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3 Social Security Planning Opportunities for Survivors

Social-security-planningSocial Security survivors’ benefits are similar to Social Security retirement benefits, but there are certain planning opportunities available to the widowed spouse. As the family’s trusted advisor, make sure you understand these opportunities in order to give your clients the most beneficial advice possible. Here are three planning opportunities for survivors:

1. Planning for Spousal Income Needs. Depending on the age of the parents and children, there is a gap in the survivors Social Security benefits. From a financial planning aspect, it is imperative that you discuss the impact this gap will have on their financial goals. After all, it will affect them for years to come and will determine their income.

For example, if your spouse passes away when you are 30 years old and you have children under age 16, you would receive a survivor benefit of 75 percent of the Social Security’s primary insurance amount. Once the children reach age 16, you will stop receiving Social Security benefits until you reach age 60. At that time, you can receive 71.5 percent of the full retirement age benefit.

As a result, you would advise your clients to find other methods to fund their income, such as investments or life insurance.

2. Allocating the Survivor Benefits Among Family Members. If you are the surviving spouse, currently working and have two or more children, you may want to avoid collecting the spousal benefit because it could subject the family to the family maximum, which would reduce the spouse’s benefit, as well as those of the children. Moreover, it would subject the spouse’s survivors benefits to income taxation.

If the spousal benefit is forgone, each child may be eligible to receive more under the family maximum formula. Social Security survivors benefits for the children would likely not be taxable because the children would probably have little or no income from other sources.

In addition, if the surviving spouse is still working, taking the spousal benefit might subject the surviving spouse to the giveback rules, if he or she earns more than $15,480.

3. Death of Two Parents with Minor Children. In this case, Social Security survivors benefits would be based on the parent who has the larger earnings records, and would be subject to the family maximum formula.

The CPA’s Guide to Social Security Planning from the AICPA Personal Financial Planning Section has a chapter dedicated to survivor issues and planning opportunities, as well as commonly asked client questions and advisor solutions on a variety of Social Security planning issues. You can download a free excerpt on the AICPA PFP Section’s retirement resources page.

Interested in diving deeper into retirement planning and other critical aspects of your clients’ financial lives? If you or any CPAs in your office are advising clients on income tax, estate, charitable giving, retirement, employee benefits, investments, insurance or risk management planning, don’t miss the live, virtual or on-demand PFP boot camps being offered this November.

Theodore J. Sarenski, CPA/PFS, CFP®, AEP, CEP and President, Blue Ocean Strategic Capital, Inc. Ted’s firm delivers customized service for individuals, retirement plans, non-profit organizations, endowments and foundations. He is the author of The CPA’s Guide to Social Security Planning and will be speaking on the “Nuances of Social Security” at the 2015 AICPA Advanced PFP Conference.

Social Security planning image via Shutterstock


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