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  You have worked all your life, dutifully paid into Social Security and your spouse worked as a teacher, a municipal worker or police, fire, or other form of government worker that has not paid into Social Security. When you die, you expect your spouse to get the benefit of the money you paid into Social security, right? Not necessarily so.

  Benefits paid by the Teacher Retirement System of Texas, or other governmental body may affect Social Security benefits due the surviving spouse on account of the Government Pension Offset (GPO).

  The Government Pension Offset affects Social Security benefits paid to individuals who either have a living spouse who's receiving Social Security benefits or who have been widowed by a spouse who paid Social Security taxes. Benefit amounts are reduced by two-thirds of the amount of the uncovered government worker’s retirement pension. If two-thirds of the pension benefit is more than the spousal benefits amount, the person doesn't receive any spousal Social Security benefit at all.

  Texas governmental pensions are not subsidized by the federal government, so the argument that receiving a state, or local governmental pension and Social security is “double dipping” is ludicrous. It is simply a way to help balance the Social Security accounts and prolong the deficits created by Congress.

  Look at the history of Social security: from Social security Reform Center ( http://socialsecurityreform.org/history/index.cfm )
  1935 - The Social Security Act, which covered workers in commerce and industry, was signed by President Roosevelt.
  1937 - The Federal Insurance Contribution Act (FICA) required workers to pay taxes to support the Social Security system. Payroll taxes were 2%.
  1939 - Social Security was expanded to cover dependents and survivors. Payroll taxes were 2%.
  1950 - Coverage was expanded to jobs outside of commerce and industry, and benefit levels were increased. Payroll taxes were 3%.
  1956 - Disability Insurance was created, and expanded over the following years. Early retirement at age 62 for women was permitted. Payroll taxes were 4%.
  1961 - Early retirement at age 62 for men was permitted. Payroll taxes were 6%.
  1972 - Automatic cost-of-living-adjustments (COLAs), which index benefits to inflation, were introduced. The formula to calculate increases initially overstated inflation by 25%, and people born between 1910 and 1916 received an unintended windfall. Payroll taxes were 9.2%.
  1977 - The mistake in the benefit formula was corrected. The "notch" refers to the difference in benefits paid to the group that received the windfall and those who retired following the formula correction. Social Security was thought to be actuarially sound. Payroll taxes were 9.9%.
  1983 - The National Commission on Social Security Reform was created in response to the actuarial unsoundness of the system. The commission called for 1) and increase in the self-employment tax; 2) partial taxation of benefits to upper income retirees; 3) expansion of coverage to include federal civilian and nonprofit organization employees; and 4) an increase in the retirement age from 65 to 67, to be enacted gradually starting in 2000. Again, Social Security was declared actuarially sound. Payroll taxes were 10.8%.
  1985 - The Social Security Trust Funds were moved "off-budget" so that the funds earmarked for the Social Security system would be tracked separately from the rest of the budget. Payroll taxes were 11.4%.
  1986 - COLAs were increased to respond to minor levels of inflation. Payroll taxes were 11.4%.
  1993 - The amount of taxable benefits for upper income retirees was increased to 85%. Payroll taxes were 12.4%.
  1996 - The Social Security Trustees' Report stated that the Social Security system would start to run deficits in 2012, and the trust funds would be exhausted by 2029. All members of the Advisory Panel agreed that some or all of Social Security's funds should be invested in the private sector. To keep the unchanged system actuarially sound, payroll taxes would have to be increased 50%, to 18% of payroll, or benefits would have to be slashed by 30%.
  1997 - All members of the presidentially-appointed Social Security Advisory Panel agreed that some or all of Social Security's funds should be invested in the private sector. To keep the unchanged system actuarially sound, payroll taxes would have to be increased 50%, to 18% of payroll, or benefits would have to be slashed by 30%."
  1999 - The Social Security Trustees' Report stated the Social Security Retirement System's unfunded liability increased by $752 billion since the 1998 Trustee Report was published. This brings the total long-term unfunded liability to more than $19 trillion.
  The Social Security system is funded by payroll taxes paid by employees and employers through the Federal Insurance Contributions Act (FICA) and the Self Employment Contributions Act (SECA). (The payroll tax is also used to fund part of the Medicare system.) Today the total employee/employer payroll tax is 15.3%, with 12.4% of that going to Social Security. This rate has been increased dramatically since 1937, when the rate was 2%.

  Employers and employees each pay a 7.65% payroll tax. They pay 1.45% on all earnings for Medicare, and they pay 6.2% for Social Security up to a capped amount of $72,600. (This cap changes each year.)

  Self-employed individuals pay the full 15.3% tax, but one half of the tax can be deducted as a business expense. Because the employer's portion of the payroll tax translates into lower wages for workers, it is most accurate to talk about the combined level of the payroll tax.

  The Social Security payroll taxes are recorded through the different program trust funds, which are used to track the inflows and outflows of the program. The trust funds are presently taking in more money then they are issuing in benefits, and they therefore run annual surpluses. Rather than saving the surpluses, Congress spends the money on other parts of the budget, such as defense, domestic discretionary programs and other entitlement programs.

  Social Security surpluses will continue until 2014, at which time the program will no longer take in enough money to cover benefits. The government will have borrowed over $3 trillion from the trust funds and not a penny will be left to cover the owed benefits. To repay the $3 trillion, the government will have to either cut spending by $3 trillion, raise taxes on every family in America by $43,000, or increase the national debt by an additional $3 trillion.

  Social Security has always depended upon more workers entering the system and paying more in taxes into the system than are being paid out of the system.
  My thanks to Teacher Retirement System, Wikipedia, socialsecurityreform.org and nysscpa.org.

  THIS ARTICLE IS FOR INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS LEGAL ADVICE. This does not constitute the establishment of an attorney client relationship between you and this lawyer. Most information is of a very general nature and cannot attempt to cover all fact situations. Nothing contained in this web site should be construed to constitute a recommendation of any product, service, or web site.
  Weston Cotten is admitted to practice in all Texas Courts, all Federal District Courts in Texas, Eastern, Western, Southern and Northen Federal Districts as dwell as the Bankruptcy Courts and the U. S. Tax Court, though not certified as to any legal specialization.  
Please visit his website at www.westoncotten.com , or call at 281-421-4050 Principal (and only) office is located at 1500 E. Wallisville Road, Highlands, TX 77562.

  Many people have a will and think that their estate plans are complete. A comprehensive estate plan will include a will or trust, a financial power of attorney (commonly called a durable power of attorney) a medical power of attorney with HIPAA compliant language and a directive to physicians, commonly called a living will.
  There are 6 common issues that may occur throughout your life that require you to update your estate plan. These issues are discussed below.

1) Children
  If you have a child you need to update your estate plan to provide a guardian for the child. If you do not choose the guardian for your child the court will do it for you without your input! This can result in chaos for the child and everyone involved. You are the person who knows who is the best person to be the guardian for your children. You need to make the choice!
  If you leave a portion of your estate to a minor child, or incapacitated child you will want to leave a trustee in charge of those funds. You can control how the beneficiary receives the property/money and when, or if that beneficiary receives the property/ money free from trust. Do you have a spendthrift child, or spouse? If so a trust which includes management for the life of the child and then a beneficiary for the remaining funds after that child dies could resolve that problem. You would not want your child or spouse to be left to depend on the charity of others. Don’t allow them to deplete their funds without regard of their future. It is your money and your loved one. Protect both.

2) Marriage/Remarriage
  When you get married your estate plan will change. Prior to marriage you will probably provide for your assets to go to your parents or friends. Typically, after marriage people want their assets to go to their spouse. After you are married you need to update your estate plan to reflect this change. If you get remarried you should update your estate plan as well. Many times there are children from previous marriages and you need to choose how the assets will be divided among beneficiaries. By planning your estate it will be executed smoothly. If you do not update your estate plan the estate can be tied up in court for years. One recent case is still pending and the person died in 1993! The parties involved are the deceased's second wife and his children from his first marriage. Prior to the division of the property the parties involved "had a great relationship." It is essential that each individual makes clear the way that they want their assets to be divided. Protect your loved ones by setting out a plan for their future, a plan they cannot influence, or alter.

3) Increase in Wealth
  Many people set up their estate plan when they are younger and have fewer assets. As they grow older their assets appreciate and they may, without even realizing it, approach the personal exemption for the estate tax. The government gives each citizen a personal exemption from the estate tax. A married couple can set up a by-pass trust and double their exemptions, thus passing twice as much to their beneficiaries free from estate tax. When calculating the estate value for estate tax purposes life insurance proceeds, retirement accounts, bank accounts, real estate, and personal property are all included. Many people believe that choosing a beneficiary for these plans or holding joint accounts excludes the asset from your estate. This is incorrect. These steps may allow the asset to avoid probate, thus bypassing the beneficiary designations in your will (which may, or may not be your intention), however, it will still be included in the estate for estate tax purposes. Given the appreciation of home values and retirement accounts many people are approaching the personal exemption and need to set up bypass trusts to preserve both spouses' personal exemption as well as pursue other options to avoid paying the estate tax. By setting up a bypass trust an individual can save estate taxes.

4) Non-Citizen Spouse
  Many people do not realize that a non-citizen spouse does not receive the unlimited marital deduction that citizens enjoy. This means that if a citizen spouse passes away and the citizen spouse has assets of over the $5,000,000 (for 2011 & 2012) personal exemption the estate tax is due immediately. This can be burdensome since the assets may be in real estate or retirement accounts and may not be liquid. It could force liquidation of assets in ways that are not tax advantageous as well as liquidations where the market is in flux. Congress has altered the rules applicable to non-citizen spouses in the following ways (all discussed in more detail below):
  The unlimited estate tax marital deduction for transfers to non-citizen surviving spouses is disallowed, unless such property is placed in a qualified domestic trust (QDOT);
  The unlimited gift tax marital deduction for transfers to non-citizen spouses is disallowed, but the annual exclusion from the federal gift tax is increased;
  The full value of jointly held property is included in the estate of the U.S. citizen spouse; and
  In certain situations where one spouse is a non-citizen the creation or termination of a joint tenancy can create a tax problem. Any family that is approaching the personal exemption needs to address this issue.
  Additionally, a non-citizen spouse may have assets located outside the United States. It is important to carefully plan for these assets to assure that they are given to the proper beneficiaries. This planning includes coordinating United States law, the law of the foreign jurisdiction and applicable treaties between the countries.

5) Health Care Power of Attorney Executed Prior to 1996
  In 1996 Congress enacted the Health Insurance Portability and Accountability Act (HIPAA). The result has been that it is much harder for other people to access your health information. Unfortunately, this has been interpreted in many different ways by different hospitals and has resulted in friends and family being denied access to their loved ones information when they are attempting to help. The easiest way to remedy this is with a health care power of attorney that clearly states that the agent is authorized for purposes of HIPAA to view the medical records. If an emergency occurs it is essential that your agent has access to the proper information to make the right decision for your well being. If you have a power of attorney executed prior to 1996 it is critical that you update this document! If your current health care power of attorney does not include HIPAA language, or designation of those to receive health care information which complies with HIPAA, you should update or replace your current document.

6) Death of a loved one
  Many times we establish our plan and then fail to review the plan when a loved one dies. If it is our spouse, we have commonly left property to our children, but in the case of a childless marriage, or a blended family, questions invariably arise. When a child dies, we assume his share will automatically go to his children, but it may not without having made provision in your will. What if you wrote your will when none of you children had children of their own. Remember, your estate has to go somewhere. Make sure it goes where you want it to go, not where the State of Texas says it must go if you do not leave instruction to the contrary.

  Feel free to call the office of Weston Cotten, Attorney at Law, with any questions you may have, or visit www.westoncotten.com.
  Legal Disclaimer: Unless otherwise indicated, the author is not certified by the Texas Board of Legal Specialization(Translation, I have not taken and passed a test in any area of legal speciality, but am licensed to practice law before all Texas State and County Courts and several Federal Courts).
  The principal office of Weston Cotten, PC is 1500 E Walisville Road, Highlands, Texas 77562., office phone is 281-421-4050
  The content of this article and any referenced pages or websites, has been written or located for informational purposes only and should not be relied upon as legal advice. Legal advice of any nature should be sought from legal counsel. This information is not intended to create, and receipt of this information does not constitute, an attorney-client relationship.