If you receive a pension from your employment that did not pay social security payroll taxes, your SSA benefit might be reduced by the Windfall Elimination Provision (WEP). How can you know if this is your situation? Your social security statement does not reflect any reduction in benefits because of the WEP. The SSA will wait until you file to collect benefits to tell you what your reduction is in the event you qualify for both social security and a non-covered pension. Without the ability to accurately calculate your social security benefits in advance, your retirement planning becomes challenging. However, you do not have to wait until you file for Social Security to understand if a reduction in benefits will apply to you.

So what are the mechanics of the WEP? The Social Security Amendments of 1983 created the WEP to prevent gaming the system by “double-dipping.” Double-dipping occurs when a retired worker receiving a pension from a job that did not pay social security payroll taxes additionally gets a social security benefits check. The WEP provision began reducing social security benefits for these workers who receive a pension from that job which did not pay into the system.

This reduction of benefits is most common among teachers and other public sector workers such as police and firefighters, state, county, and local employees, as well as non-profit organizations or if you were employed by another country. At the start, social security did not cover any public sector employees because states maintained pension funds. Over the years, however, many states dropped their pension funds and entered into the SSA coverage agreements, and the solvency of each state’s fund varies.

If public sector employment applies to your retirement, there is a rule that the maximum social security reduction can never be larger than one half of your pension. The impact of the WEP starts to diminish if you have more than 20 years of substantial covered earnings. The WEP does not apply to your benefits at all after 30 years of substantial covered earnings.

A person with a mixture of both private and public sector employment generally has a smaller percentage of their income applied to their average indexed monthly earnings. Many Americans are choosing to work past full retirement age, and if you have a mixture of public and private employment, search for a new job where you can work an additional ten or so years to offset the WEP reduction.

The SSA has not made understanding the calculation process simple. There is one set of rules that calculate your baseline retirement benefit payout, the second set of rules defining how that number will change depending on the age you choose to retire, and even more rules to cover special situations like the WEP. Factor in your state’s pension solvency situation (with the help of SSA coverage agreements), and you can see how retirement planning is becoming very complex. It is advisable to find a financial planner to sort out your pension and social security benefits position accurately

Whether or not you find the Windfall Elimination Provision fair is usually based on how it affects your financial position. Both Democrat and Republican lawmakers are looking at ways to amend the WEP formula that “some feel unfairly penalizes many public employees,” says Representative Richard Neal (D-Mass). There are separate bills currently under review to address this problem of fairness. Some policymakers are advocating that all public sector workers pay into the social security payroll tax. While this would be a simple solution going forward, it does not address the concerns of public sector employees who are going to be WEP affected.

Fixing the issues that face social security benefits is complicated. Congress is currently looking at making changes to the Windfall Elimination Provision to address public sector worker and constituent concerns. The percentages of Americans employed by federal, state, or local government ranges from 10 to 25 percent depending on the state in which you live and that is not taking into account non-profit or foreign country employment. Because policymakers can change the social security benefits calculation formula, your retirement planning is a dynamic problem to solve. The WEP is a special situation rule calculation that can affect your social security benefit and is under scrutiny for potential revision. Know your employment history fully as it relates to social security rules before retiring.

If you are retired or thinking about retiring, now is the time to update your estate plan. It is important that your medical and financial needs are addressed in your plan, and that you name qualified people to help out if needed. We would be happy to help you determine whether changes should be made.

If you have any questions or need guidance in your planning or planning for a loved one, please don’t hesitate to contact our Cincinnati, Ohio office by calling (513) 771-2444.

Welcome to the new decade, replete with new challenges to protect yourself against ever-inventive scam artists. One concern has a simple fix but requires your commitment to add two additional digits when signing or writing documents, letters, emails, and more. The National Association of Consumer Advocates (NACA) is reporting that the dawn of this decade creates unique opportunities for scammers when you abbreviate the year 2020 on official forms and documents to its shortened form xx/xx/20. The numbers representing the year are easily manipulated by nefarious individuals looking to exploit others, leaving them vulnerable to potential fraud.

CNN reports several ways abbreviating 2020 can create problems. The easiest way to understand this is by example. A document dated 1/5/20 can easily be changed to 1/5/2021 by merely adding the two numbers at the end of the year’s date. A check previously dated six months ago or more that has become “stale” can be made active by adding the number 21, making the check valid.

Another example is if you opt into signing a credit contract as a borrower, and the paperwork is dated 1/5/20. If the lender was less than credible and you might unwittingly miss a month or so of payments, the opportunity is created for the lender to add a 19 to the end of your signed date and argue you owe more than one year’s worth of payments.

While some are identifying this warning as fear-mongering, you have to ask yourself, how hard is it to simply create the discipline and sign the year as completed 2020? Of course, someone in the year xx/xx/19 could have added the number 99 to the end, creating a false document from 1999, but to be sure a document nearly 20 years out of date would get far easier dismissal than one that is being disputed between the years 2019 and 2020. Naturally, all dates can be altered on documents of any kind. Still, those within a more reasonable time frame of the current calendar suggest red flags should be raised for investigation because of the possibility for this type of date scam.

It is still early in the year, and there are no documented instances yet of someone being scammed using this method; however, it is better to be safe than sorry. Like identity theft, it is possible to regain control of a falsely dated signature scam attack. Still, it costs time, money, and adds needless frustration to your daily life to enact recovery to your signatory statements.

Think of the discipline to write out 2020 as overkill if you must, however, it makes sense to heed the warnings issued by law enforcement, consumer groups, businesses, and local governments. Financial fraud is the fastest-growing category of elder abuse, and this new decade ushers in the potential for faked date schemes on documents to defraud seniors out of their money and property. While it is unclear how pervasive this particular fraud scheme is to become in the year(s) ahead, don’t let this method of establishing an unpaid debt, attempt to cash an old check, or incorrectly dated legal documents create a catastrophe in your life.

There are more examples of how the abbreviation of 2020 can give scammers a chance to defraud you. Instead of focusing on the problem, it is better to implement the easy solution by removing the possibility of date scams on legal documents. Instead of being taken advantage of by scammers, perform a precautionary action. Therefore take the time, and instead of just writing 20, be sure to write the year in full as 2020 on all-important checks, documents, emails, and business transactions. You will be glad to have taken the time to protect yourself.

If you have any questions or need guidance in your planning or your planning for a loved one, please don’t hesitate to contact our Cincinnati, Ohio office by calling (513) 771-2444.

Although owning property with family may let you pass on the asset without going through probate, there are several risks, including taxes, creditor exposure, and loss of control. So when dealing with property, it is important to consider these risks and how to manage them, or to consider other methods of estate management entirely.

The first risk of co-ownership is taxes. When a portion of the property is deeded to someone other than a spouse, it is considered a gift, which can trigger gift or estate taxes. It also means that the property will not be subject to the capital gains exception for inheritance if your family sells the property after your death.

The second risk is creditor claims exposure. More creditors have a claim on the property when more people have ownership. Similarly, the more people own a property, the more have control over it. That means other owners can transfer ownership, and that if you decide to sell, you will have to get their permission. And so on.

If you do decide on joint ownership, careful planning is a must. Decide ahead of time who will be in charge of maintenance and repairs, rent and finances, business management and licenses, property showings, move-in and move-out, et cetera. Also, figure out how you will share expenses; one arrangement is to do so proportionally to your shares in the property. Discuss your short- and long-term goals to figure out what you all want to do with the property. If you plan on renting, regardless of who will manage tenants, it is important to agree on tenant criteria, such as credit score and lease term length.

Joint ownership also means deciding how to take title the property. There are two options, three for married couples. The first is a Tenants in Common agreement; the second is Joint Tenants with Right of Survivorship; the third is an LLC.

A Tenants in Common agreement means that you both own shares of the property and either of you can sell at either time. Under a TIC agreement, if one of you dies, your share passes on to whomever you named in your will. You can modify this in the agreement so that you can buy out your partner before they sell to someone else or after they die. Joint Tenants with Right of Survivorship is similar to a TIC, but typically only for married couples. If one owner dies, that person’s share passes automatically to the other.

Another method of joint ownership is to form a business entity, which would then own the property instead of you and your co-owner. Forming a business entity would separate the property from your personal assets and insulate personal assets from debts accrued from this particular property and the associated business.

An alternative to joint ownership is a living trust. A living trust is set up during your life and it is revocable. You have control and can add and remove assets throughout your life. Upon your death, the trustee (e.g., your spouse) distributes the assets of the beneficiaries.

If you have any questions or need guidance in your planning or planning for your loved one, please don’t hesitate to contact our Cincinnati office by calling (513) 771-2444.

Read more at:

• https://blogs.findlaw.com/law_and_life/2015/10/three-risks-to-owning-property-with-family-members-and-the-living-trust-alternative.html
• https://www.landlordology.com/hidden-dangers-of-co-owning-property/