Elder Law Firm of Steve Bailey

Signing up for Medicare as an Elder – What You Need to Know

US citizens become eligible for Medicare when they turn 65. If you are months away from your 65^th birthday, it’s best to get started on your Medicare application. Here’s what you should know about Medicare:

Types of Medicare

There are four types of Medicare:

• Part A covers inpatient services in hospitals and nursing facilities
• Part B covers doctor services, outpatient services, preventive services and medical supplies
• Part C is offered by medical insurance companies that contract with Medicare to provide all Part A and Part B benefits in a single plan, in addition to extra services such as dental and vision care. Sometimes, it may even cover prescription medication.
• Part D covers prescription medication.

When Does Enrollment Begin?

Enrollment for Medicare begins as you approach your 65th birthday. It lasts seven months split into three months before the month of your birthday and three months afterward. For example, if you are to turn 65 on 1 January 2018, enrollment begins on 1 October 2017 and ends on 30 April 2018.

How Do I Enroll in Medicare?

If you already receive Social Security benefits or Railroad Retirement pay, you do not need to enroll in Medicare since it happens automatically (for Part A and B) on the first day of the month of your 65^th birthday. You should receive your Medicare card in the mail, three months prior to your birthday.

If you are approaching 65 and you are not getting social security or railroad retirement pay, you should enroll in Medicare. You can do this by either calling Social Security at 800-772-1213 or by visiting a local Social Security office.

If you are actively employed and your employer offers health insurance coverage (COBRA coverage and VA benefits do not count), you may not have to apply for Part B coverage immediately. You may want to consult with an elder law attorney to determine if it would be reasonable to delay enrollment in the coverage.

Payments for Part B Medicare

Every person pays for Part B Medicare insurance. The funds are usually deducted from your Social Security payments.

Premiums are calculated every year. The 2017 standard premium was $134. However, many people pay less after cost-of-living adjustments. Premiums may be higher for people with high incomes and for people who did not enroll when they were eligible to do so.

Medicare Part C Coverage

Insurance companies contract with Medicare to provide seniors with Part A and B coverage in a single plan. These plans are also called Medicare Advantage plans. These plans may also cover medication and dental, vision and wellness care.

Medicare Part D

If you do not have Part C cover that’s inclusive of medication, you should enroll for Part A, B and D coverage. When you delay enrollment in Part D, you risk paying 1 percent higher premiums for every month you were eligible to enroll but delayed.

What is a Medigap policy?

Because of its numerous deductibles, coverage exclusions, and copayments, Medicare often only pays for 50 percent of all seniors’ medical costs. The balance can be settled by private insurers offering Medigap policies to cover the gaps not covered by Medicare. You can check local insurers to see if they offer a Medigap policy.

References:
“Turning 65? What You Need to Know about Signing up for Medicare”
“Enrolling in Medicare”
“What's Medicare?”
“Ready to Join Medicare?”

Major Life Change Means Update to Estate and Financial Plans

“To be successful in achieving your financial goals, you need to update your financial plan when you have a major life change.”

You did the right thing: you worked with an estate planning attorney to create a plan to achieve your long-term financial and legacy goals. However, since you created your plans, you may have experienced changes, and some of these changes may impact these plans.
NASDAQ’s recent article, “6 Reasons to Update Your Financial Strategy Now,” gives us some major life changes and stages that call for an update to your estate plan.

Marriage. It’s important that you both have an understanding of the family finances and be able to set goals together. Both of you should be knowledgeable about the monthly budget, insurance, estate planning and investments.

Divorce. Whether you are trying to maintain your financial situation or recover from the dissolution, there are some key areas that require updating, such as your financial status, a new budget, reviewing credit reports, adding to an emergency fund and analyzing your estate plan. Don’t forget to update your beneficiary designations.

Children. According to the U.S. Department of Agriculture, the typical middle-income, married parents of a child born in 2015 can anticipate spending $230,000 for food, shelter, and other necessities to raise a child up to age 18. That doesn’t include the cost of college. Review your insurance policies and estate plan to make sure that your family is protected.

Career or Job Change. Whether you were unemployed due to termination, merger or layoff, important financial concerns include loss of income, medical insurance and other benefits.

Retirement. Plan properly to avoid the risk of not outliving the retirement that you thought you would have to see you through.

Loss of a Spouse. This sad reality can be overwhelming from both an emotional and financial standpoint. An estate planning attorney will be able to help you through the process of tasks and legal issues to be resolved.

Your estate plan should be reviewed and updated on an annual basis or as your goals change.

Reference: NASDAQ (January 26, 2017) “6 Reasons to Update Your Financial Strategy Now”

Take a New Look at Long-Term-Care Insurance

Take a New Look at Long-Term-Care Insurance

“If you can't afford traditional long-term-care insurance, a new strategy that combines life insurance with long-term-care benefits may be more practical.”

Many individuals who’ve been unsure of traditional long-term-care insurance, are considering “hybrid” policies that combine life insurance with long-term-care benefits. But many still wonder if these policies really are a better way to manage the risk of catastrophic long-term-care costs.

Kiplinger’s article, “Hybrid Insurance Policies Gaining Steam," notes that the most popular hybrids attach a long-term-care rider to a whole or universal life insurance policy. People can usually pay a single up-front premium. If they never need long-term care, their heirs will receive the death benefit.

By paying a single premium or series of set premiums, you don’t have the risk of premium increases in the future. That’s an issue that has been a negative feature of traditional long-term-care policies.  Many people have also balked at the “use it or lose it” concept that goes with traditional long-term-care policies. A hybrid policy’s potential death benefit eliminates that concern. However, those advantages aren’t as clear as they appear, since traditional long-term-care policies that are priced today have a low risk of future premium increases, according to new research by the Society of Actuaries. By giving up a large chunk of change for a hybrid policy, you’re giving up earning a market rate of return on that money.

When comparing hybrid products against traditional long-term-care insurance policies, think about how you might invest the money that’s not spent on premiums. If you would look for a moderate return and might need the money to cover living expenses, stand-alone long-term-care insurance may make more sense.  With either choice, be sure to also consider inflation protection and evaluate how much you value a hybrid policy’s life-insurance component—which adds extra cost. For many of those purchasing hybrid products, life insurance is an afterthought.

If you really need life insurance, a hybrid product may not be the best choice.  This is because a long-term-care claim will decrease the death benefit. If you need both long-term-care and life-insurance protection, buy both. Don’t merely take care of whichever one comes first.

Compare multiple long-term-care coverage options, and be sure to request and read the life insurance policy illustration, which outlines policy premiums, death benefits, cash values and other details.

Reference: Kiplinger’s (January 2017) “Hybrid Insurance Policies Gaining Steam"

Carrie Fisher’s Daughter May See Millions from Mom’s Estate

“Carrie Fisher’s daughter may end up making more with a claim on Disney’s insurance policy than the family will inherit from a century of show business.”

TrustAdvisor, in “Carrie Fisher and Debbie Reynolds Dynastic Deaths Give Offspring Legacies and Millions to Inherit Overnight,” points out that Carrie had formal next of kin, her daughter Billie Lourd. She will inherit the house, money, and presumably her mom’s French bulldog, despite the fact the Star Wars actress didn’t have a valid will (How many times have you heard about big star with no will? Lots!).

Billie is almost certainly Carrie’s primary heir, and the value of her mom’s estate is increasing: the market price of everything associated with the Star Wars princess has tripled after her death. This is similar to what happened with other creative people and “collectible” celebrities like Prince and David Bowie.

Carrie owned a $14 million Los Angeles property filled with memorabilia, so whatever the family doesn’t want as a keepsake might bring big money in an auction. But she didn’t cash in on her Star Wars merchandising rights the way many stars do. She signed her Princess Leia image away to Lucasfilm at the beginning of the series. As a result, Disney owns it now for use in CGI “appearances” like the recent $440 million Rogue One. If they make money by putting that likeness on merchandise, it will keep the character “alive” well after her death. In essence, Disney wouldn’t be obligated to her estate for anything more than a gratuity for redubbing a few lines.

But Disney and Lucasfilm wanted a more mature Princess Leia for future films, and Carrie reportedly received several million to appear in the last one. Disney also had a $50 million life insurance policy to protect itself from having to rewrite the story around a dead star.

Counting Carrie’s house and the pay from the recent movie, it’s estimated that she might have left $25 million in assets. She also owns 0.0025% of the profit on the original Star Wars, which means that for every $1 million a year it grosses from here on out, her estate receives $200 a month in perpetuity. That quarter point may have already earned her $9 million on the film in her lifetime.

Reference: TrustAdvisor (January 3, 2017) “Carrie Fisher and Debbie Reynolds Dynastic Deaths Give Offspring Legacies and Millions to Inherit Overnight”

Life Insurance Settlements in Retirement and Estate Planning

“Today’s seniors face many unforeseen challenges, particularly as costs continue to rise for everything from groceries to medications.”

Many retirees are just getting by without a financial cushion to pay for emergency expenses. According to Insurance News Net’s recent article, “5 Key Questions Asked About Selling a Life Insurance Policy for Cash,” the ongoing erosion of assets threatens an entire generation of seniors currently having trouble paying retirement costs. Unfortunately, it might be even worse news for baby boomers and Generation Xers. An Associated Press analysis of savings data from the Federal Reserve found that 35% of households in their prime earning years have saved nothing in a retirement account and have no access to a traditional pension.  Therefore, for seniors facing a financial crisis or those wanting to shore up their emergency funds, a life settlement may be a necessary option.

A life settlement, also termed “a life insurance settlement,” is a financial transaction that allows a senior to sell an existing life insurance policy for immediate cash. A retiree could, for instance, sell a policy for a percentage of the overall death benefit. Even though many see life insurance as a regular expense, it’s actually an asset with an inherent value that can be sold to a life settlement company.

Most people purchase life insurance for a specific reason, like providing for a surviving spouse and family.  However, over time a person’s need for life insurance may change. In such situations, a senior may no longer need the life insurance, even though it served a valuable purpose for years.  The cost of life insurance may also increase over time and paying the premiums may become much harder to manage. In these instances, it may make sense to consider a life settlement by selling an existing life insurance policy.

Most individuals who pursue a life settlement are in their mid-to-late 70s and typically not in great health. They have an existing whole life or universal life policy … or a term policy that is near the end of the term (which can be converted). The face value of the insurance policy is a big factor in determining the offer. Life settlement companies typically want policies in excess of $500,000.  However, with a new transaction known as a retained death benefit, a senior also may be able to sell a portion of a life insurance policy and keep some coverage intact for beneficiaries.

A life settlement offer is based on a number of factors such as the face value of the policy, the amount of premium needed to keep the policy in force, the seller's medical history and the seller's life expectancy.

Every life settlement transaction is different, and a final offer will not be made until all the different factors are evaluated. Generally, a policy owner receives between 15 to 20 % of the policy's face value.

Reference: Insurance News Net (December 28. 2016) “5 Key Questions Asked About Selling a Life Insurance Policy for Cash”

Some New Year’s Resolutions Worth Keeping

“If you really want a sense of accomplishment, take care of money tasks that don't require ongoing discipline and that you typically don't have to repeat every year.”

Some basic money tasks are in the "one and done" category, but there are some others you may have to revisit as your life changes. Nonetheless, they’ll all give you a sense of progress toward your financial goals, says the Palm Beach Post in its recent article, “6 money resolutions you can actually keep.” Let’s look at the list:

1. Consolidate your retirement accounts. This makes it easier f
   or you to watch your investments and can save you money. Investment choices in 401(k)s typically cost much less than those available outside of the plans, and many large-company 401(k)s offer very inexpensive funds that are not available to retail investors. If you have a good 401(k), ask your employer if you can transfer your old retirement accounts into it. Otherwise, look at rolling old accounts into a single IRA at a discount brokerage. There are also low-cost target-date retirement funds that eliminate the ongoing need to rebalance your accounts.
2. Purchase life insurance. Not everyone needs life insurance, but if you do, you may need a good-sized chunk. If you have others depending on your paycheck or your child-rearing services, you should figure out your future obligations and subtract your current resources to see how much insurance to purchase. It is recommended that you get quotes from several carriers. Most people select term insurance, which is much less expensive than permanent insurance, which has an investment component, like whole life.
3. Set up savings categories. You can avoid having to scramble to pay a big bill like property taxes, if you set up savings accounts for specific costs. For each goal, calculate how much you'll need to pay the bill when it's due, and divide by the number of paychecks you'll get between now and then. Set up an automatic transfer for that amount, and the cash will be there when you need it.
4. Refinance student loans. If you have good credit, you may be able to lower the interest rates on your student loans. Refinancing to a lower rate is a slam dunk for private student loans, but with federal student loans, you'd be giving up some pretty important protections, like income-based repayment plans and more generous forbearance and deferment options. It might be worthwhile if you have a good job and can pay off the loans quickly. Otherwise, refinance private loans separately and apply the amount you save to your federal loan bills to help pay them off more quickly.
5. Write your will. An experienced estate planning attorney can help you create a will that expresses your wishes for your assets at death.
6. Check on beneficiaries. Review your beneficiary designations and most of the other tasks on this list, after any major life change, such as a birth, adoption, marriage, divorce or death.

Otherwise, count these as resolutions you’re able to keep.

Reference: Palm Beach (FL) Post (December 26, 2016) “6 money resolutions you can actually keep”

Part B Premium Will Rise Slightly for Most Medicare Beneficiaries in 2017

The Centers for Medicare and Medicaid has announced the Medicare premiums, deductibles, and coinsurances for 2017. After holding steady at $104.90 a month for four years, the standard Medicare Part B premium that most recipients pay will rise 4 percent to about $109 a month.  However, approximately 30 percent of beneficiaries will see their Part B premium rise from $121.80 to $134 a month, a 10 percent increase.  Meanwhile, all beneficaries will face a higher Part B deductible, which will go from the current $166 to $183 in 2017.

The reason for the two different Part B premiums is that about 70 percent of beneficiaries are protected from any increase in premiums when Social Security benefits remain stagnant, as has been the case for the last several years. Medicare beneficiaries who are unprotected from a premium rise include those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who receive both Medicare and Medicaid benefits.

For beneficiaries receiving skilled care in a nursing home, Medicare's coinsurance for days 21-100 will inch up from $161 to $164.50.  Medicare coverage ends after day 100.  (For more on Medicare's nursing home coverage, click here.)

Here are all the new Medicare payment figures:

• Basic Part B premium: $109/month (was $104.90)
• Part B premium for those not protected: $134 (was $121.80)
• Part B deductible: $183 (was $166)
• Part A deductible: $1,316 (was $1,288)
• Co-payment for hospital stay days 61-90: $329/day (was $322)
• Co-payment for hospital stay days 91 and beyond: $658/day (was $644)
• Skilled nursing facility co-payment, days 21-100: $164.50/day (was $161)

So-called "Medigap" policies can cover some of these costs.  For more on these policies, click here.

Higher-income beneficiaries will pay higher Part B premiums:

• Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $187.50 (was $170.50).
• Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $267.90 (was $243.60).
• Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 will pay a monthly premium of $348.30 (was $316.70).
• Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more will pay a monthly premium of $428.60 (was $389.80).

Rates differ for beneficiaries who are married but file a separate tax return from their spouse:

• Those with incomes between $85,000 and $129,000 will pay a monthly premium of $348.30 (was $316.70).
• Those with incomes greater than $129,000 will pay a monthly premium of $428.60 (was $389.80).

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary's premiums. So the income reported on a beneficiary's 2015 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2017. Income is calculated by taking a beneficiary's adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary's MAGI decreased significantly in the past two years, she may request that information from more recent years be used to calculate the premium.

Those who enroll in Medicare Advantage plans may have different cost-sharing arrangements.  The average Medicare Advantage premium is expected to decrease slightly, from $32.60 on average in 2016 to $31.40 in 2017. 

For Medicare’s press release announcing the new premium and deductible amounts, click here. 

For Medicare's "Medicare costs at a glance," click here.

For more about Medicare, click here.

Planning on Long-Term Care

“Most people realize that they and their loved ones are likely to need long-term care as they progress through old age. But misconceptions abound concerning the best way to get that care paid for.”

Long-term care is assistance with personal self-care needs and can be help at home or in a skilled nursing facility for medical needs or activities of daily living, like eating, dressing, personal hygiene, using the bathroom, and even household chores and money management.

About 80% of people who need assistance get it at home, according to caregiver.org, the website of the Family Caregiver Alliance. This organization was cited in the Queens Chronicle’s recent article, “Shielding assets when it’s time for Medicaid.”

Long-term care also encompasses post-hospital rehabilitation, even if the person eventually returns home to independent living.

Many people are under the impression that once a senior gets into Medicare at age 65, along with a Medicare supplement plan, his or her long-term needs are totally covered. Not quite. Medicare and Medicare supplement plans cover doctor visits and hospitalizations for acute and chronic illnesses, but not long-term care. Medicare and Medicare supplements only cover up to 100 days of rehabilitation. Those seniors who require more rehabilitation or need assistance for the rest of their lives will need to pay for it out-of-pocket, use long-term care insurance purchased in advance, or qualify for Medicaid.

Anyone under 60 years of age should be investigating long-term care insurance. Although people over age 60 might be able to buy LTC, they might not qualify for health reasons. Plus, the premiums become very expensive as one gets older. This could result in an insured paying an insurance bill for years, and then discover that he or she can’t afford the expense. They end up without coverage when it’s needed. Another option is hybrid LTC insurance. This provides a set dollar amount of coverage that will goes to heirs as a life insurance payout if it isn’t used for care during the insured’s lifetime.

Those with moderate incomes who are less likely to be willing to pay for long-term care insurance must do Medicaid planning, as Medicaid eligibility is limited to those with very limited assets.

It’s possible to transfer assets to someone else, such as a child, and have them excluded from consideration for Medicaid eligibility. But it has to be done correctly. This means the transfer has to be done five years or more before applying for nursing home care. If the applicant doesn’t satisfy this “look back” provision, they’re responsible for covering the cost of the care.

Giving your home to a child or adding the child’s name to the deed with yours isn’t the best option because this causes the loss of tax advantages for both the homeowner and the heir, and reduces or eliminates the parent’s control over the home.

Speak with an elder law attorney about your options, as this is not a do-it-yourself project and the consequences of making a mistake can be catastrophic.

Reference: Queens Chronicle (October 6, 2016) “Shielding assets when it’s time for Medicaid”

Medicare Coverage Explained

“The federal health insurance program for people who are 65 or older and for certain younger people with disabilities, Medicare is managed by the Centers for Medicare & Medicaid Services.”

The Queens Chronicle’s article, “What Medicare does and does not cover,” explains that Social Security works with the Centers for Medicare & Medicaid Services (CMS) by enrolling people in Medicare. But they’re not the same, and people frequently confuse the two.

A person can apply for Social Security benefits at age 62, with eligibility for Medicare three years later. Initial eligibility begins three months before the 65th birthday, extending through one’s birth month, and continuing for the next three months. New enrollers have a seven-month window with open enrollment for 2017 coverage from October 15 until December 7.

Many people forget to file for Medicare. Sometimes it’s because they’re still working or because they already have another form of health insurance. This can be a costly mistake, along with knowing what Medicare does and doesn’t cover.

Home-care services can become prohibitively expensive and can often quickly deplete one’s life savings.

Medicare pays in full for the first 20 days in a nursing home and then in part for another 80 days. That can leave a patient responsible for a hefty co-payment. In addition, to be eligible, an individual must have a skilled-care need, like physical therapy.

Long-term care insurance might help, as it covers home care, assisted living care, and nursing home care. But many folks can’t get insurance due to the cost or an existing physical condition.

There are two main ways to be covered: original Medicare—Parts A and B—or a Medicare Advantage Plan (Part C). Some choose additional coverage like Medicare Supplement Insurance, which, along with Parts A and B, is also replaced by the Medicare Advantage Plan, or Medicare outpatient prescription drug coverage (Part D).

If you require services that Medicare doesn’t cover, you’ll have to pay for them yourself—unless you have other insurance or you’re in a Medicare health plan that covers them. Medicare covers 80% of medical bills and, to cover the difference, many seniors purchase Medicare Supplement Insurance, which costs around $200 to $300 per month. There’s also a Medicare Advantage Plan, or Part C. This replaces regular Medicare and the supplemental insurance.

Each Medicare Advantage plan can charge different out-of-pocket costs. These can be based on many factors, like whether the plan charges a monthly premium, whether it pays any of Medicare Part B premiums, whether it has a yearly deductible or any additional deductibles, and the amount you pay for each visit or service.

Some insurance companies charge high rates for supplemental coverage, so shop around. Look at several health insurance companies for the best prices.

To enroll, you must see if you’re eligible. If you have other health insurance, you need to understand how Medicare works with that policy. If you’re retired and have coverage from your former employer, you need to determine what happens to the coverage when you’re eligible for Medicare. If you’re retired and have Medicare and group health plan (retiree) coverage from your former employer, Medicare typically pays first for your healthcare bills, and your group health plan coverage pays second.

Reference: Queens Chronicle (October 6, 2016) “What Medicare does and does not cover”

Estate Planning Mistake No. 122: Neglecting Beneficiary Designations

"If you haven't checked the beneficiaries of your accounts, you still have some work to do."

Nerd Wallet, in "Avoid This Estate Planning Mistake," reminds us that many assets have their own beneficiary designations, including retirement plans like 401(k)s, 403(b)s, pensions, IRAs, annuities and life insurance plans.

Many folks don't check them. They think their will or living trust controls their distribution. Classic estate planning mistake.

Sometimes it's a shock to discover that the deceased spouse didn't update the beneficiary designations. The beneficiary is still the husband's first wife—whom he had designated 25 years ago when he first established the account. As a result, his surviving spouse receives none of the funds associated with his IRA. The ex-wife gets the money.

Under the law, assets like IRAs aren't subject to probate, but instead are passed using a beneficiary designation. They aren't controlled by a will. The only situations in which a will controls a non-probate asset are if there's no designated beneficiary or if the beneficiary is the estate.

The Supreme Court has ruled that your beneficiary designations on insurance policies, IRAs, and other retirement accounts will always trump the beneficiaries of your will in case they are different.

So make certain that updating beneficiaries is a part of your financial planning checklist. Review the beneficiaries of your non-probate assets every few years; and make sure the beneficiaries of your will and living trust are still the individuals or entities that you want. These documents help heirs avoid probating your estate and allow you to establish beneficiaries for assets that don't have specific beneficiary designations.

You've worked hard to create a legacy for your family. Take these actions to avoid a simple but costly mistake that could damage that legacy.

Reference: Nerd Wallet May 6, 2016) "Avoid This Estate Planning Mistake"