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Redlands California Estate Planning Blog

Understanding Social Security disability

There are several misconceptions about Social Security disability insurance in California. While news stories may claim that there is rampant fraud in the SSDI system, it is very difficult for people to get approved for benefits when they have become disabled.

In 2016, 61 million Americans received Social Security benefits, and 68 percent were retired. Of the remaining recipients, 18 percent were the children or spouses of decedents who receive survivor's benefits, and 14 percent were disabled workers. Social Security is meant to provide a financial safety net for people who are unable to work, are retired or have lost the income of people who have died and are no longer able to support them.

How to apply and qualify for disability benefits

Workers in California and around the country have approximately a 20 percent chance of being disabled for at least three consecutive months during theircareer. Those who don't have disability insurance may have trouble replacing lost income. However, it may be possible to receive Social Security Disability Insurance benefits while out of work. The program is available to those who have enough credits to qualify as it funded by payroll taxes.

The program has no means test, which means that benefits are not reduced or capped because of a person's income. How much a person receives under the program depends on the work record prior to becoming disabled. To be seen as disabled, a person would need to have a medical condition that is going to last for a year or more or that will will likely result in death.

Types of trusts

California residents have many options with regard to estate planning tools. One of these options, trusts, can be used to ensure that certain assets are protected and distributed to the intended beneficiaries according to the wishes of the trust's creator. There are multiple types of trusts one can choose from to make sure that the assets intended for their heirs are properly managed.

Individuals who have spouses that are not citizens of the United States may opt to use a qualified domestic trust. The Internal Revenue Service requires that the trustee is a United States Citizen so that the estate tax will be paid when the second spouse dies. The trust has to be created in a way that ensures that the federal estate tax marital deduction will be applicable when the citizen spouse dies. The marital deduction allows the assets that are inherited by a surviving spouse to not be assessed federal estate taxes. Using a qualified domestic trust is an ideal way of postponing estate taxes until the second spouse dies.

Think of estate planning during divorce

California residents have a lot on their mind when going through a divorce. Most people probably are not thinking about estate planning. However, divorcing spouses may need to update their existing wills, trusts, retirement beneficiaries and end-of-life documentation.

A trust and trust administration professional shared a few estate planning and divorce horror stories. In one story, a spouse was injured in an accident. He received a settlement before the marriage and put the money in a trust. This money was his separate property, but he eventually added his wife as an 80 percent beneficiary of the trust. The couple was married for 10 years when they decided to get a divorce.

Submitting evidence to support disability claims

Up to 25 percent of Californians will become disabled sometime during their working years. When people suffer disabling conditions, they may be eligible for Social Security disability benefits. It is important for workers to understand what the agency will look for when it reviews their benefits claims.

When workers submit claims for benefits from the Social Security Administration, they will need to supply medical documentation that shows the severity of their conditions. The agency will also want information that is specific to the claimants' jobs. By gathering and submitting information about their jobs as well as their conditions, the workers may be likelier to be approved for benefits.

Can you force reluctant parents to move to a home?

One of the hardest parts of dealing with aging parents with dementia from Alzheimer's or other illnesses is ensuring their continued safety in their home environments. Sometimes everyone but the elderly parent — adult children, neighbors, doctors — agrees that the parent now needs a supervised living environment to remain safe.

But the parent vehemently refuses to address the issue. In fact, past efforts have always ended so badly that the kids hate to even bring it up again with their mom or dad.

Why decanting may be best when altering a trust

California residents may have a need to either cancel or make changes to an irrevocable trust. While it may be more difficult to do so compared to a revocable trust, there is a process that allows that to happen. It is called decanting, and it involves creating a second trust and pouring assets into it from the original trust. Once the asses are inside of the second trust, its terms will govern how assets are to be treated.

This may be beneficial if payments are supposed to be made to someone who isn't able to handle it. This may be true if that beneficiary has a drug problem or has recently gone through a bankruptcy. In some cases, it may also be worthwhile to decant if an asset has grown significantly in value. Typically, the new trust that is created will be a dynasty trust with a discretionary payment schedule.

Social Security appeals backlog reaches record length

Some Californians suffer from disabling conditions that prevent them from working. These people are able to apply for benefits through the Social Security Administration. Unfortunately, the SSA denies a majority of the claims that it initially receives, forcing people to file appeals of their denials.

There is a huge backlog of cases that are waiting for their appeal hearings. These hearings are held before administrative law judges who determine whether or not to grant the appeals and award benefits to the claimants. The backlog is currently 600 days, meaning that some people may be forced to wait for their administrative hearings on their appeals for nearly two years.

The importance of end-of-life decision making

California music fans were shocked to learn of the sudden-death of rocker Tom Petty. After suffering cardiac arrest, the famous musician was treated but then removed from life support. The decision was made by Petty himself in the form of a do-not-resuscitate order that he had signed as part of his long-term care and estate planning.

Unfortunately, many people do not take the time when they are still alive and healthy to develop plans for end-of-life issues. In fact, many people who understand the importance of having a will may still avoid developing a comprehensive plan that addresses medical and care issues. As a result, their family members may be confused about what their loved one would want to happen after a debilitating or life-changing injury or illness.

Going back to work while on SSDI

Many people living in California collect Social Security Disability Insurance (SSDI) benefits. The SSDI program provides cash support for qualifying individuals who are limited in their ability to work due to a disability. Some individuals who collect SSDI, over time, begin to wonder whether returning to work might be a good idea for them. They may be reluctant, however, to try a return to full-time employment out of concern that they might lose their benefits.

The Social Security Administration (SSA) does permit recipients of SSDI to engage in some employment, as long as their monthly earnings are not substantial. The SSA regularly changes the guideline for what makes earnings "substantial" to adjust for inflation, but the amount in 2017 is $1170 per month. Earning more than this can put one's benefits in jeopardy.

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