Ask Liz Weston

Get smart with your money

Q&A

Q&A: Social Security spousal benefits

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Dear Liz: I’m 52 and my wife is 57. I recently retired from the military and will have a small retirement from my new job. When should I take Social Security and when should she take hers? Her letter from the Social Security Administration says that based on her work record, she will receive $88 a month. She has spent most of our married life as a homemaker and caregiver to our children.

Answer: Your wife can’t file for spousal benefits until you file for your own benefit, and that can’t happen until you turn 62 in 10 years.

You may not want to file that early, though, since that would force you to take a permanently reduced benefit. You would be settling for about half of what you could get by letting your benefit grow, which also means a much smaller benefit for your wife should she outlive you.

A better strategy may be for each of you to wait to apply at least until you reach your own full retirement ages (66 1/2 for her, 67 for you).

Your wife would get her own small benefit until you turned 67. At that point, you could “file and suspend.” That means you file so she could get her much-larger spousal benefit, but you would immediately suspend your application so your own benefit could continue to grow.

The “file and suspend” strategy is really helpful for maximizing what married couples can get from Social Security, but the maneuver is available only for those who have reached their full retirement age.

Three years later, when your benefit maxes out at age 70, you can end the suspension and start getting your checks.

It’s especially important for higher-earning spouses to avoid locking themselves into permanently reduced checks. If your wife outlives you, she’ll have to get by on a single check — yours — so you want the amount to be as large as it can be.

Q&A: Filing joint tax return while not married

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Dear Liz: Is it possible to file a joint tax return if you are not married but have lived together for more than seven years? We’ve owned property together for nine years.

Answer: What matters to the IRS is how your state treats your arrangement. Most states don’t recognize common law marriages, in which two people live together but don’t have a marriage license. But a few do.

The states that currently recognize common law marriages under some circumstances include Colorado, Iowa, Kansas, Montana, New Hampshire, South Carolina, Texas and Utah, according to the National Conference of State Legislatures.

States that recognize common law marriages entered into prior to certain dates include Pennsylvania before Jan. 1, 2005; Ohio before Oct. 10, 1991; Indiana before Jan. 1, 1958; Georgia before Jan. 1, 1997; and Florida before Jan. 1, 1968, according to the NCSL.

Also, most states do recognize common law marriages from those states where they are recognized, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. In other words, if you move from a state where common law marriage is recognized to one where it isn’t, your union may still be considered a legal marriage.

Same-sex marriages are somewhat different, Luscombe said. The U.S. Treasury and the IRS have ruled that same-sex couples who were legally married in jurisdictions that recognize their marriage are considered married for tax purposes, even if the state where they currently live doesn’t recognize their union.

Confused yet? Talk to a local tax pro who can advise you about the status of your arrangement.

Q&A: Credit CARD Act

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Dear Liz: I have a business credit card that offers cash rebates. It has an interest rate of 15.24% on purchases and 25.24% on cash advances. I carry balances in each category. Each month the issuer posts my entire payment to my lower-interest purchases balance and nothing to my cash advance balance. I telephoned to complain but I was told that they will not post any payments to my cash advance balance until my purchases balance is completely paid off. I thought that there was a federal regulation that payments had to be posted to the highest-rate debt balance first. Am I mistaken? If not, to which federal agency can I complain?

Answer: There is indeed a federal law that requires payments in excess of the minimum to be applied to the highest-rate balance. It’s part of the Credit Card Accountability Responsibility and Disclosure Act of 2009. But the Credit CARD Act applies only to consumer credit cards — not business cards.

It’s not a good idea to carry a balance on any credit card, but it’s even more dangerous to carry a balance on a card that lacks the consumer protections promised in the Credit CARD Act. Talk to the bank that has your business checking account to see if you can arrange a lower-rate loan to pay off your balances.

Q&A: Helping a mentally ill family member

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Dear Liz: I want to offer some bit of advice to the woman with the mentally ill, homeless son. She didn’t say which state he lives in, and I’m guessing it’s not California. There are so many wonderful programs here. I did help a woman my age (late 40s at that time) get off the street by convincing her to let me drive her to PATH (People Assisting the Homeless). It took a few tries but she finally got into my car. PATH took over after that. She has been on Supplemental Security Income for years and lives in a low-income housing tax credit building. Tell the mother that there are social workers dedicated just to representing people that are both homeless and mentally ill in all 50 states. There is also subsidized housing available in all 50 states. She just needs to put her worry into action to find the right social worker or organization. They have the know-how to proceed and help her son. I’m not saying that this will be easy, but she will feel better if she persists in trying to find the right resources for her son and it just might work.

Answer: Thank you for suggesting PATH as a possible solution for homeless people in Southern California. The mother thought there was no help available in the state where her son lives, but every state has at least a few programs for the mentally ill. Getting low-income housing is another matter because many programs have far more applicants than availability.

The mother can certainly make inquiries and suggest possible solutions for her son. But she still needs to set boundaries in how much time and money she dedicates to his problems. She is elderly, on a limited income and several states away from her son. She deserves a little peace at the end of her life, which may mean making peace with the idea that his fate is not in her hands.

Q&A: Special needs trust

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Dear Liz: Your suggestions about resources to help a parent with an emotionally ill adult child were very helpful. But from a financial standpoint, don’t you think you should have discussed a special needs trust for the time when the parent dies? Whatever assets she has, most likely her home, should be put in this trust to protect her son’s eligibility for government benefits (Supplemental Security Income and Medicaid, for example). An inheritance could jeopardize his eligibility for these programs. It will be overseen by a responsible party and can never be taken as part of a potential lawsuit. This is something I recommend to my clients as a geriatric social worker.

Answer: Thank you for the suggestion. Given the brevity of this column, it’s impossible to cover all potential angles to every situation. In this case, there was no indication that the son was receiving government benefits or that his mother had sufficient assets to be concerned about an inheritance.

That wouldn’t be unusual. One study for the National Bureau of Economic Research found that 46% of Americans have less than $10,000 in financial assets when they die. Many single-person households (57%) have no home equity.

Still, even a small inheritance can disqualify someone from SSI, and losing access to Medicaid health coverage would be catastrophic for people who depend on the program. So parents who have both an heir who needs these programs and assets that might outlive them should discuss a special needs trust with an estate-planning attorney.

Q&A: Social Security and Divorce

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Dear Liz: Can my 63-year-old ex-husband, who was a slacker who never worked, collect on my Social Security? I am 59 and happily remarried. He hasn’t remarried. We were married for 25 years before I left him.

Answer: Since you were married for more than 10 years, your former husband can apply for spousal benefits based on your work record. He can’t do so, however, until you’re old enough to get retirement benefits, which means he has to wait another three years until you’re 62. If you were still married, he would have to wait until you actually applied for your own retirement benefits to get a spousal benefit. That requirement is waived for divorced spouses to keep a vengeful ex from deliberately withholding the right to benefits. His ability to claim spousal benefits on your work record would end if he remarried.
Any spousal checks he gets won’t affect or reduce your benefit or any benefits claimed by your current spouse. Should you die first, both your current and your former husbands could claim survivors’ benefits — again, without affecting each other’s checks