Parents want their children to be taken care of after they die. But children with disabilities have increased financial and care needs, so ensuring their long-term welfare can be tricky. Proper planning by parents is necessary to benefit the child with a disability, including an adult child, as well as assist any siblings who may be left with the caretaking responsibility.
Special Needs Trusts
The best and most comprehensive option to protect a loved one is to set up a special needs trust (also called a supplemental needs trust). These trusts allow beneficiaries to receive inheritances, gifts, lawsuit settlements, or other funds and yet not lose their eligibility for certain government programs, such as Medicaid and Supplemental Security Income (SSI). The trusts are drafted so that the funds will not be considered to belong to the beneficiaries in determining their eligibility for public benefits.
There are three main types of special needs trusts:
A first-party trust is designed to hold a beneficiary’s own assets. While the beneficiary is living, the funds in the trust are used for the beneficiary’s benefit, and when the beneficiary dies, any assets remaining in the trust are used to reimburse the government for the cost of medical care. These trusts are especially useful for beneficiaries who are receiving Medicaid, SSI or other needs-based benefits and come into large amounts of money, because the trust allows the beneficiaries to retain their benefits while still being able to use their own funds when necessary.
The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect a beneficiary’s access to benefits and the funds can be used to pay for the beneficiary’s supplemental needs beyond those covered by government benefits. But a third-party special needs trust does not contain the “payback” provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in the trust can pass to other family members, or to charity, without having to be used to reimburse the government.
A pooled trust is an alternative to the first-party special needs trust. Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources with those of other trust beneficiaries for investment purposes, while still maintaining separate accounts for each beneficiary’s needs. When the beneficiary dies, the funds remaining in the account reimburse the government for care, but a portion also goes towards the non-profit organization responsible for managing the trust.
Not everyone has a large chunk of money that can be left to a special needs trust, so life insurance can be an essential tool. If you’ve established a special needs trust, a life insurance policy can pay directly into it, and it does not have to go through probate or be subject to estate tax. Be sure to review the beneficiary designation to make sure it names the trust, not the child. You should make sure you have enough insurance to pay for your child’s care long after you are gone. Without proper funding, the burden of care may fall on siblings or other family members. Using a life insurance policy will also guarantee future funding for the trust while keeping the parents’ estate intact for other family members. When looking for life insurance, consider a second-to-die policy. This type of policy only pays out after the second parent dies, and it has the benefit of lower premiums than regular life insurance policies.
An Achieving a Better Life Experience (ABLE) account allows people with disabilities who became disabled before they turned 26 to set aside up to $15,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. This money can come from the individual with the disability or anyone else who may wish to give him money.
Created by Congress in 2014 and modeled on 529 savings plans for higher education, these accounts can be used to pay for qualifying expenses of the account beneficiary, such as the costs of treating the disability or for education, housing and health care, among other things. ABLE account programs have been rolling out on a state-by-state basis, but even if your state does not yet have its own program, many state programs allow out-of-state beneficiaries to open accounts. (For a directory of state programs, click here.)
Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members. In addition, ABLE accounts cannot hold more than $100,000 without jeopardizing government benefits like Medicaid and SSI. If there are funds remaining in an ABLE account upon the death of the account beneficiary, they must be first used to reimburse the government for Medicaid benefits received by the beneficiary, and then the remaining funds will have to pass through probate in order to be transferred to the beneficiary’s heirs.
Get Help With Your Plan
However you decide to provide for a child with special needs, proper planning is essential. Talk to your attorney to determine the best plan for your family.
After a Medicaid recipient dies, the state must attempt to recoup from his or her estate whatever benefits it paid for the recipient’s care. This is called “estate recovery.” For most Medicaid recipients, their house is the only asset available, but there are steps you can take to protect your home.
For many people, setting up a “life estate” is the simplest and most appropriate alternative for protecting the home from estate recovery. A life estate is a form of joint ownership of property between two or more people. They each have an ownership interest in the property, but for different periods of time. The person holding the life estate possesses the property currently and for the rest of his or her life. The other owner has a current ownership interest but cannot take possession until the end of the life estate, which occurs at the death of the life estate holder.
Example: Jane gives a remainder interest in her house to her children, Robert and Mary, while retaining a life interest for herself. She carries this out through a simple deed. Thereafter, Jane, the life estate holder, has the right to live in the property or rent it out, collecting the rents for herself. On the other hand, she is responsible for the costs of maintenance and taxes on the property. In addition, the property cannot be sold to a third party without the cooperation of Robert and Mary, the remainder interest holders.
When Jane dies, the house will not go through probate, since at her death the ownership will pass automatically to the holders of the remainder interest, Robert and Mary. Although the property will not be included in Jane’s probate estate, it will be included in her taxable estate. The downside of this is that depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation. The upside is that this can mean a significant reduction in the tax on capital gains when Robert and Mary sell the property because they will receive a “step up” in the property’s basis.
As with a transfer to a trust, if you transfer the deed to your home to your children and retain a life estate, this can trigger a Medicaid ineligibility period of up to five years. Purchasing a life estate in another home can also cause a transfer penalty, but the transfer penalty can be avoided if the individual purchasing the life estate resides in the home for at least one year after the purchase and pays a fair amount for the life estate.
Life estates are created simply by executing a deed conveying the remainder interest to another while retaining a life interest. In many states, once the house passes to the remainder beneficiaries, the state cannot recover against it for any Medicaid expenses that the ife estate holder may have incurred.
Another method of protecting the home from estate recovery is to transfer it to an irrevocable trust. Trusts provide more flexibility than life estates but are somewhat more complicated. Once the house is in the irrevocable trust, it cannot be taken out again. Although it can be sold, the proceeds must remain in the trust. This can protect more of the value of the house if it is sold. Further, if properly drafted, the later sale of the home while in this trust might allow the settlor, if he or she had met the residency requirements, to exclude up to $250,000 in taxable gain, an exclusion that would not be available if the owner had transferred the home outside of trust to a non-resident child or other third party before sale.
Contact your attorney to find out what method will work best for you.
Social Security survivor’s benefits provide a safety net to widows and widowers. But to get the most out of the benefit, you need to know the right time to claim.
While you can claim survivor’s benefits as early as age 60, if you claim benefits before your full retirement age, your benefits will be permanently reduced. If you claim benefits at your full retirement age, you will receive 100 percent of your spouse’s benefit or, if your spouse died before collecting benefits, 100 percent of what your spouse’s benefit would have been at full retirement age. Unlike with retirement benefits, delaying survivor’s benefits longer than your full retirement age will not increase the benefit. If you delay taking retirement benefits past your full retirement age, depending on when you were born your benefit will increase by 6 to 8 percent for every year that you delay up to age 70, in addition to any cost of living increases.
You cannot take both retirement benefits and survivor’s benefits at the same time. When deciding which one to take, you need to compare the two benefits to see which is higher. In some cases, the decision is easy—one benefit is clearly much higher than the other. In other situations, the decision can be a little more complicated and you may want to take your survivor’s benefit before switching to your retirement benefit.
To determine the best strategy, you will need to look at your retirement benefit at your full retirement age as well as at age 70 and compare that to your survivor’s benefit. If your retirement benefit at age 70 will be larger than your survivor’s benefit, it may make sense to claim your survivor’s benefit at your full retirement age. You can then let your retirement benefit continue to grow and switch to the retirement benefit at age 70.
Example: A widow has the option of taking full retirement benefits of $2,000/month or survivor’s benefits of $2,100/month. She can take the survivor’s benefits and let her retirement benefits continue to grow. When she reaches age 70, her retirement benefit will be approximately $2,480/month, and she can switch to retirement benefits. Depending on the widow’s life expectancy, this strategy may make sense even if the survivor’s benefit is smaller than the retirement benefit to begin with.
Keep in mind that divorced spouses are also entitled to survivor’s benefits if they were married for at least 10 years. If you remarry before age 60, you are not entitled to survivor’s benefits, but remarriage after age 60 does not affect benefits. In the case of remarriage, you may need to factor in the new spouse’s spousal benefit when figuring out the best way to maximize benefits.
The ABLE Age Adjustment Act would raise the aging of onset of a disability to 46.
Four years ago, Congress passed the Achieving a Better Life Experience (ABLE) Act of 2014, creating tax-favored accounts for persons with disabilities to save and pay for disability-related expenses. Since its passage, 41 states and the District of Columbia have created programs.
Yet despite more than 25,000 ABLE accounts opened, the National Association of State Treasurers (NAST) warned that the current program’s trajectory is not sustainable. To achieve sustainability, 390,000 ABLE accounts would need to be opened by 2021.
NAELA’s history with the legislation is complicated. While we supported the concept, the initial draft, which had no limits to funding an account, included a Medicaid payback provision. That put previously protected third-party money at risk if placed in an ABLE account instead of a third-party special needs trust.
But the final version proved to be a great benefit. That is for those who could qualify. Vastly scaled back from the initial draft, it capped yearly contributions to the gift tax exclusion amount ($15,000 in 2019). While the Medicaid payback remained, the money at risk was now vastly lower. Unfortunately, the scaled back benefit only applied to those who developed a disability before the age of 26.
The final bill’s age limitations upset many in the disability community who had lobbied hard for the ABLE Act for years only to see many individuals unable to qualify.
Given this, disability advocates have since focused on expanding the age limit needed to qualify.
That led to the introduction of the ABLE Age Adjustment Act last Congress. The legislation would raise the aging of onset of a disability to 46. Many have asked why 46? The answer is that it’s halfway to 65 from 26, the original cut-off age.
In March of this year, Sens. Bob Casey (D-PA), Jerry Moran (R-KS), Chris VanHollen (D-MD), and Pat Roberts (R-KS) along with Reps. Tony Cardenas (D-CA), Cathy McMorris Rodgers (R-WA), Steve Cohen (D-TN), Brian Fitzpatrick (R-PA), Michael Turner (R-OH), Max Rose (D-NY), and Debbie Wasserman Schultz (D-FL) reintroduced the legislation.
The timeline and likelihood for passage remain unclear. However, both Republicans and Democrats would like to address a few issues with the big tax reform bill passed in 2017. In addition, a number of tax provisions expire, requiring an extension. That could give rise to an opportunity later in the year for a legislative vehicle to include the ABLE Age Adjustment Act.
The good news from an advocacy perspective is that raising the age solves the main issue for NAST: increasing the number of accounts. According to the National Disability Institute (NDI), about 6 million individuals could qualify under current law. By raising the age to 46, an additional 8 million could qualify.
Earlier this year, as NAELA’s Sr. Public Policy Manager, I was selected to become a co-chair of the Consortium for Citizens with Disabilities Financial Security Task Force, which in part coordinates strategy and outreach for passing the ABLE Age Adjustment Act. By providing the expertise of NAELA members to Congress and the disability community at large, hopefully we’ll be able to make a difference in your clients’ lives by expanding access to these accounts.
About the Author
David M. Goldfarb, Esq., is NAELA’s Senior Public Policy Manager.
Social Security Combined Trust Funds Gain One Year Says Board of Trustees
Disability Fund Shows Strong Improvement—Twenty Years
The Social Security Board of Trustees today released its annual report on the long-term financial status of the Social Security Trust Funds. The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2035, one year later than projected last year, with 80 percent of benefits payable at that time.
The OASI Trust Fund is projected to become depleted in 2034, the same as last year’s estimate, with 77 percent of benefits payable at that time. The DI Trust Fund is estimated to become depleted in 2052, extended 20 years from last year’s estimate of 2032, with 91 percent of benefits still payable.
In the 2019 Annual Report to Congress, the Trustees announced:
The asset reserves of the combined OASI and DI Trust Funds increased by $3 billion in 2018 to a total of $2.895 trillion.
The total annual cost of the program is projected to exceed total annual income, for the first time since 1982, in 2020 and remain higher throughout the 75-year projection period. As a result, asset reserves are expected to decline during 2020. Social Security’s cost has exceeded its non-interest income since 2010.
The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2035 – gaining one year from last year’s projection. At that time, there would be sufficient income coming in to pay 80 percent of scheduled benefits.
“The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them,” said Nancy A. Berryhill, Acting Commissioner of Social Security. “The large change in the reserve depletion date for the DI Fund is mainly due to continuing favorable trends in the disability program. Disability applications have been declining since 2010, and the number of disabled-worker beneficiaries receiving payments has been falling since 2014.”
Other highlights of the Trustees Report include:
Total income, including interest, to the combined OASI and DI Trust Funds amounted to just over $1 trillion in 2018. ($885 billion from net payroll tax contributions, $35 billion from taxation of benefits, and $83 billion in interest)
Total expenditures from the combined OASI and DI Trust Funds amounted to $1 trillion in 2018.
Social Security paid benefits of nearly $989 billion in calendar year 2018. There were about 63 million beneficiaries at the end of the calendar year.
The projected actuarial deficit over the 75-year long-range period is 2.78 percent of taxable payroll – lower than the 2.84 percent projected in last year’s report.
During 2018, an estimated 176 million people had earnings covered by Social Security and paid payroll taxes.
The cost of $6.7 billion to administer the Social Security program in 2018 was a very low 0.7 percent of total expenditures.
The combined Trust Fund asset reserves earned interest at an effective annual rate of 2.9 percent in 2018.
The Board of Trustees usually comprises six members. Four serve by virtue of their positions with the federal government: Steven T. Mnuchin, Secretary of the Treasury and Managing Trustee; Nancy A. Berryhill, Acting Commissioner of Social Security; Alex M. Azar II, Secretary of Health and Human Services; and R. Alexander Acosta, Secretary of Labor. The two public trustee positions are currently vacant.
Paying for day care is one of the biggest expenses faced by working adults with young children, a dependent parent, or a child with a disability, but your clients need to know that there is a tax credit available to help working caregivers defray the costs of day care (called “adult day care” in the case of the elderly).
In order to qualify for the tax credit, the taxpayer must have a dependent who cannot be left alone and who has lived with them for more than half the year. Qualifying dependents may be the following:
A child who is under age 13 when the care is provided
A spouse who is physically or mentally incapable of self-care
An individual who is physically or mentally incapable of self-care and either is the taxpayer’s dependent or could have been the taxpayer’s dependent except that his or her income is too high ($4,150 or more) or he or she files a joint return.
Even though individuals can no longer receive a deduction for claiming a parent (or child) as a dependent, your clients can still receive this tax credit if their parents (or other relatives) qualify as a dependent. This means the caregiver must provide more than half of the relative’s support for the year. Support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Even if the caregiver does not pay more than half the parent’s total support for the year, the individual may still be able to claim his or her parents as dependents if the individual pays more than 10 percent of the parent’s support for the year, and, with others, collectively contributes to more than half of the parent’s support.
The total expenses that can be used to calculate the credit is $3,000 for one child or dependent or up to $6,000 for two or more children or dependents. So if the taxpayer spent $10,000 on care, they can only use $3,000 of it toward the credit. Once taxpayers know their work-related day care expenses, to calculate the credit, they need to multiply the expenses by a percentage of between 20 and 35, depending on their income. (A chart giving the percentage rates is in IRS Publication 503.) For example, if someone earns $15,000 or less and has the maximum $3,000 eligible for the credit, to figure out the credit he or she multiplies $3,000 by 35 percent. If an individual earns $43,000 or more, he or she multiplies $3,000 by 20 percent.
The care can be provided in or out of the home, by an individual or by a licensed care center, but the care provider cannot be a spouse, dependent, or the child’s parent. The main purpose of the care must be the dependent’s well-being and protection, and expenses for care should not include amounts paid for food, lodging, clothing, education, and entertainment.
To get the credit, taxpayers must report the name, address, and either the care provider’s Social Security number or employer identification number on the tax return.
For more information about the credit from the IRS, click here and here.
While the new tax law doubled the federal estate tax exemption, meaning the vast majority of estates will not have to pay any federal estate tax, it doesn’t mean you should ignore its impact on your estate plan.
In December 2017, Republicans in Congress and President Trump increased the federal estate tax exemption to $11.18 million for individuals and $22.36 million for couples, indexed for inflation. (For 2019, the figures are $11.4 million and $22.8 million, respectively.) The tax rate for those few estates subject to taxation is 40 percent.
While most estates won’t be subject to the federal estate tax, you should review your estate plan to make sure the changes won’t have other negative consequences or to see if there is a better way to pass on your assets. One common estate planning technique when the estate tax exemption was smaller was to leave everything that could pass free of the estate tax to the decedent’s children and the rest to the spouse. If you still have that provision in your will, your kids could inherit your entire estate while your spouse would be disinherited.
For example, as recently as 2001 the federal estate tax exemption was a mere $675,000. Someone with, say, an $800,000 estate who hasn’t changed their estate plan since then could see the entire estate go to their children and none to their spouse.
Another consideration is how the new tax law might affect capital gains taxes. When someone inherits property, such as a house or stocks, the property is usually worth more than it was when the original owner purchased it. If the beneficiary were to sell the property, there could be huge capital gains taxes. Fortunately, when someone inherits property, the property’s tax basis is “stepped up,” which means the tax basis would be the current value of the property. If the same property is gifted, there is no “step up” in basis, so the gift recipient would have to pay capital gains taxes. Previously, in order to avoid the estate tax you might have given property to your children or to a trust, even though there would be capital gains consequences. Now, it might be better for your beneficiaries to inherit the property.
In addition, many states have their own estate tax laws with much lower exemptions, so it is important to consult with your attorney to make sure your estate plan still works for you.
John Chiang, the California state treasurer, spoke at a news conference Wednesday at Loyola Law School in Los Angeles. “The goal is to make sure we stem the tide of the retirement crisis and help Californians realize the dream of a golden retirement,” he said in an interview. Monica Almeida for The New York Times
It’s going to be a busy year in Washington and state capitals for policymakers working to improve the retirement security of millions of Americans.
New retirement savings options will be on the horizon in 2019 for millions who don’t have access to workplace 401(k) plans. Meanwhile, Congress will try to agree on a plan to avert sharp cuts in traditional pension benefits for over a million workers. The long-running battle over regulation to protect investors will enter a new phase when the Securities and Exchange Commission issues new “best interest” rules governing investment advice. And the House of Representatives could take up legislation to expand Social Security.
Here is a look at crucial retirement policy topics to watch in the year ahead.
Workplace retirement savings plans have proved to be the most effective route to help savers, mainly thanks to features like automatic enrollment, regular payroll deductions and matching employer contributions. Yet one-third of private sector workers had no access to an employer-sponsored retirement plan in 2016, according to the Government Accountability Office. The coverage shortfall is greatest among low-income workers and people working for small companies.
But 2019 will be a turning point in covering more workers.
Some states are starting programs that automatically sign up workers who don’t have workplace 401(k) accounts or Individual Retirement Accounts. Over time, employers in many of these states will be required to set up automatic payroll deductions for these accounts and enroll workers, although they will not need to make matching contributions.
Oregon started its plan this year; California and Illinois will start in 2019; Vermont, Maryland and Connecticut are preparing programs; and New York has passed legislation and is establishing a board to oversee the start of a state program over the next two years. And this week, New Jersey’s General Assembly passed legislation authorizing the creation of a program (the state’s Senate is expected to consider the bill early next year).
The states that have approved plans could eventually extend coverage to 15 million workers, AARP estimates.
California’s plan alone could cover 7.5 million workers, officials there say. The CalSavers program is in a pilot phase through the end of June, and will be open to all employers beginning July 1; mandatory compliance will phase in with three waves based on employer size.
“The goal is to make sure we stem the tide of the retirement crisis and help Californians realize the dream of a golden retirement,” says John Chiang, the state treasurer. “It’s not an easy task, because the current marketplace has failed.”
Meanwhile, Congress will take up legislation next year that would make it easier for employers to band together to join a single 401(k) plan that they can offer to employees. These “open multiple-employer plans” would be offered by private plan custodians; the aim would be to offer employers low-cost plans featuring simplified paperwork.
How quickly would these multiple-employer plans be offered if legislation were approved? “Plan providers will need a year to gear up and get infrastructure in place,” predicts Kathleen Coulombe, a vice president at the American Council of Life Insurers, which supports the legislation. “I’d expect to see plans launch starting in 2020.”
Which approach is better — auto-I.R.A. or a multiple-employer plan? “They are both good ideas, and there’s no inconsistency between them,” says Mark Iwry, one of the architects of a national auto-I.R.A. program that he worked to enact during his time as a senior adviser to the Treasury secretary in the Obama administration. The national auto-I.R.A. would require employers without their own retirement plan to enroll workers.
Mr. Iwry, currently a nonresident senior fellow at the Brookings Institution, sees the two ideas as complementary, with auto-I.R.A.s serving as starter accounts likely to lead many more employers to adopt 401(k) plans.
But Mr. Iwry said the market already had achieved much of the economy of scale and reduced costs promised by multiple-employer plans, with companies sponsoring identical plans using a single low-cost investment lineup and common record-keeping and administration. “The proposed open M.E.P. legislation is desirable and long overdue,” he said. “But in their potential to expand coverage, open M.E.P.s don’t hold a candle to auto-I.R.A.s.” That is because auto-I.R.A. programs achieve big gains in plan participation through mandatory employer participation features and automatic worker enrollment; with open M.E.P.s, takeup will depend on whether financial service providers market them aggressively, and employers’ appetite to sign up. What’s more, not all of these multiple-employer plans will use auto-enrollment.
Mr. Iwry still holds out legislative hope for a national auto-I.R.A. program, noting that the bill’s longtime lead Democratic sponsor, Representative Richard Neal, of Massachusetts, is about to become chairman of the powerful House Ways and Means committee.
Saving One Million Pensions
A special congressional committee is racing to head off an insolvency crisis, one that could lead to sharp cuts in pension benefits for over a million workers and retirees, and sink a federally sponsored insurance backup program.
The problem centers on so-called multiemployer pension plans. Over 10 million workers and retirees are covered by 1,400 of these plans, which are created under collective bargaining agreements and jointly funded by groups of employers in industries like construction, trucking, mining and food retailing.
Plans covering 1.3 million workers and retirees are severely underfunded — the result of stock market crashes in 2001 and 2008-9, and industrial decline that led to consolidation and sliding employment. Cheiron Inc., an actuarial consulting firm, recently forecast that 121 plans might fail within 20 years. Plans are underfunded by a total of $48.9 billion, the firm estimated. Three plans alone account for 65 percent of all unfunded liabilities, led by the Teamsters’ Central States fund, which is falling short by $22.9 billion.
Meanwhile, the Pension Benefit Guaranty Corporation, the federally sponsored insurance backstop for defunct plans, projects that its multiemployer insurance program will run out of money by the end of the 2025 fiscal year, absent reforms.
Congress approved an overhaul in 2014, the Multiemployer Pension Reform Act, but the legislation has faced strong resistance from retiree organizations, consumer groups and some labor unions.
The act allows troubled plans to seek government permission to make deep benefit cuts, if they can show that the reductions would prolong the life of the plan. Benefit cuts vary widely depending on what a plan proposes and the tenure of the worker — but a worker with 25 years of service and a $2,000 monthly benefit could see that benefit cut to as low as $983, according to a cutback calculator created by the Pension Rights Center, an advocacy group. To date, nine plan restructurings have been approved.
This year, the special congressional committee appointed to create a replacement for the pension reform act missed an end-of-November deadline to issue its recommendation. But a draft proposal raises the guaranteed minimum benefits paid by the Pension Benefit Guaranty Corporation if a plan fails. It also would inject federal funds into the agency — perhaps $3 billion annually — to expand its partition program, which allows it to take on benefit payments to so-called orphans — people who earned benefits from employers who have dropped out of plans, often because they have gone out of business.
“It would rely less on cutting benefits, and more on raising money from existing pension plans and taxpayers,” says Joshua Gotbaum, a guest scholar at the Brookings Institution and a former director of the federal pension backstop.
The sticking points in the discussion have included the assumptions used to measure plan liabilities, and how much respective stakeholders, including the government, should contribute to maintain a viable multiemployer system, says Karen Friedman, executive vice president of the Pension Rights Center. “We’re hoping they can find a fair, comprehensive solution that can save these plans, the P.B.G.C. and protect workers and retirees.”
Protecting Investors From Conflicted Advice
The long-running battle to require brokers to look out for the best interests of clients will continue in 2019.
The S.E.C. is moving toward adoption of a “regulation best interest” standard following the end this year of an advice standard created by the Obama-era Labor Department. That regulation, which required advice on retirement accounts to meet fiduciary standards, was opposed by the financial services and insurance industries, which argued that it made advising smaller investors too costly.
The S.E.C. rule would require brokers to put their customers’ financial interests ahead of their own, but it does not require them to act as fiduciaries. The rule also would require disclosures to clients of any potential conflicts, and it reaffirms existing higher standards for registered investment advisers.
The draft regulation has come under fire from consumer advocates who note that it does not clearly define the term “best interest,” and that the proposed disclosure forms are confusing for investors.
“There is a real need to simplify the disclosure forms so that they communicate effectively to investors the information that they actually need to make decisions,” says Cristina Martin Firvida, vice president for financial security and consumer affairs at AARP.
Expanding Social Security
Proposals to overhaul Social Security by progressives are likely to get a hearing in the new Democratic-controlled House.
Most of the winning Democratic candidates who flipped 40 congressional seats in the midterm elections ran on expanding Social Security benefits, said Nancy Altman, president of Social Security Works, a progressive advocacy group. And the likely new chairman of the Ways and Means Social Security Subcommittee, Representative John B. Larson, Democrat of Connecticut, is the author of expansion legislation that has more than 170 co-sponsors in the House, including Mr. Neal, the incoming Ways and Means chairman.
“The Larson bill certainly will get a hearing, and there’s a substantial chance it will move out of committee and even get a vote on the House floor,” Ms. Altman predicted. “That will really elevate the issue and put a spotlight on the Senate and the White House.”
Mr. Larson’s bill includes a 2 percent across-the-board increase in benefits, a more generous annual cost-of-living adjustment and a higher minimum benefit for low-income workers. The bill would pay for the expansion by lifting the cap on wages subject to taxation and a gradual phase-in of a higher payroll tax rate.
Social Security faces a long-run financial imbalance — the program is now spending more than it takes in annually in payroll taxes. The Social Security trustees project that the program will be unable to pay full benefits beginning in 2034; unless Congress takes action, benefits would be slashed by about 25 percent. The funding proposal in Mr. Larson’s bill also would restore the program’s long-range financial balance.
Correction: Dec. 20, 2018
Because of an editing error, an earlier version of a picture caption on this article misstated the day of a news conference at Loyola Law School. The conference was on Wednesday, not Monday.
Below are figures for 2019 that are frequently used in the elder law practice or are of interest to clients.
Medicaid Spousal Impoverishment Figures for 2019
The new minimum community spouse resource allowance (CSRA) is $25,284 and the maximum CSRA is $126,420. The maximum monthly maintenance needs allowance is $3,160.50. The minimum monthly maintenance needs allowance remains $2,057.50 ($2,572.50 for Alaska and $2,366.25 for Hawaii)until July 1, 2019.
Medicaid Home Equity Limits
For CMS’s complete chart of the 2019 SSI and Spousal Impoverishment Standards, click here.
The income cap for 2019 applicable in “income cap” states is $2,313 a month.
Gift and estate tax figures
Federal estate tax exemption: $11.4 million for individuals, $22.8 million for married couples
Lifetime tax exclusion for gifts: $11.4 million
Generation-skipping transfer tax exemption: $11.4 million
Annual gift tax exclusion: $15,000 (unchanged)
Long-Term Care Premium Deductibility Limits for 2019
The Internal Revenue Service has announced the 2019 limitations on the deductibility of long-term care insurance premiums from income. Any premium amounts above these limits are not considered to be a medical expense.
Attained age before the close of the taxable year
40 or less
More than 40 but not more than 50
More than 50 but not more than 60
More than 60 but not more than 70
More than 70
Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $370 per day (for 2019), whichever is greater.
For these and other inflation adjustments from the IRS, click here.
Medicare Premiums, Deductibles and Copayments for 2019
Part B premium: $135.50/month (was $134)
Part B deductible: $185 (was $183)
Part A deductible: $1,364 (was $1,340)
Co-payment for hospital stay days 61-90: $341/day (was $335)
Co-payment for hospital stay days 91 and beyond: $682/day (was $670)
Skilled nursing facility co-payment, days 21-100: $170.50/day (was $167.50)
Part B premiums for higher-income beneficiaries:
Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $189.60.
Individuals with annual incomes between $107,000 and $133,500 and married couples with annual incomes between $214,000 and $267,000 will pay a monthly premium of $270.90.
Individuals with annual incomes between $133,500 and $160,000 and married couples with annual incomes between $267,000 and $320,000 will pay a monthly premium of $352.20.
Individuals with annual incomes between above $160,000 and married couples with annual incomes above $320,000 will pay a monthly premium of $433.40.
Individuals with annual incomes above $500,000 and married couples with annual incomes above $750,000 will pay a monthly premium of $460.50
High-earner premiums differ for beneficiaries who are married but file a separate tax return from their spouse. Those with incomes greater than $85,000 and less than $415,000 will pay a monthly premium of $433.40. Those with incomes greater than $415,000 will pay a monthly premium of $460.50.
For Medicare’s “Medicare 2019 costs at a glance,” click here.
Social Security Benefits for 2019
The new monthly federal Supplemental Security Income (SSI) payment standard is $771 for an individual and $1,157 for a couple.
Estimated average monthly Social Security retirement payment: $1,461 a month for individuals and $2,448 for couples
Maximum amount of earnings subject to Social Security taxation: $132,900 (was $128,400)
Millions of Americans manage money or property for a loved one who’s unable to pay bills or make financial decisions. To help financial caregivers, we’ve released easy-to-understand guides.
About the guides
The guides help you understand your role as a financial caregiver, also called a fiduciary. Each guide explains your responsibilities as a fiduciary, how to spot financial exploitation, and avoid scams. Each guide also includes a “Where to go for help” section with a list of relevant resources.
Managing Someone Else’s Money guides
If you are serving as a financial caregiver, navigating your role can be difficult. We’re here to help.
Find the right guide for you
The guides are tailored to the needs of people in four different fiduciary roles:
Power of attorney
Guides for those who have been named in a power of attorney to make decisions about money and property for someone else.