When to Sign Up for Medicare

It's important to know the deadlines for when to sign up for Medicare.
It’s important to know the deadlines for when to sign up for Medicare.

It’s important to know the deadlines for when to sign up for Medicare and the penalties that can be imposed for late enrollment.

Here are the important dates for Medicare enrollment:

  • You can initially enroll in Medicare during the seven-month period that begins three months before you turn 65.
  • If you continue to work past 65, sign up for Medicare within eight months of leaving the job or group health plan or penalties apply.
  • The six-month Medicare Supplement Insurance enrollment period starts when you’re 65 or older and enrolled in Medicare Part B.
  • You can make changes to your Medicare coverage during the annual open enrollment period, from Oct. 15 to Dec. 7.
  • Medicare Advantage Plan participants can move to another plan from January 1 to March 31 each year.

Medicare Parts A and B Deadline. Individuals who are getting Social Security benefits, may be automatically enrolled in Parts A and B, and coverage starts the month they turn 65. However, those who haven’t claimed Social Security must proactively enroll in Medicare. You can first sign up for Medicare Part A hospital insurance and Medicare Part B medical insurance during the seven months that starts three months before the month you turn 65. Your coverage can start as soon as the first day of the month you turn 65, or the first day of the prior month, if your birthday falls on the first of the month. If you fail to enroll in Medicare during the initial enrollment period, you can sign up during the general enrollment period between January 1 and March 31 each year for coverage that will begin July 1. Note that you might be charged a late enrollment penalty when your benefit begins. Monthly Part B premiums increase by 10% for each 12-month period you delay signing up for Medicare, after becoming eligible for benefits.

If you or your spouse are still working after age 65 for an employer that provides group health insurance, you must enroll in Medicare within eight months of leaving the job or the coverage ending to avoid the penalty.

Medicare Part D Deadline. Part D prescription drug coverage has the same initial enrollment period of the seven months around your 65th birthday as Medicare Parts A and B, but the penalty is different. It’s calculated by multiplying 1% of the “national base beneficiary premium” ($32.74 in 2020) by the number of months you didn’t have prescription drug coverage after Medicare eligibility and rounding to the nearest 10 cents. That’s added to the Medicare Part D plan that you choose each year. As the national base beneficiary premium increases, your penalty also goes up.

Medicare Supplement Insurance Plan Deadline. These plans can be used to pay for some of Medicare’s cost-sharing requirements and some services that traditional Medicare doesn’t cover. The enrollment period is different than the other parts of Medicare. It is a six-month period that starts when you’re 65 or older and enrolled in Medicare Part B. During this open enrollment period, private health insurance companies must sell you a Medicare Supplement Insurance plan, regardless of your health conditions. After this enrollment period, insurance companies can use medical underwriting to decide how much to charge for the policy and can even reject you. If you miss the open enrollment period, you’re no longer guaranteed the ability to buy a Medicare Supplement Insurance plan without underwriting, or you could be charged significantly more, if you have any health conditions.

Medicare Open Enrollment Deadline. You can make changes to your Medicare coverage during the annual open enrollment period from October 15 to December 7. During this period, you can move to a new Medicare Part D prescription drug plan, join a Medicare Advantage Plan, or stop a Medicare Advantage Plan and return to original Medicare. Changes take effect on January 1 of the following year.

Medicare Advantage Open Enrollment Deadline. Participants can move to another plan or drop their Medicare Advantage Plan and return to original Medicare, including purchasing a Medicare Part D plan, from January 1 to March 31 each year. You can only make one change each year during this period, and the new plan will begin on the first of the month after your request is received.

Reference: Yahoo News (July 27, 2020) “Medicare Enrollment Deadlines You Shouldn’t Miss”

 

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The Difference Between an Executor, a Trustee and Other Fiduciaries

Who is the best person to be your executor, trustee, or agent?
Who is the best person to be your executor, trustee, or agent?

When putting together an estate plan, you need to choose wisely those you trust to carry out your intent. Many people wonder what is the difference between an executor and a trustee. But those aren’t the only roles you need to consider filling when putting together your estate plan. You also may need to name agents and guardians.

The people you designate for these positions are generally called “fiduciaries.” Because these people will play an important part in the success of your estate plan you need to know what these roles entail and what kind of person would be best suited for each position.

Here is a summary of what fiduciaries you may need in your estate plan:

  • Executor  – This is the person named in your will who has the responsibility for identifying what property you own, paying your debts and final expenses, filing final tax returns, and distributing the remaining assets to your beneficiaries. Often the executor has the authority to determine what assets make up a beneficiary’s share. The executor should be organized and able to make financial decisions. The executor needs to be impartial with regard to beneficiaries. He or she should be willing to communicate regularly with the beneficiaries and keep them informed.
  • Trustee – A trustee manages a trust. As opposed to the executor, this could be a long term position, depending on how long the trust is supposed to last. The trustee must be able to communicate with the beneficiaries and be responsive to their needs while following the terms of the trust. There are many kinds of trusts, so one person may be good as trustee for one kind of trust, but may not be appropriate for another kind of trust. For example, an adult child may be a good trustee for his or her own trust, but a poor choice as trustee of a trust created for his or her step parent.
  • Guardian of a Minor or Incapacitated Child – The guardian of a child’s “person” has the responsibility for making sure that the child’s day to day physical needs are met (food, clothing, and shelter). The guardian assumes the care of the minor or incapacitated child or children upon the death or incapacity of the last of the child’s parents to die or become incapacitated. The child’s guardian should be someone who holds the same values you do and someone you trust to raise your child the way you would.
  • Agent Under Medical Power of Attorney – This is the person you appoint to make decisions regarding your medical treatment when your health care provider has determined that you cannot make your own medical decisions. This person should not be afraid or hesitant to ask you what kind of treatment you would want in certain situations. He or she needs to be able to make tough decisions and be committed to making decisions based on what you want and have expressed, not on their own wishes.  It’s important to have a frank discussion with your medical agent regarding the kinds of treatment you want or don’t want.
  • Agent Under a General Durable Financial Power of Attorney – This is the person you appoint to step in when you are unable to take care of your own business affairs, but you also may appoint an agent to act on your behalf when you are not incapacitated. The agent will be responsible for handling your day to day tasks, such as paying bills, managing investments, paying for your care and medical expenses, signing tax forms, dealing with insurance, social security, etc. This person should be organized and able to make financial decisions and have the time to handle your affairs. Your agent may hire outside help, like a bookkeeper or a caregiver.

Certain positions, such as an agent acting under a power of attorney, for practical reasons should probably be filled by one person at a time. For other roles, such as trustee or executor, you may wish to name two or more people. Just remember, the more people involved in the decision making, the more cumbersome the process may become.

You should also name successor executors, trustees, agents and guardians to act in the event the first person you choose is unable to take on that role.

In some situations, a trust company is the appropriate choice for carrying out your instructions as to how assets should be distributed and beneficiaries cared for. Trust companies are impartial and can be effective in diffusing emotions that may arise between beneficiaries and an executor or trustee. Another option may be to name an individual and a trust company as co-executors or co-trustees. The individual may be sensitive to a beneficiary’s needs and a trust company can take care of investing and managing assets.

In any event, your estate planning attorney will be able to help you explore further which roles you need to fill in your estate plan and the best people for those roles.

If you’re interested in learning more about how a trust company works. See https://galligan-law.com/how-does-a-trust-company-work/

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Preparing Children for Future Inheritance

Parents need to prepare their children to oversee and sustain their inheritance.
Parents need to prepare their children to oversee and sustain their inheritance.

Transferring wealth and having it last more than two generations is very difficult, says an article that offers suggestions: “4 Ways to Prepare Children Now to Oversee their Inheritance Later” from Forbes. A decades-long study of 2,500 families found that 70% of family fortunes disappear by just the second generation. By the third generation, that number leaps to 90%.

Why is wealth retention so difficult? One of the key reasons is a lack of preparation. Parents may devote time and resources to ensure that their estate is organized, but they must also prepare their children to oversee and sustain inherited wealth and give them the skills, values and knowledge needed.

How can parents make sure their family wealth endures? Here are a few steps:

Have an estate plan created. This lets you maximize the inheritance left to heirs, by minimizing taxes and asset distribution costs. When the children are minors, name guardians to take care of them and trustees to financially manage their inheritance until you feel they are old enough to do so, themselves.

Give your children a financial education. Children need to be taught how to save, what compound interest can do, how investments work and how money is earned. Let them handle money early and experience the consequences of poor decision making. Better to learn at a young age with small amounts of money, than when they are adults and the stakes are higher.

Let them know what the family’s net worth is and apprise them of any changes. These discussions should be age-appropriate, but financial openness and honesty that starts young eliminates confusion and mixed messages. Give them a small stake in the planning, by allowing them to choose a charity and make a donation to it. Delegating even a small portion of control and letting the child see how it feels to be a steward of wealth is an important lesson.

Encourage children to build their own wealth. Many wealthy parents worry that knowing there is an inheritance in their future will prevent their children from having any ambitions. Grant a limited amount of control over portions of their inheritance at certain ages and teach them about options: investing, saving, donating or spending.

A financial education that starts early and provides time for lessons to be learned will make children at any economic level better prepared for good decision making throughout their lives.

For more information on other issues related to estate planning and your children see https://galligan-law.com/estate-planning-life-stages/planning-for-minor-children/

Reference: Forbes (July 1, 2020) “4 Ways to Prepare Children Now to Oversee their Inheritance Later”

 

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