Amy & Dan Smith's Planning for Life: Planning for Life Disclosure and Other Family Issues in Estate Planning

What do we tell the kids?

Questions of how much and what type of information to give the children often arise during consultation.  The answers depend on the circumstances of each family – the ages and maturity of the children being the most obvious factors.  As a general rule the ideal is to advise the children as to the extent and nature of the parents’ assets and plans.  This can lead to a smoother transition to the next generation.

Issues of entitlement, sibling rivalry (where there is more than one child involved), and perceptions of fairness may naturally surface with regard to the parents’ estate.  Feelings may be particularly acute where one child has provided more care and attention to a parent than the other children, as is often the case.

Intra-family struggles are painful and can continue long after the parents are gone.  Lawsuits over estates are often more about replaying family wounds than issues of legal substance.  To the extent that parents can confront potential conflicts during their lifetimes and head them off, they will go far in providing a more meaningful legacy for their progeny.  An investment in professional family counseling during the parents’ lifetimes may be the best use of family resources.

Essential Information for Estate Administration

Accessing information for survivors can be difficult.  If no effort has been made to organize financial and estate documents during one’s lifetime, the survivors must search for necessary information to conduct estate administration.  In the digital age, mail may not bring statements indicating asset values and locations.  The Virginia General Assembly has enacted legislation to empower the estate administrator to obtain access to digital accounts; however, the process is tedious and problematic. The survivors need to have access to passwords.

Where one spouse does all the financial management for the couple and he/she is the first to die, the surviving spouse feels particularly vulnerable.  It is recommended that the money-manager spouse regularly share with the other spouse his/her routine with the family finances.

Who Should be in Charge?

Parents often ask whether their estate or trust should be left in the control of one or more of their children after they are gone.  As a rule, professionals (lawyers, CPA’s, or bank trust departments) do not need to be appointed as personal representatives of an estate or trustees of a trust.  Lay people may serve in these capacities and consult with professionals as needed.  The staffs of the Probate Department of the Circuit Court and in the Office of the Commissioner of Accounts are generally available to provide assistance to people serving in these capacities.

There are situations, however, where appointing a child or children may not be advisable.  For example, if there are several children, singling out one or two for authority may lead to ill feeling among the others.  If a parent leaves the share of a child in trust for that child – instead of an outright gift – out of concern that he/she is irresponsible or that he/she may be particularly vulnerable to a spouse or other source of undue pressure, it is generally not wise to appoint a sibling as trustee of such a trust.  It could lead to friction between the siblings.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: How To "File and Suspend" Before It Is Too Late

With the recent changes to Social Security rules, filing and suspending will soon be phased out, but there’s still time to take advantage of the strategy.

Here’s a quick guide to maneuvering this rule while it still lasts, but as always, you should work with your financial advisor to discuss further how you can use this and other strategies in your financial plan.

The phasing-out of the file and suspend strategy:

Before these changes, filing and suspending offered a great opportunity for many couples to maximize their benefits. According to Social Security rules, spousal benefits can only be paid off a worker’s record who has already filed for benefits. However, with the file and suspend strategy, one spouse who has reached full retirement age can file for Social Security Benefits and then immediately suspend the payment of those benefits. Using this strategy, the suspending spouse can file without having to receive their benefits-allowing their benefits to continue to grow (via delayed retirement credits until age 70), while their spouse can begin receiving spousal benefits.

Unfortunately, with the rule change, filing and suspending will no longer allow a spouse (or minor dependent) to claim benefits on the suspending spouse’s earning records. The person who is filing will actually have to begin taking benefits in order for his or her spouse or dependent children to be eligible for spousal or dependent benefits.

Who can file and suspend?

Trying to figure out if you make the cut? Here’s what to know. The new law takes effect on April 29, 2016, so if you turn 66 by April 30, 2016 (Social Security deems you have attained your age one day before your birthday), you can file and suspend. If you make the deadline, your spouse will be able to collect benefits off your earnings while your own benefits are left to grow.

If you were born between April 30, 1950, and August 29, 1950:

Some experts believe that the April 29, 2016 deadline does not necessarily mean that a beneficiary must turn age 66 by then in order to “file and suspend.” They argue since the Social Security Administration permits people to file their benefits application as much as four months in advance and there is a regulation that says if you’re not yet entitled to a benefit you may still request that benefits be suspended. What they’re saying in effect is that a worker reaching age 66 by August 29, 2016, could still effectively implement the file and suspend strategy.

Before you sign up:

If your birthday falls between April 30, 1950, and August 29, 1950, and you want to file and suspend, there are a few potential risks to be aware of. The SSA may not interpret the law changes to allow applications for people turning 66 after April 30, 2016, so there is a chance it will process your retirement benefit, while ignoring the request to suspend.

Additionally, if the SSA sees the timing as a missed deadline, it may grant your request to file and suspend, but not permit your spouse or children to collect on your work record, while your retirement benefits remain suspended.

TIP: Should you choose to attempt to take advantage of this strategy, pay close attention to your awards notice to ensure that everything has been processed and is working as you intended. If your request to file and suspend is denied, you can appeal the denial all the way up to the federal district court if necessary, however, this could be a long, messy process.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning For Life: There If (Or When) You Need It

Long-term care is one of the biggest and often unexpected expenses in retirement. Thinking about funding a long-term care plan now can save you later.

It seems we don’t pay much attention to long-term care until it directly affects us. Sure, it may pop up on our radar when consoling a friend who’s bearing the weight-physically and financially – of a loved one’s care or through the trials and tribulations of funding an aging parent’s assisted living needs. However, there may come a time when you or your spouse could face these challenges and decisions.  Few Americans place long-term care needs high on a list of concerns. In fact, more than half don’t have a plan for when they’re unable to independently bathe, dress, eat or get around, according to the 2012 State of Planning Survey.

Of course, it’s hard to think of ourselves in need of care, whether that’s adult daycare, assisted-living services or nursing home care. And, it can be hard to plan for future unknowns, when immediate costs demand your attention. But timing is critical when it comes to funding long-term care, and most consider mid-50’s the ideal age to consider long-term care insurance. Waiting much longer could bring much higher premiums.

Thinking about it now also gives you time to see how it fits into your overall retirement plan and could help protect your assets, preserve your independence, and ensure quality care. Plus, having that safety net could potentially relieve friends and family from the stress of unexpected financial and emotional burdens.

Don’t Underestimate Long-Term Care Costs
Long-term care is one of the biggest and often unexpected expenses in retirement. Most healthcare insurance policies, Medicare and Medigap/Medicare supplemental insurance don’t really cover what you’ll need, and only limited assistance is available from government programs. Like Medicare, healthcare insurance policies only pay benefits for short-term rehabilitative care. For a true long-term care plan, you need insurance that offers comprehensive coverage spanning years. And while an ample portfolio might absorb future long-term care costs, most people prefer to rely on quality insurance rather than pay out of pocket.

Funding Your Plan
Traditional long-term care policies can create a financial safety net should you become incapacitated and relieve your family of the burden of providing for your care-physically and financially. Covered costs can include round-the-clock home care, assisted living, adult daycare, and nursing home care. The premiums depend on many factors, including the type of policy and your age at the time of purchase. For business funded plans, long-term care premiums can be tax-deductible.

Funding your long-term care plan lets you make your own choices, while you still can, takes the burden off your children’s shoulders and, should the most expensive scenario occur, it would not devastate your retirement income plan for you or your spouse. There are many details to ponder when choosing the right policy. Talk to your financial advisor to help determine what coverage you may need and how you’ll fund it.

Guarantees are based on the claims paying ability of the issuing company. Long Term Care Insurance or Asset based long-term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59-1/2, may be subject to a 10 percent federal tax penalty in addition to any gains being taxed as ordinary income. Please consult with a licensed financial professional when considering your insurance options. Investing involves risk and investors may incur a profit or a loss. Past performance may not be indicative of future results. Diversification does not ensure a profit or protect against a loss. The foregoing contains general information only and is not intended to convey investment advice.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Six Things to Know to Weather a Market Downturn

It’s natural to be nervous when the markets head for negative territory. Keep a positive perspective with these six investing reminders.  It can be very unsettling for investors when their portfolios and the markets start heading for the red and fear sets in that all you’ve worked for and set aside for retirement and other goals could be at risk. Here are six investing basics to keep in mind during volatile times:

Periods of volatility are normal – All markets move in cycles and periods of steep contraction are completely normal. While the length of market contractions varies, periods of growth and expansion are usually waiting on the other side. Since 1973, stocks have fallen more than 10 percent and subsequently rebounded eight times.

Don’t Panic – Letting emotions dictate your investing strategy is a risk you should not take. Short-term decisions can have long-term consequences on your portfolio. Being patient can pay dividends.

Know your portfolio – Understand your investments and how specific investments represent different goals and outcomes. Keep in mind your risk tolerance and investment timeline, and if either has changed, consider talking to your financial advisor about rebalancing your portfolio. Diversification can potentially help balance risk during a downturn and mitigate extreme swings in value.

Stay the Course – Remember your financial plan and long-term goals and stick to them. A disciplined investment approach is the best strategy for handling market downturns and will likely enable you to participate when the markets rebound.

Consider opportunities – Working with your financial advisor, determine whether periods of volatility are a good time to take advantage of investment opportunities in line with your long-term plan.

You’re not alone – Your financial advisor is available to help you when you need it. He or she can guide you through difficult markets and be the independent voice and “information bodyguard” that helps you stay focused on your long-term goals.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: When the Road to Success Leads Back Home

Despite our best efforts, sometimes grown children aren’t quite ready to enter the real world.

The day our children move out of the house, graduate from college, or land their first full-time job isn’t always-or even often-the day they achieve independence. Life is full of twists and turns, and even young adults with the best laid plans can veer off course, turning to their parents for support when things get tough. One study, conducted by Arizona Pathways to Life Success, says that half of recent graduates ages 23 to 26 depend on their family’s financial support to meet their current needs.

There are many reasons why an adult may want or need to return to their family home. Difficulty finding a job after college ranks high on the list, but divorce and layoffs could factor in, too. And of course, you’ll want to help. But what happens when your soon-to-be divorced son escapes into video games, instead of searching for an apartment? How can you make sure your home is a launching (or re-launching) pad rather than an endless vacation?

You may be willing to welcome your children back home with open arms, a full refrigerator, free laundry and more, but there’s a fine line between helping and enabling. So what's a loving parent to do? It seems the answer lies in boundaries.  And the time to set them is before your children lug their suitcases back over the threshold. Let’s take a look at some of the things to keep in mind if you or someone you know finds an adult child heading home again.

Be Realistic
Returning home as an adult doesn’t carry with it the same benefits and privileges of childhood, for good reason. As parents, it might be your instinct to give your loved one as much as you can-the way you’ve always tried to in the past. But many adults supporting family members overestimate their ability to give and don’t think about how long they’ll be paying to feed another mouth.

Worse, many don’t think through what it could mean for their futures. They raid their own savings and retirement accounts, often using more than they intended to, and ignoring the fact that they may not have as much time to make up for the losses. Remember, too, that having less than you’ve planned for can greatly affect your quality of life in retirement.

To avoid this, try sitting down for a few hours as a family. You’ll need to discuss whether or not you can (or will) fund your child’s nonessential, such as trips, cellphone, entertainment and clothing expenses. If your new housemate is able, ask them to pay rent, help with bills or split the chores to ease the financial and physical burdens. Doing so reinforces responsibility-with the added benefit of putting into practice essential budgeting and money management skills. Creating a financial plan with your son or daughter also could help keep disagreements in check later on. Try turning to your advisor for help determining how you can strike a balance between assisting your children and making progress toward your own goals.

Should your meetings get a little contentious, try taking a break for a few hours, or even postponing the conversation until a day when everyone’s spirits are higher. As money issues arise, ask your advisor if they can offer some financial education to your children. Their objective guidance, along with your support, might be the push your loved one needs to rejoin the real world. Wherever your conversations end up, focusing on the love that you share will help guide you toward the right path for your family.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Giving and Taxes

There is a relationship among income, gift and estate tax which can appear complex. However, in reality most gifts are not affected by taxes.

This column addresses non-charitable gifts. Unlike a gift to charity, a gift to a person is not deductible by the donor for income tax purposes. A gift to a person is not taxable income to that person.

There is a federal gift tax but (with the exception of Connecticut and Tennessee) states don’t impose gift taxes. Here’s how the federal gift tax works: A person may make as many gifts as he/she wishes each year so long as the total value of gifts to each person for the year is within the amount of the “annual exclusion.” The annual exclusion is subject to adjustment each year and is $14,000 for 2015 and 2016. So Dad can give up to $14,000 of gifts apiece to each child, grandchild and neighbor without having to file a gift tax return, no matter how many children, grandchildren and neighbors he has. Furthermore, Mom can do the same. In fact, if Dad wants to give up to $28,000 per donee and Mom doesn’t want to give anything, Dad can “borrow” Mom’s annual exclusion for that year. However, Dad will have to file a gift tax return which Mom will sign to show she is allowing him to use her annual exclusion. (To avoid that requirement gifts can be made from joint property, as with a joint bank account.)

What if in one year Dad gives Junior $14,000 in cash plus a share of ABC stock which has a market value of $100? (Assume that Mom isn’t in the picture to donate her annual exclusion.) In that case Dad will be required to file a gift tax return to report the gift, but probably won’t have to pay any gift tax. The reason: Each of us has an exemption. For 2016 the exemption amounts to $5,450,000. So the effect of Dad’s gift is that his exemption is reduced by the amount over the annual exclusion, $100. The balance of his exemption continues through his lifetime and applies at his death to his estate. Thus, only if his taxable estate at death exceeds the balance remaining of his exemption ($5,449,900 in this example) will his estate be subject to estate tax.

Please note that any gift between husband and wife, either during lifetime or at death, is not subject to gift or estate tax, no matter the size.

There is a subtle but important issue that should be addressed in the discussion of giving. In the above example in which Dad gave Junior a share of ABC stock, the value of Dad’s gift is measured by the market value at the time of the gift, $100 in this example. Let’s say that Dad paid $50 for that share some time ago, so his “basis” in the stock is $50. When he gives the stock to Junior, Junior takes the same basis. So, if Junior sells the stock for $100, he has a capital gain to report on his income tax return of $50. On the other hand, if Dad gives Junior the stock at his death, the basis is “stepped up” to the value on the date of death. If that value is $100 when Dad dies and Junior sells the stock for $100 after inheriting it, Junior has no capital gain to report.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Trusts

A common estate planning device is the trust. A trust is simply an agreement between two people: the person who establishes the trust, who may be called the Settlor, the Grantor or the Trustor, and the person or institution who agrees to fulfill the terms of the trust, called the Trustee. There can be multiple Settlors, as, for example, a married couple; and there can be more than one Trustee. Quite often in estate planning the Settlor(s) and the Trustee(s) are the same person(s), as when a married couple creates a joint trust.

There are many different types of trust, too many to describe in the space of this article. In estate planning a “Revocable Living Trust” (RLT) is very common. This is a trust established during lifetime which the Settlor(s) can continue to change during lifetime. Usually the Settlor(s) and the Trustee(s) are the same person(s).

The RLT has several advantages. First, the RLT avoids probate for the assets with which it is properly funded during lifetime (for an explanation of probate, refer to our prior article on “Probate”). It is easier to change than a will. It provides a measure of privacy after death because, unlike a will, it is not recorded in the public records. (Beneficiaries, however, are entitled to a copy of the trust after the death of the Settlor.) It can provide lifetime management of assets for a Settlor who wants to turn that responsibility over to another person.

Contrary to popular belief, the RLT does not avoid estate tax. The RLT does avoid probate tax, but that tax is minimal. However, estate tax is not an issue for most Virginia residents. Unlike D.C. and Maryland, Virginia has no state estate tax. The federal government imposes an estate tax, but the current exemption is $5,430,000 per person.

Attorney fees are generally higher when an RLT is part of an estate plan because the trust is an additional document. Wills are still needed, although they are simple wills that “pour over” assets into the RLT at death. Do-it-yourself will and trust kits quite often lead to significant problems after death and are not recommended.

In order for an RLT to be effective in avoiding probate, it must be properly funded. This means that assets which would otherwise pass under the will (and thus go through probate) must be transferred to the trust during lifetime. It is common and most unfortunate for a Settlor to spend money to create a well-drafted trust but fail to fund it properly.

The RLT can provide for on-going trusts after the death of the Settlor. For example, a married couple may include a provision in their joint RLT that, if they are both deceased, a separate trust will be created for each child. A Trustee will be named for the trust, and the terms of the trust will be set forth. For example, the Trustee may be authorized to disburse for “health, education, support and maintenance” of the child and to disburse, say, half the balance of the child’s trust at 25 and the remaining balance at 30.

While the RLT can be very helpful in an estate plan, the need for an RLT can be overstated by advisors. There are many situations in which a simple will is quite sufficient. Each situation is different and should be reviewed with a competent advisor.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: How Divorce Affects Social Security Benefits

The 10-year rule and understanding your benefit options

When it comes to retirement income, Social Security typically accounts for the lion’s share, so it makes sense to understand how to maximize your benefits. As you may know, marital status is an important decision factor when it comes to timing benefits. But, did you know divorce also comes into play? Many people see divorce as a chance to start over, a clean slate, if you will. But just because your former spouse is out of the picture, doesn’t mean his or her Social Security benefits have to be, especially if he or she earns more money than you. In fact, your ex can actually mean extra when it comes to what you’re eligible to collect.

Here’s why. If you were married at least 10 years before your divorce, you may be eligible to receive Social Security benefits based on your ex-spouse’s record, assuming he or she is entitled to them. If your ex-spouse hasn’t applied for retirement benefits yet, you can still collect on his or her record if you’ve been divorced for at least two years. This holds true even if your former spouse has remarried. And, claiming benefits on his or her record has no effect on what a new spouse can claim. Of course, you have to qualify to do so.

To claim benefits on an ex-spouse’s record, you must be 62 or older and still single. In addition, your own work-based benefits must be less than the benefits you’d receive on your ex-spouse’s record. On the other hand, if you were the higher earner during your working years, be aware that your ex can receive benefits based on your record. The same qualifying criteria apply to your ex as well, and your own benefits will not be affected.

How divorce benefits work

Once you have reached full retirement age, you’ll have a choice between your own benefits and your spouse’s. You can choose to receive your ex-spouse’s benefits first, while delaying your own retirement benefits. Waiting longer could result in a higher benefit down the road based on the effect of delayed retirement credits. Keep in mind, though, that getting married again generally means you can’t collect on your former spouse’s benefits record, unless the subsequent marriage also ends, for whatever reason.

Prior to full retirement age, if you’re eligible for your own retirement benefits and ex-spouse benefits, you’ll receive a combination of benefits equal to whichever is higher. Basically, your benefits will be paid first and then your ex-spouses benefits will supplement the rest. Keep in mind the amount you receive depends on the age you begin drawing benefits. Generally, the longer you wait to begin claiming Social Security, the higher your benefit.

There’s no one-size-fits-all solution when it comes to Social Security and when to start drawing benefits. However, it’s important to talk to your advisor and determine how to maximize the benefits coming to you, including whether it makes sense to apply for benefits on your ex-spouse’s work record.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: When to Take Social Security - Timing is Everything

As you approach retirement, there are several decisions that can impact the level of income you will receive when you stop working. One such decision will be about claiming your Social Security retirement benefit.

More than half of eligible Americans take their benefits “early”-after they reach 62, even though they are locking in a permanent reduction in their monthly payment by as much as 25 percent. Still, “early” makes sense for many if they have little in savings and simply need the money. However, many do it because they can, without realizing they are giving up progressively higher payments each year they wait to claim, potentially losing as much as 32 percent than if they had waited to age 70. Surveys have shown that nearly 40 percent in this camp actually regret their decision to claim “early” once they realize how much they have given up in lifetime income. For some couples, this could translate into hundreds of thousands of dollars for not adopting a “wait to take” strategy.

This “wait” strategy makes even more sense when you consider the growing longevity for both men and women. On average, women reaching age 65 today can expect to live to age 86 and men to 84, according to the Social Security Administration. While that’s good news, it also presents several new challenges. A longer life increases the likelihood that you’ll have increased medical and long-term care expenses. The value of your nest egg will be more significantly impacted by increases in the cost of living over a longer term. And, quite simply, you could outlive your money.

This means that today, it’s more important than ever to make calculated decisions about when to begin drawing Social Security benefits within the context of your overall retirement income plan and to develop a strategy to maximize the value of it. Evaluating a number of decision factors can help you maximize your Social Security retirement benefits and even your survivor’s benefits. By addressing each of these factors as it pertains to you, you can develop a plan to get the most out of your benefits when combined with other sources of retirement income.

Once a plan is in place, you can then knowledgeably and confidently make your appointment at the local Social Security Office, which can be found via the website www.ssa.gov. Here you can find more information about the claiming process.

To recap, if you are considering applying for benefits soon, you’re likely concerned with four primary decision factors:
Your Age-when should you draw benefits?
Your Job-How do earnings impact your benefits?
Your Taxes-How are benefits taxed when combined with other retirement income?
Your Marital Status-How do spousal and survivor benefits work?

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: A Social Security Strategy Could Enhance Your Retirement Income Plan

What do you think of when someone mentions Social Security? Many people consider Social Security and retirement as one and the same. More than 90 percent of working Americans plan for Social Security to replace part of their current incomes when they leave the workforce. Sadly, what really happens is that, because of timing decisions, 75 percent of those already receiving benefits are drawing a reduced amount.*

Your benefits can be greatly affected by your specific circumstances during retirement. Your monthly payment amounts as well as your tax status can change if you decide to work part time or start a second career. There is also your and your spouse’s beneficiary eligibility to consider.

Baby boomers – on average – are living longer than any previous generation. While that’s good news, it also presents several new challenges. A longer life increases the likelihood that you’ll have increased medical and long-term care expenses. The value of your nest egg will be more significantly impacted by increases in the cost of living over a longer term. And, quite simply, you could outlive your money.

One important aspect of planning for your later years is factoring in the benefits you will be entitled to once you reach retirement age. The Social Security Administration website (http://ssa.gov/myaccount/) provides you with a useful online tool to determine your likely benefit amount as well as your earnings statement. Registration is required. But, once you establish an account you can check your earnings record and benefits estimate at any time, day or night. No more waiting for your quarterly statement to arrive in the mail!

It’s important to check your earnings once a year to make sure the SSA is recording your income accurately. If your income is being under-reported, it could reduce the amount of benefits you receive.

When you consider all these factors, it’s more important than ever to make calculated decisions about when to begin drawing Social Security benefits within the context of your overall retirement plan. Alongside other sources of income, Social Security is a critical asset to plan for in retirement, so it’s important to develop a strategy to maximize the value of it. Evaluating a number of decision factors can help you maximize your Social Security retirement benefits and even your survivor benefits.

Over the coming months, I’d like to present an overview of the critical factors that relate to your benefits including:
Your age: When should you draw benefits?
Your job: How do earnings impact benefits?
Your taxes: How are benefits taxed when combined with other retirement?
Your marriage: How do spousal benefits work?
*Source: Social Security Administration

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.