For your clients, losing a family member can be a difficult time. Not only have they lost a loved one, they may have also lost a major contributor to the family’s income. This can present financial difficulties. That’s why the Social Security Administration provides benefits to the deceased worker’s family, commonly known as Social Security survivor benefits.
The relationships that people had when they were alive may be more complicated than having a spouse and a couple of children. That’s why it’s important for an advisor to investigate and apply the rules on the varying Social Security benefits for a widow and social security benefits for a spouse, for example.
There are other complicated circumstances for determining who receives social security survivors’ benefits. Questions may come up, such as:
Read on as InvestmentNews provides insight into these and more about Social Security survivor benefits.
Social security survivor benefits are monthly benefits payments given to eligible family members of a deceased worker who has made enough contributions to their Social Security benefits during their lifetime.
Survivor benefits can be considered as a secondary benefit, which would typically have workers give a portion of their salary to the Social Security Administration (SSA).
To determine their benefits amount, the number of years worked, and the amounts earned in wages or income translate into credits earned as set in the SSA’s credit system. The credits earned over the workers’ lifetime correspond to the amount they’ll receive as monthly payments when they retire.
For the decedent’s family members to be eligible for Social Security survivor benefits, the deceased worker must have earned a minimum number of Social Security credits while they were working. Those who have worked for 10 years straight are eligible to provide full survivors benefits.
The simplest rule for survivorship benefits is that the surviving spouse receives 100% of the benefits of the deceased worker – assuming that the surviving spouse is at least of full retirement age.
Different rules apply if the surviving spouse remarries. There are also rules that apply to other beneficiaries like the decedent’s children or ex-spouse.
Here are the rules for the different beneficiaries according to their civil status.
In general, the surviving spouse must have been married to the deceased worker for at least nine months at the time of death to be eligible for survivors’ benefits.
Surviving spouses can:
If the surviving spouse remarries before they reach age 60, they lose their surviving spouse benefits. This condition is set at age 50 if they have a disability.
Should a surviving spouse marry after age 60 (or 50 if they have a disability), this can no longer prevent them from getting the benefits.
At age 62 and up, the surviving spouse can receive benefits from their new spouse’s work, but only if the new spouse’s benefits would be the higher amount.
If the surviving spouse was already receiving spousal retirement benefits, this immediately converts to Social Security survivor benefits once the SSA is informed of the death of the worker. The funeral home can report the death, but the surviving spouse can do this too.
If the spouse was already receiving their own Social Security retirement benefits, they can only apply for Social Security survivor benefits if it is a larger amount than their own retirement benefits.
In case the decedent has an ex-spouse, they can also receive survivors’ benefits if:
Did you know you may be eligible for Social Security benefits as a spouse, even if you’re divorced? Learn more about spouse’s benefits in today’s blog: https://t.co/kEaunMGkiM pic.twitter.com/UOCgwNfDNH
— Social Security (@SocialSecurity) July 11, 2024
The deceased worker’s children who are still single may likewise be eligible for Social Security survivor benefits if:
Stepchildren, grandchildren, step-grandchildren and adopted children may also be eligible in some instances.
In cases where the deceased worker was caring for one or both of their parents when they were alive, these parents can receive Social Security survivor benefits as well. To qualify, they must be at least 62 years old and were receiving at least half of their financial expenses from their working child.
They might not receive these survivor benefits if:
In some cases, stepparents or adoptive parents can also be eligible if they became the parents of the deceased before they turned 16.
Your client may apply for survivor benefits only at their local Social Security Office or contact the SSA by phone.
If your client isn’t currently receiving social security benefits, the SSA will require more information and documents for their application of survivor benefits. This will include:
If your client doesn’t have all the required information or documentation, you should still push for the application. The SSA can assist your client in completing all the requirements.
The surviving spouse gets Social Security survivor benefits for the rest of their life. But there are restrictions that apply to divorced spouses eligible to receive benefits.
Benefits for surviving children stop when they reach age 18, or 19 if they are full-time students. Surviving children who became disabled before age 22 receive their benefits for life.
The amount that beneficiaries can receive varies depending on the decedent’s average earnings throughout their lifetime. The more they earned and contributed, the higher the benefits their family members can receive.
The exact amount that beneficiaries can receive will be a percentage of the deceased worker’s basic benefits. In most cases, they are:
Beneficiaries cannot postpone taking survivor benefits past the age of 70.
There’s a maximum amount that eligible family members can get from a deceased worker. This maximum amount can be in the range of 150% to 180% of the decedent’s basic benefit. Benefits paid to surviving divorced spouses due to disability or age do not count towards this amount. So, if your client’s family reaches the max amount, their benefits are proportionately reduced.
Here’s a video that shows in more detail how much surviving spouses and other eligible family members can receive in social security:
For more information, here’s an in-depth article on Social Security benefits and how they work.
Apart from these monthly payments, the surviving spouse can receive a one-time lump sum death payment of $255. This is given by the SSA to help pay for the burial or cremation expenses.
Whether your client will have to pay taxes on their Social Security survivor benefits depends largely on their total income, which can include:
Your client will have to pay income tax up to a maximum of 85% of the survivors’ benefits they receive.
There are also separate rules for paying income tax on survivor benefits if they filed their income tax:
For more information, here’s an in-depth article on Social Security benefits and how they work.
Apart from these monthly payments, the surviving spouse can receive a one-time lump sum death payment of $255. This is given by the SSA to help pay for the burial or cremation expenses.
Whether your client will have to pay taxes on their Social Security survivor benefits depends largely on their total income, which can include:
Your client will have to pay income tax up to a maximum of 85% of the survivors’ benefits they receive.
There are also separate rules for paying income tax on survivor benefits if they filed their income tax:
Estate planning requires paying attention to the details of every asset and retirement vehicle. A client’s Social Security survivor benefits are no exception.
Whenever necessary and appropriate, assist the surviving spouse, children, parents and other beneficiaries find ways to beef up their finances via investments and other retirement vehicles. This is especially important if you see that Social Security survivor benefits alone will not be enough to support them.
As potentially unpleasant as it might be for your clients, start conversations on estate planning as early as possible. Don't put off discussing matters like survivorship benefits until it’s too late. Finally, keep in mind that Social Security survivor benefits are often only an additional financial cushion. It’s not something that your clients should rely on 100%.
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