Social Security Benefits & Estate Planning
One thing most Americans agree on is how important Social Security can be for retirees. Even though it was originally intended to contribute 40 percent of retirement income when it was launched in 1935, recent numbers put 37 percent of men and 42 percent of women at closer to 50 percent reliance on Social Security funds for their earnings. Considering there are about 65 million people receiving benefits in the US, this is a substantial group whose baseline needs rely on the program.
Financial Planning and Social Security
Evidently, many people consider Social Security to be a significant portion of their estate planning but they may not understand how the two interface. First, some of the basics. To be eligible for Social Security benefits, a worker has to have reached a specified number of minimal earnings over the course of at least ten years. When an individual makes a claim, the Social Security Administration (SSA) calculates a “primary insurance amount” (PIA) based on the retirement benefits available at full retirement age (FRA). Spousal and survivor benefits may also be available to individuals who are related to those who qualify for benefits. Spousal benefits include current spouses, widows, and ex-spouses. Survivor benefits may be available for spouses, children, or a parent of a worker who dies.
Does the SSA Recognize Power of Attorney?
What many people do not realize is that even if you complete a legal Power of Attorney (POA) and appoint someone to handle your finances if you are unable, the SSA will not recognize the Power of Attorney designation. Based on a 2018 law, the SSA requires you to contact them and formally appoint up to three people as designated representative payees in order of priority. An individual already receiving social security can appoint representatives at any time and can also name designees during the claim process. It will also be important that your estate executor will understand their administrative duties regarding your Social Security income and that they will be responsible to notify the SSA of your passing and to pay any overpayment of benefits that may occur.
When to Apply for Social Security in Estate Planning?
Another interesting estate planning wrinkle to consider is the decision around when to apply for Social Security—a decision that needs to reflect either your single or married status. For a single person, you will need to reflect on what age you plan to retire, estimate the value of your assets and their longevity. For married couples, the decision around timing needs to consider that there may be advantages to the order in which both partners claim their Social Security benefits. If one spouse has short life expectancy, you will also need to think about applying for spousal benefits.
Overall, it makes sense to receive good counsel when it comes to estate planning and maximizing your Social Security benefits. Whatever your personal circumstances, be smart and take care with your Estate Planning. Your thoughtful efforts will make an enormous difference for your loved ones. Remember that as you navigate all of life’s turns in the road, you can trust our legal team at Hillsborough Wills & Trusts to support you and your family as you Build Your Circle of Security.
Call us for a free consultation at 919-245-8440 or contact us today.
