Retirees Should Adjust Planning With Four Big Changes in Mind

November 20, 2025

Retirement planning is never static. Tax laws evolve, healthcare costs shift and investment conditions change sometimes dramatically. For retirees, these changes can affect everything from monthly income to estate strategies. Understanding recent adjustments in tax policy and retirement rules can help ensure that your plan remains stable and sustainable. Retirees should adjust planning with four big changes in mind.

Changing Tax Rules for Retirees

Tax planning remains one of the most potent tools for preserving retirement income. Recent federal adjustments have affected both Social Security taxation and retirement account withdrawals. For instance, higher-income retirees may see a greater portion of their Social Security benefits taxed, while inflation adjustments have shifted income brackets slightly upward.

These changes make tax diversification more critical than ever. Retirees who rely solely on traditional 401(k)s or IRAs, where withdrawals are taxed as income, could face higher overall taxes in retirement. Combining pre-tax, Roth and taxable investment accounts provides flexibility to manage income levels strategically each year.

Adjusting to Required Minimum Distribution Rules

One of the most significant changes in recent years involves Required Minimum Distributions (RMDs). The starting age for RMDs has risen to 73, giving retirees more time to grow assets tax deferred. However, waiting too long to begin withdrawals can result in larger future distributions and higher tax bills later in life.

Some retirees may benefit from partial Roth conversions in their early 60s, especially during lower-income years before Social Security or RMDs begin. Spreading conversions over several years can reduce future taxes and provide more control over income in later retirement.

The Ongoing Impact of Healthcare and Long-Term Care Costs

Healthcare remains one of the most significant expenses for retirees. Medicare premiums are expected to rise, and out-of-pocket costs for prescription drugs and long-term care continue to increase. Without planning, these expenses can quickly erode savings meant for other goals.

Health Savings Accounts (HSAs), when used properly, offer a tax-efficient way to prepare for medical costs. Funds grow tax-free and can be used for qualified expenses at any time, even in retirement. Retirees should also consider long-term care insurance or hybrid life insurance policies that include care benefits to reduce financial strain later.

Inflation and Market Volatility

Even modest inflation can significantly affect retirees who live on fixed incomes. While 2024 and 2025 have seen periods of stabilization, retirees should continue planning for long-term inflation by balancing income and growth investments.

Bond-heavy portfolios, while stable, may struggle to keep pace with inflation over the long term. Adding moderate exposure to dividend-paying stocks, real estate, or inflation-protected securities (TIPS) can provide resilience. Working with a financial advisor to review investment allocations annually ensures that risk levels remain appropriate.

Integrating Legal and Financial Planning

Estate planning and retirement planning are inseparable. Changes to tax law, account rules and estate exemptions can affect how assets transfer to heirs. Retirees should review beneficiary designations, update wills or trusts and ensure that powers of attorney and healthcare directives are current.

An estate planning attorney can help retirees adjust their planning with these four big changes in mind. They can align investment and withdrawal strategies with legacy goals. This integration ensures not only tax efficiency but also future protection for beneficiaries. If you would like to learn more about planning for retirement, please visit our previous posts.

Reference: Kiplinger (Aug. 10, 2025) “Retirees Should Watch These Four Key Tax Changes in 2025”

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Legal Planning for Long-Term Care is Essential

November 6, 2025

Care demand is rising while the paid and unpaid workforce struggles to keep pace. Families often fill the gap first, then their savings and finally the public safety net. Legal planning for long-term care is essential. Without preparation, a sudden hospitalization, a memory change, or a fall can lead to rushed decisions that cost more, strain relationships and jeopardize eligibility for benefits.

What a Shortage can Change Legally and Financially

Scarce care makes timing critical. If documents are missing or outdated, facilities and agencies may not accept instructions from loved ones. If assets are titled poorly, paying for interim care can trigger taxes, penalties, or loss of need-based benefits. A plan that works in a stable market may falter when waitlists and staffing shortages appear.

Documents to Put in Place before a Crisis

Decision-Making Authority

Create or update a durable financial power of attorney and a health care proxy. Add a HIPAA release, so clinicians can speak with named agents. Confirm successors in case a first choice is unavailable.

Care Directives

Use a living will or advance directive to state preferences for interventions, placement and end-of-life care. Add a short care memo that covers routine, food preferences, mobility needs and key medications. This helps when unfamiliar staff step in.

Access To Money that Matches Care Timelines

Keep at least one liquid account titled for quick agent access. Align automatic bill pay, Social Security deposits and insurance premiums so coverage does not lapse during transitions. Review beneficiary designations to avoid conflicts with the rest of the plan.

Funding Care when Supply Is Tight

Layer Private and Public Sources

Combine income, savings and long-term care insurance with Medicaid planning, where appropriate. Map the order of withdrawals to control taxes and preserve eligibility.

Hold a Short-Term Bridge

Keep a 60 to 90-day cash buffer for deposits, respite, or agency minimums. Reimburse family caregivers through written agreements that document duties and pay, which helps with Medicaid look-back analysis.

Verify Contracts and Waitlists

Read homecare and facility agreements for rate ladders, overtime rules, cancellation terms and minimum hours. Place names on multiple waitlists and keep contact logs to prove diligence.

Guardrails against Family Conflict

Clarify Roles

Assign one person to lead medical decisions and one to lead finances or name a professional fiduciary if family dynamics are tense. Write a short communication plan that sets out how updates are shared.

Document Gifts and Caregiver Pay

Use a written caregiver agreement if a child is paid, and record hours and tasks. Note any lifetime gifts and whether they are advancements against inheritance. Clear paper trails reduce later disputes.

How an Elder Law Attorney Helps

Legal planning for long-term care is essential to avoid headaches and financial jeopardy. An attorney aligns documents, titles and funding with local rules. They structure caregiver contracts, review facility agreements and design Medicaid timelines that account for look-back periods and fair-market payments. They also develop contingency plans for placement shortages and coordinate with care managers who are familiar with local capacity. If you would like to learn more about planning for caregivers, please visit our previous posts.

Reference: Otsuka US (May 20, 2025) “New Report Shows Nearly Half of U.S. States Are on the Threshold Of A Caregiving Emergency”

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Choosing a Guardian for Minor Children is Critical

October 14, 2025

Parents often focus on wills, trusts and financial planning. However, they overlook naming a guardian for their children. Choosing a guardian for your minor children is a critical step. Without this step, a court may decide who raises the child if both parents are unable to do so. While judges consider family ties and the child’s best interests, the decision may not reflect your preferences. Proactive planning provides peace of mind and helps prevent uncertainty during an already challenging time.

Key Considerations in Choosing a Guardian

Guardian selection should not be rushed. Families should weigh a variety of factors before naming someone.

Emotional and Practical Suitability:

The guardian should have the ability and willingness to provide both emotional stability and day-to-day care. Consider their relationship with the child, their parenting style and their values. A guardian’s age and health also matter. While grandparents may love deeply, they may not be physically equipped to raise young children long-term.

Financial Stability:

Raising children is expensive. A guardian does not need to be wealthy. However, they should have the financial means to provide a stable home. Estate planning tools, such as life insurance and trusts, can supplement the guardian’s resources and ensure that children’s needs are met.

Location and Lifestyle:

The guardian’s location may affect schooling, friendships and the child’s sense of continuity. Consider whether relocation would be necessary and assess the potential disruption it might cause. Lifestyle factors, such as work commitments, existing family dynamics, or religious beliefs, should also be considered to ensure alignment with your wishes.

Naming and Documenting a Guardian

Once you have decided on a guardian, it is crucial to make the designation legally binding.

Using a Will or Legal Document:

The primary place to name a guardian is in your will. Without this, the court decides. A clear, legally valid designation ensures your choice is respected. In some cases, you may include alternates if the first choice is unable or unwilling to serve.

Open Communication with Potential Guardians:

Before finalizing the decision, have an honest conversation with the chosen guardian. Confirm that they are comfortable with the responsibility and that they understand your expectations. Discuss practical matters, such as education, healthcare and long-term goals for your children.

The Role of Estate Planning in Supporting Guardians

A guardian’s role is primarily personal and emotional. However, financial structures can ease the transition.

Trusts to Manage Assets:

Appointing a trustee to manage the child’s inheritance allows the guardian to focus on caregiving. The trustee and guardian may be the same person or different individuals, depending on your comfort level. Separating financial and caregiving roles can sometimes reduce conflicts and ensure accountability.

Regular Review and Updates:

Life circumstances change. A chosen guardian may move, experience health problems, or no longer be the best fit. Revisiting your estate plan every few years ensures that the guardian designation remains appropriate.

Why Legal Guidance Is Essential

Guardian selection is a deeply personal decision. However, it also has legal and financial implications. An estate planning attorney ensures the designation is executed correctly and that supporting documents, such as wills, trusts and powers of attorney, work together to provide a safety net for your children.

Choosing a guardian for your minor children is a critical. Consulting an estate planning law firm provides peace of mind that your children will be cared for according to your wishes. If you would like to learn more about guardianship, please visit our previous posts.

Reference: BabyCenter “How to choose a guardian for your child”

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How the 2025 Tax Law Impacts Your Estate Plan

September 10, 2025

The recently signed One Big Beautiful Bill Act of 2025 covers a vast amount of ground. It may take some time before every aspect has been thoroughly examined. For now, a recent article appearing in Forbes, “10 Reasons To Reevaluate Your Estate Plan Following The 2025 Tax Law,” offers a good overview of how the 2025 tax law impacts your estate plan and taxes.

Estate and Gift Tax Exemptions: The federal estate, gift, and generation-skipping transfer tax exemption is now set at $15 million per individual and $30 million for married couples. This extremely high exemption is particularly beneficial to high-net-worth families.

How Permanent Is the Exemption? While this may seem unlikely now, remember that estate planning is a long-term strategy. If political power shifts, the exemption could be undone. Proactive planning remains essential to safeguard legacies.

Trust Income Taxation: The 2025 law permanently modifies trust income tax brackets and rules. This may be a good time to evaluate trust structures to minimize taxes and make sure that your heirs don’t give more to the government than necessary.

State-Level Estate and Inheritance Taxes: Certain states tie their own estate taxes to federal tax rates, while others have separate systems. Review your state’s estate and/or inheritance taxes.

Long-Term Care Costs and Medicaid Adjustments: Those who rely on public benefits for healthcare or whose loved ones depend on Medicaid and other government programs need to prepare for upcoming cuts. Private LTC insurance and Medicaid planning are more important now than ever for middle-class Americans who want to protect the money they have earned over a lifetime.

Long-Term Care Insurance Deductions: Qualified long-term care insurance premiums remain deductible, and the deduction may increase because of the new law. Verify if your policies meet the requirements.

Retirement Accounts and Income Tax Strategies: Permanent changes were made to individual income tax provisions impacting IRAs, Roth conversions and income shifting strategies. You’ll want to ensure that your retirement accounts align with your estate plan to minimize taxes.

Business Succession and Asset Management. Changes have been made to valuation rules and succession planning, so any buy-sell agreements, liquidity planning and leadership transition plans should be reviewed by an experienced estate planning attorney.

Family Legacy and Estate Goals: Whenever there is a significant change to tax laws, estate plans should be reviewed to ensure they take advantage of any new opportunities. Consult with your estate planning attorney to determine how the new laws will impact your estate plan, including charitable giving plans, and to identify any necessary changes.

Speak with your estate planning attorney to see how the 2025 tax law will impact your estate plan. Whether it is a minor change, or a significant one, being aware of changes in tax law is critical. If you would like to learn more about how tax laws impact your estate planning, please visit our previous posts.

Reference: Forbes (July 7, 2025) “10 Reasons To Reevaluate Your Estate Plan Following The 2025 Tax Law”

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Health Care Proxy and Power of Attorney are Essential Tools in your Estate Plan

September 4, 2025

While you may think of a last will and testament when the phrase “estate planning” is used, there are several other documents you need. A health care proxy and a durable power of attorney are essential tools in your estate plan. A recent article in Kiplinger, “I’m an Estate Planning Attorney: These Are the Two Legal Documents Everyone Should Have,” explains what every adult needs to protect themselves and help loved ones during a time of crisis.

An estate plan does far more than simply distribute assets when you’ve died. It also protects your wishes while you’re living, as well as in case of incapacity. Two documents are required: the healthcare proxy and the durable power of attorney.

A health care proxy, sometimes referred to as a Health Care Power of Attorney, appoints someone you trust to receive information about your medical care and make decisions if you are too sick or injured to communicate your wishes. If you recover and regain capacity, you resume the ability to oversee your own health care, and the health care agent can no longer make medical decisions or have access to your medical care.

No one expects to be incapacitated. However, it’s best to be prepared. If you’re scheduled for surgery and are sedated, for instance, you’ll want another person to be able to make decisions for you in case something goes wrong. If you experience a longer medical event, such as being in a coma, your family will be able to make decisions on your behalf.

If there is no Power of Healthcare Attorney in place, your spouse or family members will need to petition the court to name a guardian to be able to make decisions for you. There have been many court cases where a surviving spouse would like to take their loved one off life support, but their parents don’t want that to happen. This is a terrible situation for everyone involved and can be avoided with the right estate planning.

A healthcare proxy may include provisions for a Living Will, which would specify the types of medicine or treatments you would want or not want if you were in a terminal state. For example, you may not want to be kept alive through artificial nutrition or a heart and lung machine if you are in a vegetative state. The living will is your way of communicating your wishes to your family clearly and coherently.

Who you name as your healthcare agent is entirely up to you. A younger person may name a parent, spouse, or close friend as their guardian. Couples often name their spouse or partner, while elderly people are more likely to name an adult child.

If there is no health care proxy named, even a married spouse doesn’t have the legal right to make decisions for you. Once a child reaches the age of legal majority, they are considered an adult, and their parents are no longer the default guardians. When children go to college, they should have a health care proxy in place.

The second critical document is the Power of Attorney. This names a person to make financial and legal decisions on your behalf. Without one, the family will need to go to court to access your accounts, pay bills and maintain the business side of your life.

Even if you don’t care what happens to your possessions after you die, having a health care proxy and durable power of attorney in place will give your family the essential tools in your estate plan to care for you without added burdens when they are needed. If you would like to learn more about health care directives and powers of attorney, please visit our previous posts.

Reference: Kiplinger (Aug. 7, 2025) “I’m an Estate Planning Attorney: These Are the Two Legal Documents Everyone Should Have”

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Parents with Young Children need an Estate Plan

August 27, 2025

More than 60% of parents with minor children don’t have a will, according to several national surveys. This is a serious lapse, as parents need a will to appoint a person to raise their children if the parents die. The solution is not that difficult, says a recent article from Seattle’s Child, “Why every parent needs a will.” Parents with young children need to have an estate plan.

An estate plan includes several documents serving to protect children in case of their parents’ death. The guardian is named in the will. Trusts are used to provide funds for the child’s upbringing and to protect any inherited assets, so the child can’t access them until they are mature enough to make sound financial decisions.

If there is no will or other estate planning documents, there are default laws and procedures to determine who will become the guardian of the minor child and what will happen to the parent’s assets. The court could decide the child should be raised by a blood relative who lives many states away, taking the child from their home and community during a time of great stress.

If parents would rather the child remain in their school and community, having a will and naming a close family friend as their guardian could prevent the child from being uprooted from everyone and everything they know.

Many people make the mistake of thinking their spouse automatically inherits their estate. However, this depends upon the laws of your jurisdiction. In some states, the estate is divided between the spouse and the children. If the children are minors, they cannot legally inherit property. Therefore, their portion of the inheritance may be controlled by an administrator appointed by the court. If this occurs, the surviving spouse will receive a smaller inheritance, which may make it financially impossible to stay in the family home. Placing the surviving spouse in a position where they must request funds from a court-appointed administrator is not a pleasant legacy to leave.

If there is no will, the court divides assets according to the law of intestacy—the state’s laws. Children who inherit a full estate upon reaching the age of 18 are rarely ready to manage large amounts of money. Creating a trust for the benefit of a child, with a trustee who will manage the assets and provide directions on when to disburse funds and for what purposes, solves this problem.

When going through the estate planning process, you’ll also need to select someone to be your personal representative after you’ve died. The executor obtains death certificates, notifies Social Security and other government agencies, consolidates assets, pays bills and pays taxes for the estate and your final personal income taxes.

Parents with young children need to have an estate plan. Planning for what could happen in the future when your children are young is not as much fun as going on a family vacation or decorating a nursery. However, taking care of this will ensure that your beloved children are protected according to your wishes. This is a legacy of love. If you would like to learn more about planning for young parents, please visit our previous posts.

Reference: Seattle’s Child (July 25, 2025) “Why every parent needs a will”

Secure Your Spouse’s access to Quality Care

August 14, 2025

When a spouse requires nursing home care, many families feel overwhelmed by the sudden medical needs, the high cost of care and the fear of losing their savings. However, with timely legal planning, you can secure your spouse’s access to quality care, while preserving your financial stability and your family’s home.

Understanding Medicaid Eligibility

Nursing home care often exceeds $90,000 per year, making Medicaid an essential resource for many couples. However, strict income and asset limits make eligibility feel out of reach for some. Medicaid’s spousal impoverishment rules help by allowing the “community spouse” (the spouse remaining at home) to retain a portion of the couple’s income and assets, while the spouse needing care qualifies for Medicaid.

Assets are divided into countable and exempt categories. Exempt assets often include the primary residence, one vehicle and personal belongings. Countable assets include checking, savings and investment accounts. Understanding how your state defines and limits these categories is crucial for effective planning and decision-making.

Why Legal Planning Is Essential for Medicaid Eligibility

Applying for Medicaid without legal guidance can result in mistakes that cause delays or penalties, especially if assets were transferred within Medicaid’s look-back period. An elder care lawyer can help you:

Spend down assets legally on exempt items, such as home repairs or a reliable vehicle.
Establish Medicaid Asset Protection Trusts to preserve assets while planning for eligibility.
Explore spousal refusal in states where this strategy can protect additional resources.

Legal planning also includes preparing powers of attorney and healthcare proxies, so your spouse or another trusted person can manage your affairs if you become incapacitated.

Preparing Emotionally and Practically for the Transition to Nursing Care

Moving a spouse into a nursing home is emotionally challenging. Visiting facilities ahead of time, discussing expectations and reviewing care options can help ease the transition. It’s equally important for caregivers to seek emotional support through counseling or community resources to manage stress.

You should also review your overall estate plan to ensure that it aligns with your family’s needs, protects your spouse’s quality of life and secures your legacy for your loved ones. Secure your spouse’s access to quality care by working with a qualified and experiences attorney. If you would like to learn more about Medicaid planning and long term care, please visit our previous posts.

Reference: Medicaid Planning Assistance (May 06, 2025) “Getting an Aging Parent, Spouse or other Loved One into Medicaid Nursing Home”

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A Living Will Should be Part of Your Estate Plan

July 31, 2025

Creating a living will is the best way to provide your loved ones with the guidance they need in making decisions if you aren’t able to communicate your wishes. This is the clear message from an article, “Living wills take guesswork out of medical care,” from C&G Newspapers. A living will should be a part of your estate plan.

A living will is different from a last will and testament, which concerns itself with property distribution after you have died. A living will addresses your wishes regarding life-sustaining treatment. They are used when the signer can’t speak on their own behalf.

Most families prefer not to address this issue at all, which is understandable. The prospect of your loved one being too sick or injured and unable to tell you what kind of end-of-life care they want is not a pleasant one. However, the alternative to not having a living will is for a family or spouse to guess what you would have wanted.

This is an unfair burden to place on others, who may have to live with the worry of never knowing if their decision was the right one. Having a living will also prevents the family from fighting when one person believes you want to be kept on life support, while the other believes you’d prefer not to spend any more time than necessary hooked up to artificial feeding tubes, a ventilator, or a heart machine.

Living wills are typically prepared by estate planning attorneys, often in conjunction with other estate planning documents, such as a last will, power of attorney, healthcare power of attorney and trusts.

While a living will is not a legally enforceable document, it is invaluable in clarifying your wishes and helping loved ones during a medical crisis. The living will lists very specific preferences and can be as detailed as desired. It may set a time frame for how long you want to be kept on a ventilator, what kind of pain medications you’d wish to have and even when you would like to terminate life support.

Withholding life-sustaining care is a difficult decision to make, and the person must be resolute about following your directions, regardless of their own feelings about the choices. They may also need to withstand challenges made by family members, who may have strong feelings about your wishes.

A document regarding organ donation could be prepared. However, this is usually decided by the person named as the healthcare proxy.

Having a comprehensive estate plan created by an experienced estate planning attorney is a gift to your family. You should have a living will as a part of that estate plan. It will allow you to clarify your intentions in the most challenging circumstances is an act of kindness, as it avoids the added pain of uncertainty, family squabbles and removes doubt in a time of great emotional duress. If you would like to learn more about living wills and advanced directives, please visit our previous posts.

Reference: C&G Newspapers (June 24, 2025) “Living wills take guesswork out of medical care”

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Prepare For When Your Special Needs Child Turns 18

July 16, 2025

When a child with special needs reaches the age of majority, parents often face unexpected challenges. While the child may still depend on them for daily support, the law begins treating them as independent in many areas, including healthcare decisions, legal contracts and access to government benefits. It is important to prepare for when your special needs child turns 18.

Preparing for this transition takes more than just a birthday celebration. Parents need to address guardianship, financial planning and benefit eligibility to ensure that their child is protected and supported.

Legal Decision-Making and Guardianship

At 18, individuals are presumed legally competent to make decisions, regardless of cognitive or developmental limitations. If a child cannot safely manage finances, health care, or other responsibilities, parents must seek legal authority.

Guardianship provides comprehensive decision-making power, whereas alternatives, such as power of attorney or supported decision-making agreements, offer varying levels of autonomy. Families should consider their child’s capabilities and needs before pursuing a legal route.

Each state has different procedures and standards for granting guardianship or its alternatives. Consulting with an attorney ensures that parents choose the most appropriate legal path and comply with local requirements.

Maintaining and Maximizing Government Benefits

Reaching adulthood can also impact eligibility for programs such as Supplemental Security Income (SSI), Medicaid, or vocational rehabilitation services. Many benefits shift to individual eligibility once the child turns 18, meaning that parental income no longer factors into the qualification process.

Families should apply for SSI as early as possible after a child turns 18 to establish eligibility and start receiving monthly support. Medicaid eligibility often follows, unlocking access to medical care and home-based services.

In some cases, parents who are retired, disabled, or deceased can trigger Disabled Adult Child (DAC) benefits through Social Security for their child, which may offer higher monthly support than SSI.

Financial and Long-Term Special Needs Planning Considerations

If parents plan to leave money for a child with disabilities, it’s critical to avoid compromising government benefits. A Special Needs Trust can hold funds, while preserving eligibility for programs like Medicaid or SSI. These trusts enable funds to be used for various purposes, including therapies, education, housing and enrichment.

Families should also make sure that their own estate plans reflect their child’s needs. This might include naming a guardian or trustee, outlining care instructions and avoiding direct inheritance that could disqualify the child from assistance. Work closely with an Elder Law attorney to prepare for when your special needs child turns 18.

Key Takeaways

Turning 18 changes legal status: Parents no longer have automatic authority to make decisions unless they pursue guardianship or legal alternatives.
Benefit eligibility becomes independent: SSI and Medicaid are based on the child’s income and assets after age 18.
Legal planning is essential: Powers of attorney, supported decision-making, or full guardianship may be needed.
Special Needs Trusts protect benefits: These tools enable parents to provide financial support without jeopardizing government aid.
Estate plans must reflect future care: Naming appropriate trustees, caregivers and legal representatives ensures long-term stability.

If you would like to learn more about special needs planning, please visit our previous posts.

Reference: Special Needs Alliance (Oct. 18, 2022) “The Top 5 Things to Know When Your Child With Disabilities Turns 18”

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Spousal Lifetime Access Trusts can Protect Your Partner

Avoid the Survivor’s Tax Penalty After the Death of a Spouse

June 30, 2025

When one spouse passes away, the surviving partner often assumes their financial obligations will decrease. However, many widows and widowers face a surprising increase in their tax burden. Known as the “survivor’s penalty,” this issue affects individuals who transition from joint filing to single status, often while still receiving the same or similar income. There are some tips to avoid the survivor’s tax penalty after the death of a spouse.

As a result, survivors may end up in a higher tax bracket, lose key deductions and pay more on Social Security or investment income. If you or a loved one is navigating life after a spouse’s death, proactive tax and estate planning can help reduce this burden and preserve your financial stability.

What Is the Survivor’s Penalty?

The survivor’s penalty refers to the increased income taxes surviving spouses may face after switching from “married filing jointly” to “single” or “qualifying widow(er).” This change impacts:

Income tax brackets, which become narrower for single filers
Standard deductions, which are cut nearly in half
Taxation of Social Security benefits, which may be higher if income remains steady
Medicare premiums, which increase with higher taxable income

This situation is prevalent among retirees who rely on Social Security, pensions, or retirement accounts for their income. A surviving spouse may lose only a portion of the household income but still be taxed as a single person, resulting in a higher effective tax rate.

Real-World Impact on Retirees

Consider a couple filing jointly who has a combined income of $90,000. Their federal tax liability may be relatively modest thanks to the wider joint tax brackets and higher standard deduction.

However, if one spouse dies and the survivor continues to receive $70,000 in income, including retirement accounts and survivor benefits, they may be subject to a higher tax bracket. That income could also cause more of their Social Security benefits to become taxable and raise their Medicare Part B premiums.

These hidden costs can take a significant toll on a surviving spouse, especially during an emotionally and financially vulnerable time.

How a Probate Attorney Can Help You Plan Ahead

The best way to avoid the survivor’s penalty is to anticipate it while both spouses are still living. With the help of a probate or elder law attorney and financial advisor, couples can build tax-efficient strategies that reduce exposure.

Some options include:

Roth conversions: Paying taxes on retirement accounts now to reduce taxable income later
Adjusting Social Security claiming strategies: Coordinating timing to maximize survivor benefits
Splitting income-producing assets: Using trusts to distribute income more evenly across heirs or generations
Using the step-up in basis: Taking advantage of tax resets on inherited assets to reduce capital gains

It’s also important to ensure that estate planning documents reflect your current wishes. A surviving spouse who is suddenly left in charge of financial and medical decisions needs clear legal authority through powers of attorney, healthcare proxies and updated wills or trusts.

What to Do after a Spouse’s Death

If you are already a surviving spouse, it’s not too late to act. In the year of a spouse’s death, the surviving partner can still file a joint return. After that, unless they have a qualifying dependent, they must file as single.

Working with a probate attorney can help avoid the survivor’s tax penalty after the death of a spouse. They will help sort through estate settlements, beneficiary changes and tax filings. A CPA or financial planner can also assess how the change in filing status impacts required minimum distributions (RMDs), Medicare and taxes. If you would like to learn more about tax planning after the death of a loved one, please visit our previous posts.

Reference: CNBC (November 6, 2024) “You could face the ‘survivor’s penalty’ after a spouse dies — here’s how to avoid it”

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Category: Elder Law