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Former Spouses are Impacted by New Social Security Changes

Posted on: December 22nd, 2015
elder legal planningThe Bipartisan Budget Act of 2015 was signed into law in early November. Valuation and timing of some Social Security benefits is affected by the new provisions. Our elder law attorneys review the Act’s impact on elder care legal planning in an earlier post here.

One of the estate planning goals of many Americans is ensuring their assets are preserved and effectively transferred to surviving heirs. For many individuals who are divorced and/or re-married, their goals involve providing for a current or future spouse and excluding a former spouse. Failure to update property titles, payable on death forms, transfer on death forms, and beneficiary designations is often the contributing action that legally entitles a former spouse to assets. However, even if one makes sure to update all of the above forms and designations, a former spouse might still be entitled to a certain benefit that one has little control over: Social Security benefits.

Social Security benefits are controlled at the federal level. Some individuals, particularly divorced or widowed seniors, elect to postpone or altogether avoid re-marriage in order to remain eligible to receive a former spouse’s Social Security benefits. The changes recently made to the Social Security benefits program affect the benefits of some ex-spouses. Social Security spousal benefits should be assessed during an estate planning review, particularly given recent changes. Restricted applications for spousal benefits hinge on the birthdates of the beneficiary and their ex-spouse’s birthdate, among other factors as follows:
Individuals born on or before January 1, 1954 and whose ex-spouse is 62 or older are eligible to receive an ex-spouse’s benefits. 
  • Individuals born on or after January 2, 1954 will not have the ability to delay their individual retirement benefit while simultaneously claiming a former spouse’s benefit. Instead, the individual will only have two options: Claim both the spousal and individual benefit and take the larger of the two or delay taking the individual retirement benefit to enjoy deferred growth.
  • Individuals who are already claiming a spousal benefit at full retirement age (and whose ex-spouse is 62 or older) remain eligible for benefits.
  • Spousal benefit conversions are no longer permitted; these conversions were popular options when an individual chose to defer the worker benefit and drew on a spousal benefit instead. Now individuals are required to draw on the larger of the two.
These are just a portion of the new requirements and regulations included in the Act. Additional changes and their potential impact on your estate planning should be discussed during your next estate planning review. Retirement asset growth and preservation is increasingly important and should be discussed in addition to Social Security benefits. Learn more about the rising rates of long-term care insurance as well as growing elder care costs. Review retirement investments outside of Social Security and ensure beneficiary designations are up-to-date and that the assets are structured in the most effective way possible.

By Attorney Gregory Herman-Giddens
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