January 2012 "2012 Cost of Living Adjustments"

2012 COST OF LIVING ADJUSTMENTS

By Trust, Estate, and Elder Law Attorneys Jennifer & Jeff Hawkins

State and Federal public benefit agencies adjust eligibility values and benefit payment values for inflation from time to time. For example, if the cost of groceries and gas increases, the Social Security Administration will increase the Social Security/retirement benefit to adjust Social Security benefits for inflation. Our economy declined so much in 2009 and 2010, that the Social Security Administration gave no cost of living adjustments for Social Security benefits in 2010 and 2011. Social Security retirement benefit recipients should know by now that they will receive a cost of living (COL) adjustment in January 2012.

Benefit recipients receive COL adjustments, but costs and program eligibility guidelines also adjust from time to time for COL. Retirees should not get too excited about adjustments to Social Security benefits, however, because the 2012 Medicare premium will increase slightly to offset some of the Social Security increase.

These COL adjustments affect most financial values in systems like Medicare, Medicaid and Social Security for benefits and eligibility limits. For example, Medicaid allows a nursing home resident's spouse residing at home to keep half of the couples' countable resources like bank accounts and investments as long as one-half is less than a maximum value. The maximum resources value that a spouse living at home may keep beginning 2012 increased from $109,560 to $113,640 on January 1, 2012. Some of these basic values change periodically in January and other values change periodically in July. The values only change when the government agencies that administer the programs determine that inflation requires them to update the values. These changes affect people significantly over time. A family that experiences a health crisis should meet with an experienced elder law attorney as soon as possible when the health crisis arises so that the family may know the current laws and feel more confident about financial stability. Sometimes, a consultation informs a family that financial consequences of a health care crisis are much less frightening than expected and real planning alternatives exist to protect a spouse at home from impoverishment.

These changing values permit people to receive benefits that they supported with their taxes over the years. Unfortunately, too few people meet with trust, estate and elder law attorneys while they are healthy and make effective plans to deal with a health crisis. A good estate plan provides much more flexibility so that a family can respond quickly and intelligently in a health crisis.