As a New Parent, Have You Updated (or Created) Your Estate Plan?

You just had a baby. Now you’re sleep-deprived, overwhelmed, and frazzled. Having a child dramatically changes one’s legacy plan and makes having a plan all the more necessary, says ThinkAdvisor’s recent article, “5 Legacy Planning Basics for New Parents.”

Take time to talk through two high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

  1. Will. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state decides what goes to whom. Lastly, a will must name an executor.
  2. Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
  3. Trust. Created by an experienced estate planning attorney, a trust has some excellent benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
  4. Power of Attorney and Health Care Proxy. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney and health care proxy designees can make important financial and medical decisions, when you’re incapable of doing so.
  5. Life Insurance. Most people don’t think about purchasing life insurance, until they have children. Therefore, if you haven’t thought about it, you’re not alone. If you are among the few who bought a policy pre-child, consider increasing the amount so your child is covered, if something should happen.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”

Suggested Key Terms: Estate Planning Lawyer, Wills, Capacity, Guardianship, Executor, Trusts, Trustee, Asset Protection, Probate Court, Inheritance, Intestacy, Beneficiary Designations, Life Insurance

Why Am I Being Charged More for Medicare?

Many seniors have their Medicare premiums paid automatically from their Social Security benefits.  However, now some are getting a separate monthly Medicare premium bill, in addition to the amount that is taken from their monthly Social Security benefits.

Kiplinger’s recent article, “How Changes in Income Affect Medicare Premiums,” says they are receiving the extra bill because they’re now subject to the Medicare high-income surcharge, or the “Income-Related Monthly Adjustment Amount (IRMAA).”

The bill should indicate “IRMAA.” This means that a senior must pay this surcharge, because his modified adjusted gross income, plus tax-exempt interest income, was higher than $85,000 if single or $170,000 if married filing jointly on his last tax return on file (usually 2017 for 2019 premiums).

This surcharge ups the monthly Medicare Part B premiums from the standard $135.50 in 2019 to a range of $189.50 to $460.50 per month, depending on income. Medicare Part B (medical insurance) is part of Original Medicare. Part B covers medical services and supplies that are medically necessary to treat a health condition. This can include outpatient care, preventive services, ambulance services and durable medical equipment.

In addition, if a senior has Medicare Part D prescription-drug coverage, he may also have to pay an extra $12.40 to $77.40 per month, in addition to his Part D premiums. If a senior and his spouse file jointly and are both receiving Medicare benefits, they’ll both be subject to the high-income surcharge.

If a senior’s income has dropped since 2017 because of certain life-changing events, like marriage, divorce, death of a spouse or retirement, he can ask to have his Medicare premiums based on more recent income, which could reduce or eliminate the surcharge. The senior must file Form SSA-44 with the Social Security Administration, along with evidence of the eligible life-changing event (such as a statement from your employer with the date of your retirement) and an estimate of your reduced income for the year.

If a senior’s income was unusually high in 2017 for other reasons (e.g., because he sold investments for a profit or rolled money over from a traditional IRA to a Roth), he won’t be able to get his premiums reduced this year. However, the senior may go back down next year when his premiums will be based on his 2018 income.

Reference: Kiplinger (February 19, 2019) “How Changes in Income Affect Medicare Premiums”

Suggested Key Terms: Financial Planning, Elder Law Attorney, Medicare, Social Security

How Can I Protect My Child’s Inheritance, If They Have a Substance Abuse Problem?

Kiplinger’s recent article, “Selecting the Right Trustee and Protector for a Substance Abuse Trust,” explains that selecting the trustee for a substance abuse trust should start with a good idea of the duties they will perform. Next, find a person or institutional trustee that’s most qualified to fulfill those obligations. Parents should then think about naming a trust protector, who serves in a supervisory role to ensure that the trust is being properly administered.

The basic duties of a trustee include a fiduciary duty to administer the trust in good faith and in accordance with its terms and purposes; loyalty to the beneficiaries, by acting solely in their interests; invest the trust property prudently by considering the purposes, terms, distributional requirements, and other circumstances of the trust; and to act impartially, when there are multiple beneficiaries.

There may also be special duties of the trustee. For a child with a substance use disorder, the trustee’s duties for distributions could be linked specifically to paying for the costs of rehab, job training, professional service fees and other items that are part of the treatment plan developed by the beneficiary’s treatment team. Tying distributions into the treatment plan would mean the trustee, and maybe someone familiar with treatment management, would have to work closely with the treatment team to carry out the plan.

If the trust has incentive clauses, the trustee will also have to determine if the beneficiary has attained the goal (like sobriety for a certain period of time) and if so, the benefit to which he or she’s entitled. These can be hard to administer, since it can be hard to verify if the beneficiary has actually met the goals.

If the beneficiary is eligible for government program benefits, like SSI or Medicaid or from private health insurance, another set of duties will be placed upon the trustee to make certain that distributions won’t be classified as “maintenance” or “support.” If so, it could result in the child being declared ineligible. Since distributions from the trust are meant only to supplement the benefits that SSI or Medicaid is providing (and not duplicate or supplant them), the trustee will have to closely watch the uses of the distributions, so they aren’t support and maintenance.

You must next look at potential candidates to see who’s best suited for the role of trustee. There are two categories of trustees: individual and institutional. Individual trustees can include family members. The advantage here is that they’ll know the beneficiary and can give more personalized service than an institutional trustee. However, appointing a family member or friend as trustee may ruin the relationship, if the trustee denies the beneficiary’s demands.

You can appoint a trust company, bank trust department, or a corporate trustee connected to a brokerage firm to serve as the trustee to avoid possible family conflicts. However, some institutional trustees may be more focused on their investment performance, than on tending to the mental and physical needs of their beneficiaries. In the case of a substance abuse trust, “hands-on” involvement with the beneficiary is vital.

One alternative may be to appoint an individual and an institutional company to serve as co-trustees. The individual could be personally involved with the beneficiary and their treatment plan, and the institutional trustee could deal with and handle the investments. However, both trustees should make distribution decisions. The best type of institutional trustee for a substance abuse trust, would be one that works primarily in administering special needs trusts. These are created for the benefit of children with disabilities. These trustees will be knowledgeable about SSI and Medicaid eligibility rules.

A trust protector, depending on applicable state law, acts as the settlor’s surrogate. This continues even after the settlor dies. This allows the trust to adapt to changing circumstances. The trust protector could also direct the trustee’s actions concerning how the trust assets would be invested and could approve or deny proposed disbursements from the trust. The trustee would be obligated to comply with such directions, unless they would be manifestly contrary to the trust’s terms or a breach of the protector’s duties.

As far as a substance abuse trust, a trust protector can provide supervision, if the trustee doesn’t possess experience in coordinating trust distributions with a substance abuse treatment plan, or with monitoring the beneficiary’s eligibility for government aid programs. Instead of the trustee appointing agents to assist in these matters, the protector would actively monitor the progress of the beneficiary’s recovery and, if necessary, direct the trustee to engage a treatment manager for the beneficiary or an advocate to secure SSI and Medicaid benefits.

Support from all parties will help the beneficiary continue on the road to recovery, which is the ultimate goal of the trust.

Reference: Kiplinger (March 8, 2019) “Selecting the Right Trustee and Protector for a Substance Abuse Trust”

Suggested Key Terms: Estate Planning Lawyer, Substance Abuse Trust, Trustee, Disability, Trust Protector, Medicaid, Social Security, Special Needs Trust

How Working and Taking Social Security Benefits Works Or Doesn’t

It seems too good to be true — the idea of working at your regular job, receiving your regular salary and giving yourself a little extra income by applying for Social Security benefits at the same time. However, as explained by the article “Working and Taking Social Security at the Same Time? Watch Out for This” from Yahoo! Finance, there are some real pitfalls to doing this, unless you are very careful.

If you are under your Full Retirement Age (FRA), which depends on when you were born, the government may reduce your benefits, if your paycheck exceeds certain thresholds. This is formally known as the Social Security Earnings Test. You’ll need to work all the numbers to see if this strategy might work for you. Don’t expect it to, by the way, because that’s not what Social Security is all about.

The Social Security Earnings Test calculates how much you will lose in Social Security benefits, if you are under your FRA and if you’re earning over a certain amount every year from a paycheck. In 2019, that limit is $17,640. Note that this only applies to earned income. It does not apply to any other government benefits, investment earnings or pension income. For every $2 you earn more than $17,640 in 2019, the SSA (Social Security Administration) deducts $1 from your monthly benefit.

Let’s say you are entitled to a $1,000 benefit every month ($12,000 per year) and you also earn $2,400 from your job. You’ll lose $3,180 in benefits and you’ll get only $8,820 for the year.

The numbers are a little different, if you are reaching your FRA at some point during 2019. The 2019 earnings limit when a person has reached FRA is a lot larger at $46,920, instead of $17,640. In this case, for every $3 you earn over the limit, the SSA will reduce benefits by $1.

Here’s the sweet spot: as soon as you hit your FRA, the rules no longer apply, and you can earn as much as you can. The SSA won’t take deductions from your paychecks.

There is a Retirement Earnings Test Calculator on the Social Security website. You must enter your date of birth, estimated earnings and your estimated Social Security benefit. It will provide further information on how earnings will be calculated.

If you are counting on Social Security for most of your living expenses during retirement, consider working longer, at the very least until you reach your FRA. You can also keep working full-time and delay taking Social Security benefits, so when you do start getting that monthly benefit it will be bigger.

For every month you delay taking Social Security beyond your 62nd birthday, benefits increase by 2/3 of 1%. You’ll reach 100% of your benefits at FRA, and if you can keep delaying benefits until age 70, benefits increase by a significant amount: 132% if your FRA is 66, or 124% if your FRA is 67.

Reference: Yahoo! Finance (Feb. 25, 2019) “Working and Taking Social Security at the Same Time? Watch Out for This”

Suggested Key Terms: Social Security Earnings Test, Retirement, Full Retirement Age, FRA, Benefits, Income Thresholds, Earned Income

When Should I Review My Estate Plan?

When a person hits the age of 18, they should at least have powers of attorney to designate who will make their healthcare decisions and handle their finances, in the event of any incapacity. When a person starts to accumulate assets and have children, it’s critical to have an estate plan in place.

Bankrate’s recent article, “Estate planning triggers: When to re-evaluate your estate planning strategy,” says the risk of not having a current estate plan and will that state your wishes is significant. When  people fail to put any plan into place, it leads to confusion, chaos and unintended consequences. Use this list of important life events as triggers to remind you to discuss your current situation with a trusted attorney.

Getting married. You and your future spouse probably have had some financial conversations before getting engaged. However, if you haven’t, once wedding plans are set, it’s vital to discuss all aspects of each partner’s financial situation and the desired distribution of assets. You should decide whether to sign a prenuptial agreement, the totals of your separate and joint assets and who you want inherit those assets should on or both spouses pass on. In light of these factors and the prenuptial agreement, an estate plan that satisfies both parties must be created.

Starting a family. The decision to have a child comes with the responsibility of planning for that child’s care. You and your partner will want to determine the amount of your assets you want to pass to your children in the case of a death, at what age your children will inherit those assets and name a legal guardian.

Divorce. If a couple decides to divorce, it’s important to update their separate estates. If you fail to change the beneficiary designations for a trust or life insurance policy after getting divorced, your ex-spouse may receive the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

Retirement. Beneficiaries are named when setting up a 401k or Roth IRA account. If you started the account years ago, the beneficiaries may be out-of-date. Retirees should look at their total retirement assets and update their beneficiaries to reflect their current relationship and financial circumstances.

Other life events. Any significant change in assets, a move to another state, the death or disability of a person named in your estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth, adoption, or death of a child are all important life events that should trigger a revision of your estate plan.

Reference: Bankrate (March 4, 2019) “Estate planning triggers: When to re-evaluate your estate planning strategy”

Suggested Key Terms: Estate Planning Lawyer, Will Changes, Guardianship, Inheritance, Intestacy, Beneficiary Designations, Life Insurance, Pre-nuptial Agreement

How Will My IRA Be Taxed?

The most common of IRA tax traps results in tax bills through Unrelated Business Taxable Income (UBTI). The sources of business income from stocks, bonds, and funds like interest income, capital gains, and dividends are exempt from UBTI and the corresponding tax (the Unrelated Business Income Tax or UBIT).

Fox Business’s recent article, “Your IRA and taxes: Don’t get a surprise tax bill” explains that IRAs that operate a business, have certain types of rental income, or receive income through certain partnerships will be taxed, when the total UBTI exceeds $1,000. This is to prevent tax-exempt entities from gaining an unfair advantage on regularly taxed business entities.

UBIT can take a chunk from an IRA, and the Tax Cuts and Jobs Act of 2017 replaced the tiered corporate tax structure with a flat 21% tax rate. That begins in tax year 2018 (this tax season). These tax bills often have penalties, because IRA owners aren’t even aware that the bill exists.

Master Limited Partnerships (MLPs) held within IRAs are a good example of how UBTI can catch investors by surprise. MLPs are fairly popular investments, but when they’re held within an IRA, they’re subject to UBIT. When the tax is due, the IRA custodian must get a special tax ID number and file Form 990-T to report the income to the IRS. That owner must pay the tax, and is typically unaware of the bill, until it arrives as a completed form to be submitted to the IRS (completed and signed on behalf of the owner). In some instances, the owner may have to pay estimated taxes throughout the year. This can mean a significant underpayment penalty.

Working with prohibited investments will also result in a tax bill. Self-directed IRAs can violate the rules. Alternative investments such as artwork, antiques, and precious metals (with some exceptions) are generally considered as distributions and are subject to taxes.

Prohibited transactions are a step above prohibited investments and can result in the loss of tax-deferred status for the entire IRA. This includes using an IRA as security to obtain a loan, using IRA funds to purchase personal property, or paying yourself an unreasonable compensation for managing your own self-directed IRA. Executing a prohibited transaction can result in the entire IRA being treated as a taxable distribution to you.

Therefore, like fund holdings, ETFs, and other investments, it’s critical to understand exactly what you own and how to deal with the tax liabilities.

Reference: Fox Business (March 6, 2019) “Your IRA and taxes: Don’t get a surprise tax bill”

Suggested Key Terms: Estate Planning, Tax Planning, Financial Planning, IRA, Self-Directed, Unrelated Business Taxable Income (UBTI)

What Should My Fiancé and I Discuss About Finances Before We Say “I Do”?

If you’re older and remarry, you may have more assets and you probably have children. That’s different than a first marriage, where people often enter as financial equals. In subsequent unions, situations are more complicated—and the stakes are higher. You should protect your money in the event of divorce and protect your children in the event of your death.

Barron’s recent article, “How to Manage Your Money When You’re Remarrying,” says the subject of money should be easier this time around. Money talk might have been taboo going into your first marriage, but experience—and the battle wounds of divorce—tend to make this dialog much easier.

The best strategy for navigating the financial side of remarriage is to be direct and give yourself plenty of time before the wedding to work out the details. All good financial plans start with a broader discussion that has more to do with identifying and setting goals, than it does about dollar signs.

Consider what you hope to achieve individually and as a couple over the next year, five years, decade, and so on. Discuss your priorities and intentions, be specific, and write it all down. Your conversation will be the groundwork for the specific financial planning decisions the two of you will need to make, when it’s time to formalize your plans for merging finances or—as the case may be—keeping them separate.

Prenuptial agreements, or “prenups,” are becoming more frequently used by millennials because they are marrying later and bringing more assets and debt to the marriage. In the case of remarriage, a prenup should be strongly considered by most couples. This legally-binding agreement details how assets and liabilities will be divided, in the event of divorce.

Many experts suggest keeping separate checking, savings, and investment accounts—but setting up joint accounts for shared lifestyle expenses. Having a joint account removes the need for constant discussion about how you’ll divide expenses. Create a monthly joint budget and agree on the fairest way to split it. Some couples divide it down the middle, while others base it on a percentage of their respective incomes.

You don’t need to have all of your estate plans settled before the wedding but be certain to update key documents where appropriate—such as your wills, medical advance directives, retirement plan and insurance beneficiaries.

A big trouble spot for couples remarrying—especially if there are children and grandchildren from other marriages—is how assets will be divided in the future. Without a clear estate plan, if you die first, then the assets will pass to your spouse and then to that spouse’s children. That can be a big source of family strife—even for families who aren’t wealthy. A good solution is to set up revocable livings trusts that say exactly how you want your respective and joint assets to be distributed when you die.

Reference: Barron’s (March 2, 2019) “How to Manage Your Money When You’re Remarrying”

Suggested Key Terms: Estate Planning Lawyer, Revocable Living Trust, Asset Protection, Probate Court, Inheritance, Power of Attorney, Healthcare Directive, Living Will, IRA, 401(k), Pension, Beneficiary Designations, Life Insurance, Pre-nuptial Agreement

Does Your Estate Plan Include Furry or Feathered Family Members?

Here’s a sad fact: The Humane Society of the United States estimates that as many as 100,000 to 500,000 pets end up in shelters, after their owners die or become incapacitated. So, while we spend upwards of $60 billion on food, supplies and veterinary care, says The National Law Review in “Estate Planning For Your Pets,” we also allow many beloved pets to end their lives in shelters.

The answer is to include your pet’s care in estate planning, just as we do for our family members. The first major consideration is to name who you would want to be responsible for your pet, if you should become incapacitated. Make sure that person is willing to take on the role of caretaker and that they have sufficient room in their homes (and their hearts) for your pets.

If they agree, then start by preparing a sheet with this basic information:

  • What does your pet eat? Do you give him/her treats, and if so, what kind?
  • Medical records for your pet: vaccinations, surgery, special medications.
  • The name of the veterinarian and any specialists.
  • What does your pet do, when she/he is nervous or anxious? What calms them down?
  • What other information would you want someone to know, in your absence?

Speak with your estate planning attorney to see if they have a “Pet Care Authorization” form. This is a form that is similar to something you would use for a child staying with a relative who might need care. The form would designate the agent to act on your behalf for a variety of situations, including medical care.

For planning for your pets after you die, you can designate a caretaker. This may be the same person who agreed to care for your pet, if you became incapacitated. You can do this in a last will and testament or a revocable living trust. You’ll also need to provide funding for the care of your pet.

You can use a trust as an alternative to an outright distribution of funds to the caretaker. The pet trust would be overseen by a named trustee, who would be responsible to ensure that funds are used to benefit your pet(s). Make sure to allot a reasonable amount of money to cover the cost of veterinary care, grooming, feeding, training and any additional expenses.

You don’t have to be a wealthy person to have this arrangement in place. It is simply a practical matter to ensure that your furry family members are taken care of, after you pass away. Another factor to consider: what is the average age expectancy of your pet? A parrot could easily live 60 to 80 years, and a horse could live for four decades. The care and feeding of a horse will be considerably higher, than for a golden retriever or house cat.

Speak with an estate planning attorney to learn how pet care can be built into your estate plan, so next time your pet welcomes you home you will know you’ve planned for their future.

Reference: The National Law Review (Feb. 18, 2019) “Estate Planning For Your Pets”

Suggested Key Terms: Pet Trusts, Beneficiaries, Trustees, Agent, Estate Planning Attorney

Digital Assets in Estate Planning: The Brave New World of Estate Planning

Cryptocurrency is almost mainstream, despite its complexity, says Insurance News Net in the article “Westchester County Elder Law Attorney… Sheds Light on Cryptocurrency in Estate Planning.” The IRS has made it clear that as far as federal taxation is concerned, Bitcoin and other cryptocurrencies are to be treated as property. However, since cryptocurrency is not tangible property, how is it incorporated into an estate plan?

For starters, recordkeeping is extremely important for any cryptocurrency owner. Records need to be kept that are current and income taxes need to be paid on the transactions every single year. When the owner dies, the beneficiaries will receive the cryptocurrency at its current fair market value. The cost basis is stepped up to the date of death value and it is includable in the decedent’s taxable estate.

Here’s where it gets tricky. The name of the Bitcoin or cryptocurrency owner is not publicly recorded. Instead, ownership is tied to a specific Bitcoin address that can only be accessed by the person who holds two “digital keys.” These are not physical keys, but codes. One “key” is public, and the other key is private. The private key is the secret number that allows the spending of the cryptocurrency.

Both of these digital keys are stored in a “digital wallet,” which, just like the keys, is not an actual wallet but a system used to secure payment information and passwords.

One of the dangers of cryptocurrency is that unlike other financial assets, if that private key is somehow lost, there is no way that anyone can access the digital currency.

It should also be noted that cryptocurrency can be included as an asset in a last will and testament as well as a revocable or irrevocable trust. However, cryptocurrency is highly volatile, and its value may swing wildly.

The executor or trustee of an estate or trust must take steps to ensure that the estate or the trust is in compliance with the Prudent Investor Act. The holdings in the trust or the estate will need to be diversified with other types of investments. If this is not followed, even ownership of a small amount of cryptocurrency may lead to many issues with how the estate or trust was being managed.

Digital currency and digital assets are two relatively new areas for estate planning, although both have been in common usage for many years. As more boomers are dying, planning for these intangible assets has become more commonplace. Failing to have a plan or providing incorrect directions for how to handle digital assets, is becoming problematic for many individuals.

Speak with an estate planning attorney who has experience in digital and non-traditional assets to learn how to protect your heirs and your estate from losses associated with these new types of assets.

Reference: Insurance News Net (Feb. 25, 2019) “Westchester County Elder Law Attorney… Sheds Light on Cryptocurrency in Estate Planning”

Suggested Key Terms: Digital Assets, Estate Planning, Elder Law Attorney, Cryptocurrency, Digital Keys

How a Government Pension Can Cut Your Social Security Benefits

If you work as a public service employee who will receive a government pension and you also qualify for Social Security retirement benefits, you might be “unpleasantly” surprised to learn that you will not get to collect the full amount of both when you retire one day. Many people consider it unfair that the government will take away something they worked years to earn. There are many people who are unaware of how a government pension can cut your Social Security benefits, and they are counting on receiving both sources of income when they retire.

Let’s say you worked as a teacher throughout your career. You worked enough years to qualify for a teacher’s pension from the government. You did not have to pay Social Security taxes on those earnings to qualify for the pension. You also worked a side job in the private sector. Your employer withheld Social Security taxes from your second job paycheck. You worked in the private sector long enough to qualify for Social Security retirement benefits.

When you retire, you will not receive both your teacher’s pension from the government and the full amount of Social Security retirement benefits that you qualify for from your second job. If you did not work a second job that paid into the Social Security system, but you qualify for Social Security retirement benefits based on the earnings record of your spouse, you will not receive that full amount either.

There are two federal rules that will take away a chunk of your retirement benefits:

The Windfall Elimination Provision (WEP) applies to people who receive government pensions. This law changes the amount you will receive, when you apply for Social Security retirement, spousal, or disability benefits.

In response to the argument that reducing these benefits because of the government pension is unfair, proponents of the rule say that WEP actually helps to preserve a basic assumption that underlies Social Security. This assumption is that people who did not earn much money throughout their careers, should receive a higher amount of benefits relative to their income than people who were high earners.

Since the work you did that qualified you for the government pension did not count toward Social Security, the amount of earnings you had in your private sector job makes it appear, incorrectly, that you were a low earner throughout your career. Because your total earnings in your government and private sector job would keep you out of the low earner category, you should not receive the extra help that a low earner needs.

If you fall under the WEP rule, the Social Security Administration can only reduce your Social Security retirement benefits, by up to half of the amount of your government pension. Of course, if you have a substantial government pension and would qualify for a small Social Security retirement check, half of your government pension could completely wipe out your Social Security check.

It is important to understand that WEP does not apply to survivor benefits. The second rule that applies to government pensions and Social Security benefits, however, could reduce the amount of Social Security payment that your dependents would receive in survivor benefits.

The Government Pension Offset (GPO) applies to people who qualify for Social Security benefits through their spouse’s earnings history and have a government pension based on their own job. In this situation, the government can reduce your Social Security spousal or survivor benefits by up to two-thirds of the amount of your government pension. As with the WEP rule, the GPO can reduce your Social Security benefit to nothing.

Your local elder law attorney can answer your questions about government pensions and Social Security.

References:

AARP. “Why Public Servants Feel Cheated by Social Security.” (accessed February 28, 2019) https://www.aarp.org/retirement/social-security/info-2019/public-servant-pensions.html

Suggested Key Terms: government pensions and Social Security, how government pension affects Social Security benefits

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