A cautionary tale about Social Security benefits
When people who get paid under the table die, their spouses and kids may get nothing.
Dear Liz: My daughter has two children, ages 2 and 4. Recently the children’s father took his own life. He was 27. The job he worked as long as I knew him paid him in cash, so he didn’t pay into Social Security. Does this mean the children cannot receive survivor benefits from Social Security? Answer: If the father never worked at a job that paid into Social Security, your grandchildren — and your daughter — won’t qualify for survivor benefits.
Their one hope is that he had a previous job that did pay into Social Security.
At 27, he would have needed at least six quarters of coverage to trigger survivor benefits, says Bill Meyer, founder of Social Security Solutions, a claiming strategies site.
The older a person is, the more quarters they need to qualify for benefits, but no one needs more than 40 quarters. The amount of earnings required for a quarter of coverage is $1,360 in 2019. Once you earn $5,440, you’ve earned your four quarters for the year.
If the father had earned those six quarters, his children would qualify for survivor benefits that typically last until age 18 (or 19 if they are still in high school full time). Your daughter also would be entitled to benefits until the younger child turned 16 because she’s caring for the deceased person’s minor children.
If this young man was paid under the table because he was not able to work legally in the U.S., his family wouldn’t qualify for Social Security benefits even if payroll taxes had been deducted.
If he or his employer didn’t want to pay taxes, though, that choice had expensive repercussions for the people he left behind.
Curious about parents’ living trust
Dear Liz: How do I find out the details of my parents’ trust? My father recently died and my mother, who is 89, is not familiar with the details. My older sister is not responsive when I ask questions. She and I are the only children. My husband recently became disabled and it would be a comfort to know if we had any money coming from my parents. Can you give me any advice? Answer: Presumably you’re asking about a living trust, which is designed to avoid probate, the court process that otherwise follows death. Unlike wills, living trusts don’t have to be filed with the courts so you can’t go down to the county courthouse to view them.
Living trusts are revocable trusts, which means they can be changed. People other than the trust creators don’t typically have a right to see the trust until it becomes irrevocable. In the past, part of a living trust often became irrevocable when one spouse died. Today, it’s more common for trusts to remain revocable until the surviving spouse dies.
To some extent, state law determines who gets to see a copy of the trust once it’s irrevocable. Typically beneficiaries have a right to see the trust, and in some states (including California) so do
Pension payouts: Know your options
Dear Liz: My husband and I each receive a pension from the companies where we worked. If my husband dies first, will his company continue to pay me his pension and vice versa? Answer: That depends on how you chose to receive your benefits. Typically people are offered a choice of payouts: a “single life” option that ends at the pensioner’s death, and “joint and survivor” options that continue payments after the pensioner dies. A 50% joint and survivor option would pay half the monthly amount after the pensioner’s death, while a 100% option would continue the payments without reduction.
The option that continues payments without reduction, however, often offers the smallest monthly payment to start. The “single life” option pays the largest monthly amount, but because the payments end at the first death, it can leave the survivor in a bad way. Liz Weston, certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.