Reader Question: My wife and I are both elderly and she has dementia. At some point, she will probably have to go into an assistance living facility. Since I have her power of attorney, I changed the beneficiary on my IRA’s (3 traditional and 1 Roth) to my daughter. She is our only child. If I die before my spouse, and she is in or out of an assisted living facility, will the IRA’s be subject to the 5 year lookback before she can receive Medicaid?
Answer: The Medicare rules and laws are very complex so I turned to Birmingham lawyer and elder care specialist, Melanie Bradford for her insights. Here’s what she had to say: “Medicaid rules vary from state to state. In Alabama, there is a prohibition against a spouse disinheriting another spouse; such an act should cause Medicaid to impose a transfer penalty for the statutory elective share. Currently, there is no prohibition or transfer penalty against a spouse changing his or her non-probate estate plan; however, this can change at any moment. The safer course of action is to work with an elder law attorney that can prepare an estate plan that places assets equaling the elective share in a special needs trust for the incapacitated spouse. Such a trust does not disqualify the spouse for Medicaid. Instead, it provides for any needs the spouse has that Medicaid does not cover. Any funds remaining at the spouse’s death are passed to the children. This effectively accomplishes all goals by providing for the spouse, preserving the rights to Medicaid, and passing on remaining assets to children.”
Reader Question: I’m retired and turning 65 soon. I have been receiving Social Security since I was eligible (age 62). Can I suspend Social Security and receive the 8% annual increase until I resume SS?
Answer: “No, suspending benefits to collect the eight percent delayed retirement increase is not an option since you have been taking benefits for almost 3 years. Social security will allow you to start your benefit over within 12 months of the first month of entitlement and limited to one withdrawal. You must file a request for withdrawal of application and your benefits stop immediately. Social Security Administration will tell you how much you are required to pay back. After your repayment of benefits, you can reapply at the age your choice”, says Kimberly Reynolds, CFP and partner at The Welch Group.
Reader Question: Sen. Ron Paul is not the only person who speaks of a financial apocalypse and others who have written books too. From what you know or foresee, is there any possible way the U.S. government (with the way U.S. banks are set up)…could possibly limit cash withdrawals? Also, if the U.S. Dollar is devalued…By what amount and what affect would this have on U.S. consumer buying items in U.S.A.?
Answer: This is a story that apparently is not going away soon. Former Senator Ron Paul is particularly worried about the $18 trillion that the U.S. owes and that our biggest creditor is China. To repay the debt, every man, woman and child in America would need to fork over about $57,000! Clearly that’s not going to happen and so far our leaders (President, House and Senate members- Republicans and Democrats alike) are not only unwilling to pass debt reduction programs, but by their policies, they continue to grow the debt. Yes, at some point this chicken is coming home to roost and it may get ugly…but, after observing our economy at work for over forty years, I’ve concluded that it is much more elastic than most people think. And while we witnessed the citizens of Greece recently standing in long lines at the bank with withdrawals limited to $300 per day, I can’t imagine that happening here in America. Let’s not lose sight of the fact that while Greece is a country, its economy is about the size of Alabama’s economy. Likewise, it’s highly unlikely we’ll see a ‘devaluation’ of our currency although the value of the Dollar rises and falls versus other world currencies based on global financial and economic conditions. If the U.S. Dollar did ‘collapse’, I suspect what we’d see would be sharply inflated prices of goods sold here. Again, this is a highly unlikely scenario.