Last Chance to Use File and Suspend Strategy for Claiming Social Security Benefits

February 24, 2016

Time is running out to use a potentially very lucrative Social Security benefits-claiming strategy. Spouses will no longer be able to use the “file and suspend” strategy after April 29, 2016. Beware, however, that the new rules are causing confusion at some Social Security offices.

The federal budget agreement that was signed in fall 2015 ended two Social Security strategies that some spouses have used to maximize benefits.  The “File and Suspend” strategy allowed a worker to file for benefits and then suspend them. The worker’s spouse or children could then begin to receive spousal or children’s benefits while the worker postponed receiving benefits and continued to earn retirement credits.

Under the new law, which takes effect April 29, 2016, a spouse cannot begin receiving benefits until the worker is actually receiving benefits, too. Workers can still file and suspend, but spouses (or other dependents, including minor and disabled children) cannot receive benefits during the suspension. There is an exception for divorced spouses. A divorced spouse can continue to receive spousal benefits if the worker suspends benefits.

The second strategy, “Claim Now, Claim More Later,” allowed a spouse at full retirement age to choose whether to take spousal benefits or benefits on his or her own record. Under the new law, if you were not 62 years old by January 2, 2016, you do not get to choose which benefit to take. You may take whichever benefit is higher, but you cannot take spousal benefits and then switch to your own record later.

If you are at 66 years old or older before April 29, 2016, you should immediately consider whether or not you want to file and suspend your Social Security benefits.  If you do not file and suspend before April 29, 2016, your spouse will not be able to collect spousal benefits unless you are also receiving benefits. Filing and suspending can be a beneficial strategy for certain couples. For example, suppose a husband is 66 and his wife is 65. The husband can file and suspend before April 29, 2016. Because the wife was 62 years old or older on January 2, 2016, when she turns 66, she can choose to take her spousal benefit while her own benefit continues to accrue. Meanwhile, the husband continues to work, so his benefit is also growing.

If you do decide to file and suspend before the deadline, beware that according to articles in Forbes and Investment News, some Social Security offices are giving out incorrect information about using file and suspend before the new law takes effect, claiming that a worker can only file and suspend if his or her spouse is also 66. While Social Security has issued emergency memos about the changes to field offices, they have yet to issue formal guidance. If you run into trouble with a Social Security office, you may need to be persistent to get the correct information.  Update: Social Security has published answers to frequently asked questions on file and suspend and on “claim now, claim more later” (which it calls deemed filing).  For the first, click here; for the second, click here. For an article on Social Security’s explanation of its new rules, click here.

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What Is Undue Influence?

Saying that there has been “undue influence” is often used as a reason to contest a will or estate plan, but what does it mean?

Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes and to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats, or isolation. Often the influencer separates the individual from their loved ones in order to coerce. The elderly and infirm are usually more susceptible to undue influence.

To prove a loved one was subject to undue influence in drafting an estate plan, you have to show that the loved one disposed of his or her property in a way that was unexpected under the circumstances, that he or she is susceptible to undue influence (because of illness, age, frailty, or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so. Generally, the burden of proving undue influence is on the person asserting undue influence. However, if the alleged influencer had a fiduciary relationship with your loved one, the burden may be on the influencer to prove that there was no undue influence. People who have a fiduciary relationship can include a child, a spouse, or an agent under a power of attorney. For more information on contesting a will, go here.

When drawing up a will or estate plan, it is important to avoid even the appearance of undue influence. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your will in drafting your will. Family members should not be present when you discuss the will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive or accompany you to the attorney’s office. You can also get a formal assessment of your mental capabilities done by a medical professional before you draft estate planning documents. For more information on preventing a will contest, go here.

July 14, 2016

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