Making Sure the Surviving Spouse has Income

The National Association of Personal Financial Advisors was recently polled determine common surprises encountered by their clients planning for retirement. A Chicago Tribune article highlighted one of the most common responses from those advisors:  a failure to set aside significant income for a surviving spouse.

It is one thing to examine how long an individual is expected to live, subtract that from their current age, and determine how much is needed each of those years. By no means is this an exact science, but it is somewhat intuitive to roughly understand how much a single individual needs to retire. Things get more confusing, however, when spouses get thrown into the mix. As one planner interviewed for the article noted, "One thing people don't plan for is the reduction of income if a spouse or partner dies."

Think about Social Security. When two partners are alive, each may receive Social Security benefits. However, if one of the spouses dies, his or her income will disappear. Even taking into account a larger benefit for the surviving spouse, the overall family income will be lower than before. Similar problems can arise for those living off a pension. A spouse's death may cause the pension income to dry up. If not accounted for, this can thrown some seniors into a financial tailspin. One professional interviewed for the Chicago Tribune story told of a recent client whose retirement income dropped 35% following her husband's passing, but who found only a 10% decrease in expenses. This ultimately required a significant lifestyle change for the woman at the very moment when she craved stability following the loss.

Various tactics can be used to minimize the long-term consequences and provide more stability no matter what the future holds. For instance, a higher-earning spouse may choose to refrain from taking Social Security. This may earn him or her "delayed credits" up to 8% a year until the age of 70. If that spouse passes on, the surviving spouse may be able to switch to the value of the other's benefit, including delayed credits and cost-of-living adjustments. For pensions, a "joint and survivor annuity" might be appropriate, where less is paid out monthly for the peace of mind of knowing that income will continue even if the pensioner dies first.

Documentary on Financial Elder Abuse Starring Mickey Rooney

A new documentary entitled Last Will and Embezzlement that is slated for release tackles senior financial exploitation.  The film will touch on all aspects of the problem with the ultimate goal of raising awareness of the problem to ultimately lower the incidence of mistreatment.

The centerpiece of the film is an extended interview with perhaps the most well-known advocate against elder financial abuse: Mickey Rooney.  The 91-year old film star testified before Congress last year while detailing abuse that he suffered at the hands of a family member.  His purpose in appearing in the film is to dispel the myth that this sort of exploitation occurs only to those who live alone or have few close friends and family members.  In fact the documentary tagline is: "If it can happen to Mickey Rooney, it can happen to anybody."

The filmmaker was motivated to take on the project after watching her father fall victim to abuse. She explains how her father was in a nursing home, when mysteriously, a stranger entered the facility and claimed to be his son. The senior had just lost his wife and was suffering from severe Alzheimer's at the time. The filmmaker states that her father "would have signed the Magna Carta" if it was placed in front of him at that point in his life.

The scammer used his lie about being a relative to acquire sensitive financial information and exploit the ailing senior. The man also acquired a Power of Attorney over the senior, making it incredibly difficult for the family to unravel the problem down the road. It ultimately took two years before the woman finally learned of the depth of the exploitation.  Her advice: "Set it up so you don't become a victim...know the laws against elder abuse."

Since the Supreme Court upheld the Affordable Car Act, The Elder Justice Act contained in it can be implemented.  It aims to combat financial, physical, and mental crimes and abuse committed against the elderly.  Some help may also be coming in the form of federal legislation. New York Senator Chuck Schumer, for example, is fighting for stepped up federal laws requiring more mandatory reporting of suspicions of elder mistreatment. While these new rules may help, by no means do they offer clear avenues to eliminate all mistreatment.

Planning and oversight by the family are crucial preventative steps. Obviously having elder law attorneys and other advocates in the mix is one way to ensure abusers aren't able to obtain legal documents and wreak havoc on the life of a vulnerable senior who may not fully understand the situation.  Overall, it's best to have comprehensive oversight and proper preparation before disability or cognitive vulnerability sets in.

Losing the Family Home Over a $400 Tax Bill

Senior care advocates repeatedly remind families that oversight is needed in some cases to ensure seniors do not fall victim to financial exploitation. Beyond protecting against scammers and hucksters, many seniors are facing a new financial crisis that is not rooted in illegal misconduct. When on a fixed income and struggling with confusing money issues, some seniors might face incredibly severe financial penalties for falling behind on certain bills or taxes.  CNN Money reported this week on a growing number of individuals who are losing their homes because they owe relatively small sums.  A report from the National Consumer Law Center (NCLC) detailed how some states have outdated laws that allow states to sell tax liens on delinquent properties.  This means that instead of the government having a lien on a piece of property that owed back taxes or bills for services like water and gas, private investors own the lien.  The investor then collects interests on the overdue bill or, in some cases, forecloses on the home.  Some states allow investors to charge staggeringly high interest rates, from 15% to 50%.

Seniors are particularly vulnerable to falling behind in this way, either because of challenges of being on a fixed income or confusion with the bill paying process.  The NCLC report details one case of an 81-year old woman who lost the home she lived in for 40 years because she owed $474 on a sewer bill.  The NCLC report noted that seniors with cognitive diseases, like dementia and Alzheimer's are prone to fall victim to this situation.  It is very confusing to follow the changing financial arrangements.  The seniors are usually notified of the situation in legalese that many do not understand.  As a result, they do nothing, rack up interest debt, eventually default, and often lose their home.  The report elaborated that seniors without family members or who have not visited with elder law attorneys and other professionals were more likely to be hurt by this situation.  In one case, an elderly woman who lived alone without family fell back $5,000 on taxes.  Eventually, she lost her home and lost about $150,000 in equity that she had accumulated.

Advocates are working to change laws so that interest rates are lowered and adequate warnings are provided to homeowners.  It remains unclear if those efforts will be successful, and so putting preventative measures in place now is prudent for local seniors to avoid this situation.

Planning for Couples with an Age Gap

Each estate plan is slightly different, but there are some challenges in estate planning that present themselves to different couples.  One common challenge is planning for married couples who have a significant age difference.

Perhaps the most obvious issue involves overall financial planning.  With age differences, one spouse is likely to outlive the other, perhaps by a considerable length of time.  The younger spouse may therefore feel more comfortable taking certain risks than the older spouse who is more likely to suffer from short-term financial dips.  It is important to balance the interests of both partners.  Couples of different ages require unique planning so that time horizons are meshed.  Retirement planning can be tricky if one spouse plans on working longer.  Similarly, long-term health care planning will be implicated by the age differential.  One spouse may need care earlier, though it is usually not prudent to automatically assume that the younger spouse will be able to provide the needed care.

A recent Morning Star article touched on many of these topics and mentioned a few other issues to consider for couples in this situation.  One point made in the story is that these couples often need to prioritize long-term care and life insurance.  Planning for disability is particularly crucial to couples, because family finances must account for both partners.  If one spouse is injured or faces a medical complication and is disabled, then family finances may be decimated if expensive, long-term care is needed.  In the worst-case scenario, assets are exhausted to care for one spouse while the second spouse remains healthy.  In order for the sick spouse to receive Medicaid support, assets for the entire couple must be below a certain level.  The healthier spouse can be left with little to no assets.  In these situations it is critical to get professional advice, as certain strategies can be employed in order to save as many assets for the second spouse as possible while still allowing the ill spouse to qualify for Medicaid.  This is particularly true for spouses with large age differences, because the younger spouse often needs assets to last for many years to come.

Family Feuds Over Inheritance While Parents Are Alive

Family inheritance disputes are extremely common.  In most of the cases that make headlines, a famous individual passes away without conducting thorough estate planning and various family members publicly feud to get their fair share of the individual's wealth.  Family disagreements regarding an inheritance are quite common, particularly when no planning is done and the matters must be left up to the court-centered probate process.  Sometimes, though, feuding occurs even before the family matriarch or patriarch passes away.  For example, a recent Sacramento Bee letter explored a situation where two siblings seemingly isolated an aging mother from other siblings. Claims of undue influence and abuse were made. The three ostracized siblings were left wondering what options were available to ensure they received their share of the inheritance.

The case: The 80-year-old mother drafted a will specifying that she wanted all of her assets split evenly between her children.  However, after the will was created, two siblings convinced the mother to take out loans totaling more than $100,000 for their children's college education and to purchase a house.  One daughter obtained power of attorney over the mother and moved into the mother's home.

The three remaining siblings became concerned about the situation, questioning whether their mother was being taken advantage of, and reported their suspicions to local authorities.  The mother is now on Social Security and has no assets other than her home, which may even have been used as collateral on the loans. The siblings are left wondering if they will have any inheritance at all.

This situation presents a wide range of legal issues, and the case is a reminder of the dangers of relying only on a will.  Legally, the resolution of these issues will depend on a range of factors, including whether the siblings signed promissory notes on the loans and whether any changes to the will were made in the time that the daughter has lived with the mother.  No matter how it ends, it is likely to be a contentious, drawn-out process.

The lesson: Parents can ensure that their children never deal with this situation by locking down inheritance affairs early on with more comprehensive legal tools, like trusts. Children are well-served by encouraging their parents to deal with these issues as soon as possible since planning will not only settle inheritance issues, but also save on taxes and provide for potential disability.

Lack of Autopsies after Elderly Die Conceals Health Flaws

Abuse in nursing homes and suspicious deaths among seniors often go undetected because post-mortem examinations for seniors are becoming less common. In 2011, a National Public Radio (NPR) News and ProPublica investigation found that because of a lack of resources (both financial and staffing) many jurisdictions stopped doing autopsies on people over the age of 60 unless it was obvious that a violent death occurred.  This is as the population of individuals over the age of 65 increases in America. The investigation has uncovered more than three dozen cases in which alleged abuse, neglect, and murder of seniors that were not discovered by authorities. Only after a whistle-blower or relative pushed medical and law enforcement officials for answers were the cases reopened.

The latest report tells the case of a 76-year-old man whose death was tied to a combination of ailments related to poor care and  an "inappropriate administration of powerful antipsychotic drugs, which have potentially lethal side effects for seniors." His original death certificate said "heart failure brought on by clogged arteries." The real reasons for his death only came to light after a nursing-home staffer spoke up.  The reporting reveals that the number of U.S. autopsies performed on seniors dropped from 37 to 17 percent between 1972 and 2007. 

In the article, Dr. Kathryn Locatell, a geriatrician who specializes in diagnosing elder abuse, said: "We're where child abuse was 30 years ago. I think it's ageism -- I think it boils down to that one word. We don't value old people. We don't want to think about ourselves getting old."


To read the whole article, visit ProPublica.org.

Home Care Workers: the Minimum Wage Controversy

Seniors typically obtain peace of mind knowing that they will be able to receive late-in-life care in an ideal setting and that the care will be of top quality.  These simple goals should not be out of reach for any older community member.  However, many seniors will be forced to deal with less than adequate care, often in institutional settings where they would rather not live.

Part of the problem is that many will not have planned for late-in-life care.  Staying in one's home while aging usually requires advance planning and ensuring that a home care worker is actually providing an appropriate level of care. Recently there has been a shortage of quality home care workers.  One of the biggest problems is that for a period these workers were exempt from minimum wage laws.  When Congress passed minimum rights legislation, all home care workers were lumped into the category of exempt employees who acted as "companions."  This was the case even for workers who engaged in a wide range of physical labor helping seniors bathe, dress, use the facilities, walk, get exercise, and eat properly.  Of course, it seems intuitively unfair for these workers to be forced to live in dire poverty at incredibly low wages and no overtime pay.

Fortunately, the legal error was recently corrected.  One reason the law took so long to change was that many of the individuals who fill these roles, often including women and those who are not native English speakers, have few advocates.  Also, as a result of the prolonged period of abysmal pay, advocates are worried that there is a shortage of well-trained, capable home health care workers.  The need for these workers is expected to skyrocket in the coming decades.

The shortage of quality caregivers makes it important for local residents to conduct proper research when deciding on an appropriate home care provider for their loved one.  Therefore, most advocates recommend going through a qualified agency to find these assistants.  Most agencies are required to perform multi-state background checks, screen for drug use, and require references. The risk of abuse or theft is always much higher when home care workers are unsupervised and unaccountable.  Home care is of little value if that home care worker is inadequate.