Lynn Brenner's Family Finance

Can Widow Claim Social Security After Tragically Brief Marriage?

Q: I married my late husband one month after he was diagnosed with stage IV metastatic pancreatic cancer. He was 56 and I was 54. We had been planning a wedding, and it really meant a lot to both of us to be married, knowing his time was limited. We were focused on his illness and treatments, and taking care of his mother who just had a stroke, and did not fully investigate the financial consequences.

We married in December 2004. He died a few months later in April, 2005. Since we were only married a short time, I was told I am ineligible for widow’s benefits. We had lived together for six years before we married but didn't qualify for common law marriage status. Since he wasn’t incapacitated over 6 months, he didn't qualify for Social Security disability benefits either. He was self-employed and didn’t have disability insurance; and the life insurance policy he had applied for in good faith was rescinded when his illness was diagnosed just before signing the policy.

I lost my job shortly after he died. My previous, ex-husband is 65, but I am told I don’t qualify for his benefit either, as I remarried! I can only find part-time work, and at 62, I don’t have enough to retire on. I am juggling 3 part-time jobs, and not bringing in enough to cover all my expenses, let alone save for retirement. I really need the widow’s benefits until I reach full retirement so I can save for the future and live modestly now. Any ideas?

 A:  Yes. Based on what you say, there's a good chance that you do qualify for a Social Security benefit based on your 65 year old ex-husband's work record.

It's true that you cannot claim benefits based on a former spouse's record if you are currently married to someone else. But you aren't currently married.

A 62 year-old unmarried woman with two deceased spouses, or two living ex-spouses over age 62, or a deceased spouse and a living 62 year old ex-spouse is eligible to claim a Social Security benefit based on the record of either former husband. (The rules are unisex; they apply for men, too.)

Your eligibility to claim a benefit from your first marriage depends on its duration. If it lasted for at least ten years, you qualify.

Here are the basic Social Security rules on how long you must have been married before you can claim benefits based on your spouse's record:

1. Your marriage must have lasted at least nine months to qualify you for a widow's benefit. There are exceptions, but unfortunately they don't apply to you. This rule is waived if your spouse was expected to live for at least nine months at the time of your marriage and he died accidentally or while serving on active duty as a member of a uniformed service.

2. The marriage must have lasted at least one year for you to collect a spousal benefit during your husband's lifetime.

3. It must have lasted at least ten years to qualify you for a benefit based on a former husband's work record, during his lifetime or after his death.

Your ex-husband is still alive. So if you do qualify for Social Security based on his record, it will be a spousal benefit, not a survivor benefit.

Assuming you're eligible, the maximum spousal benefit would be 50% of the amount your ex-husband is entitled to receive at his full retirement age.

But you must be 66 years old to get the maximum. (The determining factor is your age, not his.)  At 62 you can only claim 35% of the amount he gets at full retirement age; and the discount is permanent.

Moreover, at 62 you'll automatically be applying both for your own benefit (also permanently discounted because you're under 66) and for the spousal benefit based on his record. You'll get the larger of the two amounts.

Finally, until you turn 66, you'll be subject to the annual earnings cap I wrote about in my last post. The Social Security Administration will withhold $1 of benefit for each $2 you earn above $14,160 a year.

All of which is to say that this may prove a more slender financial lifeline than you really need. But a slender lifeline is better than none.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved.

Where to Keep Your IRA Beneficiary Forms

My May 12 post explained why IRA beneficiary designation forms are so important: They're the equivalent of a will for your IRAs.

I suggested that your safe deposit box is a good place to keep these forms. But I didn't make it clear that what you should keep are copies. The original forms must be filed with the IRA custodian -- i.e., the bank, brokerage, mutual fund company or other financial institution that holds the account.

Barry C. Picker, a Brooklyn NY tax accountant and IRA expert, points out that a hasty reading of my earlier post might lead some readers to the erroneous conclusion that it's okay to fill out a beneficiary form, sign it, and put it in your safe deposit box without ever submitting it to the custodian.

That could be disastrous!

"Say you filled out a form naming your son and sent it to the custodian. Now you change your mind and create a document naming your daughter, sign it, put it in your safe deposit box, but never submit it to the custodian. I don't think the daughter will get it," says Picker. "Definitely not without a fight from the son. I think what's on file with the custodian will trump it."

Just to make sure there are no misunderstandings about something so important, here's a step-by-step guide:

1. Ask your IRA custodian for a new beneficiary designation form and fill it out. (This is the easiest way to make sure you'll have a copy of the form, even if you aren't going to name a new beneficiary.)

Some custodians let you download or even complete this form online. Others simply ask you to send them written instructions, specifying the name of your beneficiary, his or her birth date and Social Security number, your relationship (e.g., spouse, son, daughter, friend), and the percentage of the account this person is to receive.

2. Make a copy of what you send the custodian, for your own records. You need this copy to prove that you submitted one, in case the custodian loses it.

3. Write a cover letter to go with the form. In your cover letter, you'll ask the custodian to send you written confirmation that he has received your beneficiary designation form.

4. Make a copy of the cover letter for your own records.

5. Send the original beneficiary designation form, along with the cover letter, to the IRA custodian.

6. Stay on top of the situation by making sure you receive that written acknowledgement.

6. Put your copy of the form, your copy of the cover letter, and the custodian's letter of acknowledgement in a safe place. It doesn't have to be a safe deposit box. But wherever it is, you should make sure that your executor and/or your lawyer knows where to find it.

You can change your IRA beneficiary designation as many times as you wish. Just make sure you always date it, and always have a copy of the current form.

Please send your questions to [email protected]. I'm sorry I can't respond personally to every email. Questions are addressed only online.

(c) Lynn Brenner, All Rights Reserved.

What Are the Financial Pros and Cons of Marriage?

Q: My partner and I are in our late 50s, and have been together for 4 years. We plan to be together for the rest of our lives, but we're wondering what the ramifications of marriage would be on finances.

I'm especially concerned about my home, which is solely in my name and will be paid off in a few years. If we were married and my husband needed long-term nursing home care, would my home be an asset that might be lost? I seem to remember when my grandmother went into a nursing home in her final years, they required that her home be surrendered as payment. We have agreed that my home will eventually go to my children. I don't want to risk losing it.

Are there any other financial pros or cons we should be aware of when considering whether or not to legally tie the knot? -- CB via email

 

A:  I can give you some pointers, but you and your partner should to consult a lawyer about the specifics of your situation. Look for an estate lawyer who knows elder law, and is therefore familiar with your state's rules about nursing home care.

Here's my earlier post about how to find an estate lawyer.

You don't just need legal advice on how to protect your house in the event that either of you needs long-term care. You also need to put your agreement that your kids will ultimately inherit the house in writing -- not because you distrust your partner, but because state law will supercede your agreement unless it's in a legal contract.

Your marriage is a unique relationship that you create together. But it's also a legal partnership with rights and obligations regulated by the government.

By federal law, your spouse is legally entitled to be the beneficiary of your employer-sponsored retirement plans, for example. State laws require that you leave a certain percentage of your assets – typically at least one-third – to your spouse. As a married couple, you also have the option to file a joint income tax return, which may substantially reduce your total tax bill. You’re automatically entitled to be each other’s dependents for health insurance and other employee benefits. And you’re automatically entitled to Medicare, and to Social Security spousal and survivor benefits based on each other’s work records. These marital rights can all add up to a very pretty penny!

But of course the one-size-fits-all marital inheritance rights don't fit every family -- and you don't have to accept them. You can sign a prenuptial or postnuptial agreement -- a contract in which both of you agree to waive your legal entitlements, and create a plan that’s more appropriate to your situation.

Naturally, prenuptial contracts are particularly important for people who want to safeguard some of their assets for their children by a previous marriage.

A good prenuptial or postnuptial agreement protects your spouse as well as your kids. In your case, for example, your agreement could say that your children will inherit your house when you die, but that your husband will have the right to continue living there for his lifetime if he survives you. (If so, the agreement should also spell out who will be responsible for the cost of maintenance and capital improvements to the house while your surviving spouse lives there.)

A prenuptial and/or postnuptial agreement allows both of you to leave your solely-owned assets to anyone you wish. But it won't protect those assets from legitimate third party claims -- and these include claims from your spouse's medical providers. By state law, spouses are responsible for paying for each other's food, clothing, shelter and medical care.

An attorney familiar with your state's laws can tell you if there are legal steps you can take to protect your house from potential future claims. (One way might be to put your children on the deed now, for example.)  

From what you say about your grandmother, it sounds as if Medicaid paid for her nursing home care. Medicaid is a joint federal and state program that provides medical and long-term care based on financial need. (Don’t confuse it with Medicare. Medicare is a federal program whose benefits are not based on financial need; it provides medical coverage, but doesn’t cover long-term care.)

Although Medicaid rules are state-specific, in general you must spend most of your assets before you can qualify for nursing home benefits. Your house is an exception, however. Even if you are receiving Medicaid nursing home benefits, in most states your house cannot be sold to pay for your care as long as you affirm your intention to return there. And even after your death, Medicaid cannot enforce a lien against your house to recoup benefits that it paid for your care as long as your spouse still lives there.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved

Life Insurance Is Always Paid to the Named Beneficiary

Q: My ex died in a car crash. Does my fifteen year-old daughter have a right to his life insurance, even though his same sex partner of nine years is the beneficiary? We are in Ohio, and I'm not sure what my rights might be. --RW via email

A: Bad news, I'm afraid. Children have no legal right to inherit from their parents.

Your ex-husband's life insurance policy goes the beneficiary he named. This would be true regardless of his beneficiary's gender, or age, or of their relationship. In fact, the named beneficiary of a life insurance policy doesn't even have to be a human being -- it could be a charitable institution, for example.

A life insurance policy is a contract between the insurance company and the person who pays the premium. It's protected by contract law -- and there is no stronger legal protection.

Whether or not your daughter gets anything is going to depend on whether or not her father left a will. If he did, and it doesn't name her, she gets nothing. It often shocks people to learn that the law lets you disinherit your children, but it's true -- and not just in Ohio.

The law doesn't let you disinherit your spouse -- but a former spouse has no inheritance rights.

It's a different story if there is no will. When a person dies without a will and without a surviving spouse, the state's intestacy law determines how his assets are divided. Most state intestacy laws -- including Ohio's -- would divide his assets among his surviving children.

But intestacy law only applies to property that can be left through a will -- and that doesn't include jointly owned property and accounts with named beneficiaries. An asset with a named beneficiary goes directly to that person. A jointly-owned asset automatically goes to the surviving owner.

You won't have trouble finding out if your ex left a will because a will is a public document. Besides, when a will is presented for probate, the decedent's next of kin must be notified. (Probate is the legal procedure in which a court validates a will.) If there's a will, your daughter will have to receive probate notification; and since she is a minor, you will be notified as her guardian.

If there isn't a will, and you have reason to believe that your ex owned assets in his name alone -- i.e., he owned assets that were not jointly owned and didn't have named beneficiaries -- your daughter has a legal claim to those assets. You can pursue that claim by asking the probate court in your county for an intestacy proceeding. That's the legal process in which an estate is distributed when there is no will. 

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved