may qualify for additional monies if they are housebound or require the aid and attendance of another person to perform activities of daily living (or are blind or nearly so or in a nursing home). To be deemed housebound, Veterans must be, for the most part, confined to their immediate premises because of a permanent disability. This may qualify them for a pension up to the amount of $1,310 for unmarried Veterans and $1642 for Veterans with one dependent.

When Veterans require the aid and attendance of another person to perform activities for daily living, they may qualify for up to a total of $1,789 for unmarried Veterans and $2,121 for Veterans with one dependent.

Death Benefits
Thus far we have discussed what Veterans may be entitled to receive in the way of basic service pension benefits. In addition, a Veteran’s surviving spouse (or child) may be entitled to some benefits, called Death Benefits, upon the Veteran’s death. In order to qualify to receive these benefits, Veterans must meet similar requirements set forth above. The surviving spouse must also meet certain requirements, including having a valid marriage to the Veteran and not being remarried.

Pension Benefits Application Process
The application process for these benefits can be time consuming. In addition, the law is written in such a way that its interpretation can be subjective. Specifically, the requirement that Veterans’ worth not be excessive is open to interpretation by the Veteran’s Administration, the administrative body that determines whether Veterans should receive benefits and, if so, how much. Because there is room for interpretation, it is important to obtain the advice of a knowledgeable Elder Law Attorney. In the event a claim for the service pension is denied, there is an appeals process, at which point it is imperative to have qualified legal representation.

As a nation we desire to honor our service men and women. One of the ways we do this is through benefits such as those described herein. Unfortunately, many of our Veterans and their families are unaware of the existence of the service pension benefits available. If you know of a wartime veteran or surviving spouse of a wartime veteran we would be happy to speak with them about whether they could be eligible for a pension benefit.

Wartime Periods

• World War I (April 6, 1917 – November 11, 1918)
• World War II (December 7, 1941 – December 31, 1946)
• Korean conflict (June 27, 1950 – January 31, 1955)
• Vietnam era (February 28, 1961 – May 7, 1975 for Veterans who served in the Republic of Vietnam during that period; otherwise August 5, 1964 – May 7, 1975)
• Gulf War (August 2, 1990 – through a date to be set by law or Presidential Proclamation)

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

December 1, 2015No Comments

grandfather-and-grandchild-1365226773XdVParents used to be able to count on leaving their hard-earned wealth to their children. However, more and more often, families end up paying most or all of their life savings to a nursing home. If the time comes when you or your parents have to avail yourselves of nursing home care, any gifts or other transfers of cash or property for FIVE YEARS prior to entering the nursing home can cause you to incur serious penalties if you find yourself in need of Medicaid.

However, by utilizing proper estate planning and specialized Medicaid planning techniques, we can protect your savings and allow you to give as much of your money and property as possible to your loved ones, instead of to the nursing home.

  • Putting your home into a trust will protect it from a nursing home.
  • Even if your loved one is already in a nursing home, we can protect your family’s money.
  • We can draft trusts that will allow you to make gifts to your family without worrying about the five year lookback.
  • Trusts avoid probate, which means that your family will be able to access your property immediately, without the expense and delay that occurs with probating an estate.
  • We can custom draft powers of attorney that will allow you protect your assets.
  • You can legally pay your children to take care of you using a custom drafted Personal Care Agreement.

Your existing Last Will and Testament of Powers of Attorney may be useless if you or your loved one has to go into a nursing home. Protect your family estate and make sure it is there for your family.

If you would like to talk about Medicaid planning and asset protection, give us a call today. (256) 713-4383

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

November 30, 2015No Comments

 

salute flag

There are currently over 25 million veterans alive in the United States. There are over 9 million surviving spouses of veterans currently living in the United States. Many of these veterans and surviving spouses are receiving long term care or will need some type of long term care in the near future, and there are funds available from the Veterans Administration (“VA”) to help pay for that care. Unfortunately, many of those who are eligible have no idea that any type of benefits exist for them or that an attorney can help them become eligible.

Benefits Available

There are three types of benefits available that provide a monthly cash payment to veterans who have long term health care needs. Below is an overview of the three benefits, and more detail will be provided on each benefit in the following paragraphs.

Service Pension. The VA provides a monthly cash payment to wartime veterans who meet active duty and discharge requirements, who are either 65 or older or disabled, and who have limited income and assets. Service pension is also available to a surviving spouse of a wartime veteran. An unmarried veteran can receive up to $985 per month, a married veteran can receive up to $1291 per month, and a surviving spouse can receive up to $661 per month (with additional payments available if dependent children are present in the home).

Pension with Housebound Allowance. A slightly higher monthly payment is available to wartime veterans (who meet the same service requirements as Service Pension) but who are confined to their home for medical reasons. An unmarried veteran can receive up to $1204 per month, a married veteran can receive up to $1510 per month, and a surviving spouse can receive up to $808 per month (with additional payments available if dependent children are present in the home).

Pension with Aid and Attendance. The highest monthly benefit is available when a wartime veteran or surviving spouse requires the assistance of another person to perform activities of daily living, is blind or nearly so, or is a patient in a nursing home. This benefit, often referred to simply as “Aid and Attendance” is the most widely known and talked-about benefit as it offers the highest possible monthly payment. An unmarried veteran can receive up to $1644 per month, a married veteran can receive up to $1949 per month, and a surviving spouse can receive up to $1056 per month (with additional payments available if dependent children are present in the home).

Prerequisite Benefits

Wartime Service. As noted above, a veteran must first meet certain service and discharge requirements before being considered for any type of pension benefit. A veteran must have served 90 days of active duty with at least one day beginning or ending during a period of war. After September 1, 1980, the active duty requirement increases to 180 days. In addition, the veteran must have been discharged under circumstances other than dishonorable.

Disability. To qualify for any type of pension benefit, a claimant must also be 65 or older or be permanently and totally disabled. A claimant is the individual filing for benefits – either a veteran or surviving spouse.

Permanent and total disability includes a claimant who is:
• In a nursing home;
• Determined disabled by the Social Security Administration;
• Unemployable and reasonably certain to continue so throughout life; or
• Suffering from a disability that makes it impossible for the average person to stay gainfully employed.

Asset and Income Requirements

The financial eligibility requirements of any pension benefit address a claimant’s net worth and income. A married veteran and spouse should have no more than $80,000 in countable assets (less for a single veteran or surviving spouse), which includes retirement assets but excludes a home and vehicle. However, the $80,000 limit is a guideline only – it is not a rule set by the VA. The VA looks at a claimant’s total net worth, life expectancy, income and medical expenses to determine whether the veteran or surviving spouse is entitled to special monthly pension benefits.

Many times the most difficult task in this area is to reduce a claimant’s assets down to the applicable level (or what one hopes will be acceptable to the VA). The assistance of legal counsel is important to ensure the right strategies are used with minimal impact on Medicaid in the future.

A veteran or surviving spouse must have Income for VA Purposes (“IVAP”) that is less than the benefit for which he or she is applying. IVAP is calculated by taking a claimant’s gross income from all sources less countable medical expenses. Countable medical expenses are recurring out-of-pocket medical expenses that can be expected to continue throughout a claimant’s lifetime. If a claimant’s IVAP is equal to or greater than the annual benefit amount, the veteran or surviving spouse is not eligible for benefits.

Is the Claimant Housebound?

If a claimant qualifies for regular pension and is housebound, the claimant’s maximum allowable income increases (as does the annual benefit amount) to the special monthly pension. The VA defines housebound as being substantially confined to the home or immediate premises due to a disability that will likely remain throughout the claimant’s lifetime. A veteran with no dependents who is housebound is eligible for benefits of up to $14,457 in annual income.

Unreimbursed medical expenses will reduce a claimant’s income dollar for dollar after a small co-pay (5% of the annual pension amount) is met. But remember, to be eligible for a special monthly pension for being housebound, the claimant’s IVAP must be less than the annual income threshold.

To illustrate, a veteran with exactly $14,457 in annual income would not be eligible for a special monthly pension for being housebound. However, if that veteran was able to show annual income of $20,000 and unreimbursed medical expenses of $25,000, the veteran would be eligible for $14,457 in special annual pension (paid on a monthly basis) because the veteran has negative IVAP. A surviving spouse with no dependents who is housebound must have annual IVAP of less than $9,696.

Does the Claimant Require the Aid and Attendance of Another?

If a claimant can show, through medical evidence provided by a primary care physician or facility, that the claimant requires the aid and attendance of another person to perform activities of daily living, that veteran or surviving spouse may qualify for an additional special monthly pension commonly referred to as aid and attendance pension benefits.

The VA defines the need for aid and attendance as:
• Requiring the aid of another person to perform at least two activities of daily living, such as eating, bathing, dressing or undressing;
• Being blind or nearly blind; or
• Being a patient in a nursing home.

Qualification

As stated above, the VA looks at a claimant’s total net worth, life expectancy, and income and expenses to determine whether the claimant should qualify for special monthly pension benefits. Unlike Medicaid, there is no look-back period and no penalty for giving assets away. However, one must use caution when considering a gifting strategy to qualify a veteran or surviving spouse for special monthly pension benefits as this will cause a period of ineligibility for Medicaid which could be as long as five years. Other Medicaid planning strategies may apply when trying to qualify a veteran or surviving spouse for special pension with aid and attendance. The client’s advisors must work together to determine the best combination of strategies and financial products that will gain eligibility for special monthly pension but not disqualify the client from Medicaid.

An Illustration. Robert, age 82, is a World War II veteran who is widowered. Robert’s total monthly income consists of Social Security income of $1500 per month. Robert was diagnosed last year with dementia and now lives in an assisted living facility as he needs help bathing, dressing and taking his medication. The assisted living facility costs $3000 per month. Robert has liquid assets totaling $100,000.

Robert’s IVAP:
Income $1500
Unreimbursed recurring medical expenses $3000
Total IVAP ($1500)

The maximum monthly benefit that Robert could qualify for is $1,644 of pension with an allowance for aid and attendance. Because Robert has a negative IVAP of $1500, he is eligible for the full pension with aid and attendance benefit. However, his assets are too high. But because Robert has negative income of $1500, one option may be to take a portion of his liquid assets and convert them into an income stream through the use of an immediate annuity or promissory note. As long as Robert’s IVAP remains a negative number or $0, he can qualify for the full pension with aid and attendance amount.

The Application Process

While the application process for special monthly pension can be agonizingly slow – some applications take over a year before the VA makes a decision – the benefit is retroactive to the month after application submission. Having the proper documentation in place at the time of application (for example, discharge papers, medical evidence, proof of medical expenses, death certificate, marriage certificate and a properly completed application) can cut the processing time in half. Because benefits are retroactive to the month after application submission, it is imperative for potential claimants to seek legal help immediately to become eligible and to apply as quickly as possible.

Conclusion

Time is of the essence for veterans or surviving spouses who may be eligible for pension benefits. It is imperative for those who work with veterans or surviving spouses of veterans to be aware of these benefits and to help potential claimants obtain legal help to qualify for pension benefits. If you know of someone who may be eligible, please give us a call.

 

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

November 27, 2015No Comments

Long_gun_suppressor

If you want to add some NFA weapons to your arsenal and have been thinking about forming a Firearms Trust, now is your chance! But you will need to act fast, because this one-time discount won’t last long! For Black Friday and Cyber Monday only, I am offering a 50% discount on all Firearms Trusts, so the Silver edition trust (regularly $500) will only be $250! Or, you can avail yourself of the added features in the Gold edition trust (regularly $1,000) for only $500, the regular cost of a Silver edition trust.

All you need to do is download the intake form below, and email the completed form to us at info@rocketcitylawyers.com by midnight on Tuesday, December 1st, 2015.

GOLD FIREARMS TRUST INTAKE FORM

SILVER FIREARMS TRUST INTAKE SHEET

Once we have reviewed your intake form, we will contact you to arrange for payment by check or credit card. Payment must be received no later than December 8th, 2015. The trust documents will be delivered by mail with instructions on how to execute the documents yourself- or if you would prefer to sign the documents at my office, we can do that for a small additional fee. Contact us for additional details.

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

November 23, 2015No Comments

photo-1418848372148-629424a5ca04

In this post, we will address the critical yet often-misunderstood topic of Social Security survivor benefits. This post is based in part upon an article by Frank Rainaldi and William Rainaldi, first published in Trusts & Estates magazine and available on WealthManagement.com.

Survivors Benefits

According to the Social Security Administration, a surviving spouse may be eligible to receive the deceased spouse’s full retirement benefits at full retirement age (“FRA”). For survivor benefits only, FRA is 66 for anyone born before 1957, and it increases two months every year until it reaches 67 for those persons born in 1962 or later. (For a regular retirement or spousal benefit, FRA is 66 for anyone born before 1955 and it increases two months every year until it reaches 67 in 1960.) (E.g., see http://www.ssa.gov/pubs/EN-05-10084.pdf.)

Simply stated, survivors benefits are determined by looking first at the age of the deceased spouse, and then at the age of the surviving spouse. In other words, we look at the amount of the benefit available to or being paid to the deceased spouse. Then, we use the age of the surviving spouse to determine if benefits are paid early or at FRA; if the surviving spouse’s benefits are paid before 65, we must apply an actuarial reduction to the deceased spouse’s benefits.

It is important to note a key difference between survivor benefits and spousal benefits. Spousal retirement benefits provide a maximum 50% of the other spouse’s primary insurance amount (PIA). Alternatively, survivors’ benefits are a maximum 100% of the deceased spouse’s retirement benefit.

Also, note the difference between the PIA and retirement benefit, which is critical when considering deferred retirement credits (DRCs). DRCs can increase benefits by 8% per year when the worker elects to start collecting after FRA, up to a maximum increase of 32% for deferral to age 70. Note, however, that DRCs apply only for survivor benefits; DRCs do not increase the PIA and thus they aren’t applicable to spousal benefits. Therefore, if one spouse has the higher personal benefit and waits until age 70 to begin collecting, the full benefit with DRCs would be payable to the surviving spouse.

The Most Common Scenario – Both Spouses Reach FRA

The most common scenario is when death occurs after both spouses have reached their respective FRA. In this case, the survivor benefit is simply the higher of the two benefits. If one spouse is collecting $2,500 and the other is collecting $2,000, the surviving spouse’s benefit would be $2,500. It actually does not matter which spouse dies, the survivor benefit is still $2,500.

For example, assume Mr. A has a personal benefit of $2,000, the amount he would receive at age 66. If he elects to defer until age 69 he would get a 24% increase in his personal benefit to $2,480.

Now let’s say Mrs. A. never worked outside the home. When Mr. A. is age 66, the spousal benefit would be 50 percent, or $1,000. Note, however, that the spousal benefit would still be $1,000 (not $1,240) when he is age 70 because the 24% increase does not apply to spousal benefits. But DRCs do apply to survivor benefits. So, when Mr. A. dies, Mrs. A. would get the full $2,480 as a survivor benefit.

What if the first spouse dies prior to age 62? The benefit will be the deceased worker’s recalculated PIA, which is based on a different set of assumptions. It uses the worker’s earnings for a “substitute year” and a different set of required Social Security credits for the applicable age. This special PIA calculation can only help; it can’t hurt. It only applies if it provides a higher PIA then the regular PIA calculation.

What if death occurs after age 62 but prior to FRA after taking early retirement benefits? The benefit will be the deceased worker’s reduced retirement benefit. This is one good reason not to retire early. Note that there is a minimum benefit of 82.5% of the deceased worker’s PIA, not including any actuarial reduction in benefits.

Surviving Spouse Collects Early

If the surviving spouse elects to collect before her own FRA, as with other Social Security retirement benefits there is an actuarial reduction. For a personal, spousal or divorced spouse’s benefit, one can start as early as age 62. However, a surviving spouse can start collecting as early as age 60. If the survivor benefit is at FRA or later, there is no actuarial reduction.

It’s important to note that the surviving spouse has additional options. Suppose the surviving spouse is age 60 and not collecting any benefits. When the other spouse dies, she has the option of receiving her actuarially reduced personal benefit, then later switching to a full-unreduced survivor benefit at FRA. This could limit the downside of collecting early.

To determine the monthly reduction amount, simply take 28.5% divided by the number of months between age 60 and the survivor FRA determined above.   The “Widow Limit” caps the survivor’s benefit at the larger of the benefit the deceased would have received if he or she were still alive, or 82.5% of the deceased PIA. This Widow Limit only comes into play if the deceased claimed benefits prior to his or her FRA. The following, from SocialSecurityTiming.com, graphically explains these options.

Screen Shot 2015-02-16 at 7.00.41 PM

Examples

Suppose the surviving spouse started collecting a reduced personal benefit at 62, and her spouse dies when she is 64. At that point, she has the option of continuing to collect her personal benefit for two more years and then switching to a full, unreduced survivor benefit at age 66.

Of course, the survivor cannot collect both benefits at the same time; the survivor must choose one or the other. Only one switch is allowed. If the surviving spouse is already collecting a personal benefit, she could not go from a personal benefit to a survivor benefit and then back to the personal benefit.

Understanding survivor benefits is especially important when there is a significant age difference between the two spouses. When one spouse may outlive the other by a considerable margin, survivor benefits are a much more important than “file and suspend” or “spousal only.” In that case, it is often a good idea to make sure that the spouse with the higher personal benefit defer until age 70, if possible.

Divorce

A former spouse who is age 60 or older (50-59 if disabled) can get benefits if the marriage lasted at least 10 years. However, there is no age or length of marriage requirement if the former spouse is caring for her or his natural or adopted child who is younger than 16 or who is disabled and entitled to benefits based upon your work. Benefits paid to a former spouse who meets age or disability requirement does not affect the benefits for other survivors based upon the worker’s record. However, the benefits paid to a former spouse who is caring for a minor or disabled child do affect other survivor benefits.

Remarriage

Generally, the survivor cannot get survivor’s benefits if he or she remarries before age 60. But remarriage after age 60 (or age 50 with a disability) will not prevent the survivor from getting benefit payments based on the former spouse’s benefits. And at age 62 or older, the survivor may get benefits based on the new spouse’s work, if those benefits would be higher.

Conclusion

Social Security survivor benefits offer a surviving spouse the opportunity to significantly increase her or his benefits based upon the benefits payable to the deceased spouse. Therefore, it’s important that seniors and their loved ones understand how to maximize those benefits. Accessing survivor benefits and understanding what is available is an important piece in helping seniors with their overall planning goals. Please contact our office if you have any questions or if we can be of assistance to someone you know.

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

November 17, 2015No Comments

vet2As a nation we celebrated Veterans Day recently to honor our service men and women. We hope you enjoyed gathering with friends and family with a grateful heart towards our military men and women. In keeping with this theme, we will focus our attention this time on Service Pension benefits, which are available to qualifying Veterans. This is a valuable benefit that many Veterans and their families are unaware exists.

General Requirements for Basic Service Pension
In order to qualify for Basic Service Pension, Veterans must meet several criteria.

The first requirement has to do with the amount of time Veterans were in active duty and whether they served during wartime. Prior to September 1980, Veterans are required to have at least ninety (90) days of active duty with at least one day being during a wartime period. See “Wartime Periods” chart. After 1980, Veterans must have generally served at least 24 months (or the full period for which they were called or ordered) of active duty with at least one day being during a wartime period. Second, Veterans must not have been dishonorably discharged.

Third, Veterans must meet one of the following criteria:
• sixty-five (65) years of age or older;
• permanently and totally disabled;
• in a nursing home receiving skilled nursing care;
• receiving Social Security Disability Insurance; or
• receiving Supplemental Security Income.

In addition, Veterans’ worth must not be excessive and their countable family income must be below a yearly limit set by law.

Service Pension Benefits
Unmarried, low-income Veterans meeting the requirements stated above, may qualify for a monthly pension of up to $1,072 in 2015. Veterans with one dependent (including a spouse) can qualify for up to $1,404. These figures increase annually at the same rate as Social Security benefit increases.

Veterans who are eligible for the basic service pension discussed above, may qualify for additional monies if they are housebound or require the aid and attendance of another person to perform activities of daily living (or are blind or nearly so or in a nursing home). To be deemed housebound, Veterans must be, for the most part, confined to their immediate premises because of a permanent disability. This may qualify them for a pension up to the amount of $1,310 for unmarried Veterans and $1642 for Veterans with one dependent.

When Veterans require the aid and attendance of another person to perform activities for daily living, they may qualify for up to a total of $1,789 for unmarried Veterans and $2,121 for Veterans with one dependent.

Death Benefits
Thus far we have discussed what Veterans may be entitled to receive in the way of basic service pension benefits. In addition, a Veteran’s surviving spouse (or child) may be entitled to some benefits, called Death Benefits, upon the Veteran’s death. In order to qualify to receive these benefits, Veterans must meet similar requirements set forth above. The surviving spouse must also meet certain requirements, including having a valid marriage to the Veteran and not being remarried.

Pension Benefits Application Process
The application process for these benefits can be time consuming. In addition, the law is written in such a way that its interpretation can be subjective. Specifically, the requirement that Veterans’ worth not be excessive is open to interpretation by the Veteran’s Administration, the administrative body that determines whether Veterans should receive benefits and, if so, how much. Because there is room for interpretation, it is important to obtain the advice of a knowledgeable Elder Law Attorney. In the event a claim for the service pension is denied, there is an appeals process, at which point it is imperative to have qualified legal representation.

As a nation we desire to honor our service men and women. One of the ways we do this is through benefits such as those described herein. Unfortunately, many of our Veterans and their families are unaware of the existence of the service pension benefits available. If you know of a wartime veteran or surviving spouse of a wartime veteran we would be happy to speak with them about whether they could be eligible for a pension benefit.

Wartime Periods

• World War I (April 6, 1917 – November 11, 1918)
• World War II (December 7, 1941 – December 31, 1946)
• Korean conflict (June 27, 1950 – January 31, 1955)
• Vietnam era (February 28, 1961 – May 7, 1975 for Veterans who served in the Republic of Vietnam during that period; otherwise August 5, 1964 – May 7, 1975)
• Gulf War (August 2, 1990 – through a date to be set by law or Presidential Proclamation)

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Benjamin Jarrell is the founder of The Law Office of Benjamin Jarrell and focuses his practice on helping individuals and families preserve what matters to them through estate planning. He practices in Huntsville, Madison, Decatur, Florence, Guntersville, Scottsboro, Birmingham and other cities throughout the State of Alabama.

We hope the information in this article is educational; however it should not be construed as formal legal advice. Every client's situation is unique, so please allow us to talk with you and analyze your situation in its proper context.  To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this article was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances.

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