, , , ,

Medical Tax Deductions – 2018

The deduction for qualified medical expenses has survived yet another round of tax reform.  The IRS will allow a tax payer to deduct expenses that exceed 7.5% of their adjusted gross income for 2017 and 2018.  Beginning in 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.

For example, if you have a modified adjusted gross income of $50,000 and $5,470 of medical expenses, you would multiply $50,000 by 0.075 (7.5 percent) to find that only the expenses exceeding $3,750 can be deducted. This leaves you with a medical expense deduction of $1,720 (5,470 – 3,750).

Many elders who have been ordered into a professional care environment such as assisted living, may have qualified care expenses of $30,000, $40,000 or more annually.  Often times, the elder relies on other parties such as their children to supplement their care expenses.  Regardless of the amount, “anyone” who is contributing to the direct care expenses of themselves or a loved one, should seek qualified tax services from an Enrolled Agent or CPA to determine if those expenses are deductible.  Considering the a mount of money and complexity of claiming these expenses, I do not recommend using on-line Internet Tax or Shopping Mall type tax preparation services.  Many of these face to face data collection persons are customer service agents with minimal, if any, actual tax training or credentials.  You have the right to claim these deductions – if it is done properly.

Also, for those who used an Irrevocable Trust to re-position assets, you should meet with your Attorney, Enrolled Agent or CPA to discuss if you will be required to file a 1041 tax return.

One big tip for those receiving VA Aid and Attendance.  Some professionals recommend you file a 1040 and claim your care expenses – even if you are exempt from filing.  Remember, the VA is tasked with verifying your care expenses exceed your income annually.  By filing the 1040, it makes their job easy.  By not filing a 1040, make certain you keep a close eye for any correspondence from the VA.  If you fail to respond timely, they may terminate your monthly benefit.

Source: https://www.advancedwellnessgcm.com/

, , ,

VA Disbursements have Increased

Helen Justice, Geriatric Care Manager, at Advanced Wellness, published an informative article on updates to VA disbursements:

Are you a War-Time Veteran or Widow of War Time Veteran?

There are Financial Benefits available for War Time Veteran and Widow of War Time Veteran to help defray the cost for senior placement Assisted Living Facilities, Board and Care Homes, and In-Home Care. There is a non-service connection pension cal Aid and Attendance Pension Plan. This was established in 1954 under Section 38 USC to assist qualified veterans and their surviving spouses.

And the amounts have just increased:

Current Maximum VA Monthly Benefit Amounts

  • Two Veterans/ Spouses: $2,903 per month / $34,837 annually
  • Married Veteran: $2,169 per month / $26,036 annually
  • Single Veterans: $1,830 per month / $21,962 annually
  • Widow: $1,176 per month / $14,113 annually

What are the qualifications?
The Veteran Must:

  • Be aged 65+ or Unemployable
  • Be Honorably Discharged having 90 days or more of active duty service with at least one of those days during a period of War. This does not mean they needed to be in War Country.
  • Have Cost of Care that is 5% greater than their fixed income.
  • Eligible Veterans must show active duty service for a minimal 90 days during a time in which the US was involved during a declared conflict (from 1980 forward the veteran needs to serve 2 years active duty).
  • You must need assistance with activity of daily living (ADLs) (bathing, eating, dressing, hygiene, transferring, and medication management). Your doctor will provide a report that you need assistance with at least of two ADLs.

You can contact Helen directly at her website, or call our office and we’ll get you going in the right direction. Our toll-free number is: 866-988-3956.

Source:  Advanced Wellness Geriatric Care

, ,

Planning for Incapacity

CunninghamLegal – The Living Trust Lawyers

Planning for Incapacity

“I’d like to do a power of attorney for my mother who has dementia.”  This is the type of request that I sometimes receive from a prospective client calling our office.  In these cases, a conservatorship is the only option.  An estate plan is not just for efficiently passing on wealth to the next generation, asset protection, or for saving taxes.  An often overlooked reason for also executing an estate plan is planning for incapacity.

You can plan for incapacity by giving someone authority to act on your behalf in the event you are unable, thereby bypassing the need to establish a conservatorship in probate court.

What is a conservatorship?

Simply put, a conservatorship is a court process where a judge appoints an individual (the “conservator”) to care for an adult who lacks the capacity (the “conservatee”) to care for his or her own finances and/or wellbeing.  The key downside to a conservatorship is that a judge is choosing the conservator, not you.  Other major downsides include significant time delays, costs and loss of privacy.

If you have ever attended a conservatorship proceeding, you understand that it is not a pleasant process.  Private details are discussed in public to an open audience of spectators and people waiting for their matter to be called.  Oftentimes, there are disputes between family members over who should be named conservator.  With proper advance planning, a conservatorship proceeding is almost always not necessary.

Alternatives to Conservatorship

Less restrictive alternatives to a conservatorship are available, but only with advance planning while an individual still has the legal capacity necessary to execute certain documents.  These documents which can prove to be invaluable in the event of incapacity include a durable financial power of attorney, an advance health care directive and a trust.  With these documents, you are naming someone who you want and trust to take care of your financial affairs and make health care decisions for you in the event you are unable.

Call us today or come to one of our seminars to learn more about how we can help you and your loved ones.

–Stephen Wood

, , ,

Avoiding a Medi-Cal Recovery Claim on a Personal Residence

CunninghamLegal – The Living Trust Lawyers

Avoiding a Medi-Cal Recovery Claim on a Personal Residence

In order to qualify for Medi-Cal, an individual must have limited income but may have unlimited assets due to the expansion of Medi-Cal under the Affordable Care Act. Medi-Cal expansion has made it easier for an increasing number of Californians to qualify for Medi-Cal. Although this is welcome news to many, it also presents an unanticipated consequence for many. Note that long term care Medi-Cal, which pays for care in a skilled nursing facility, is still an income and asset tested benefit, meaning that assets are still considered for eligibility purposes. For long term care Medi-Cal, some assets are considered “exempt,” meaning that Medi-Cal will not consider that asset in determining eligibility. For example, the personal residence is an exempt asset.

What is the unanticipated consequence for a Medi-Cal recipient? Medi-Cal recovery.  When a Medi-Cal recipient dies, exempt property remaining in the recipient’s name becomes available for Medi-Cal to seek reimbursement for benefits it has paid out during the recipient’s lifetime.  Not everyone who has received Medi-Cal is subject to Medi-Cal recovery, Medi-Cal only seeks recovery for benefits paid out when a recipient is over age 55, or when a recipient of any age is cared for at a skilled nursing facility or other similar institution.  Medi-Cal recovery claims are often very large and must be paid by assets left over in the estate.

Many people I speak with are surprised to hear that Medi-Cal recovery is avoidable with proper planning.  For purposes of this article, I will be focusing on avoiding recovery of the personal residence since it is typically the most valuable exempt asset and probably the asset Medi-Cal seeks recovery against the most. Perhaps the simplest way to avoid a Medi-Cal claim against the personal residence is to transfer it out of the estate before death or to do a retained life estate.  There are some downsides though to these methods.  In most cases, we advise transferring the personal residence to an irrevocable Medi-Cal Asset ProtectionTrust (“MAPT”) for the following reasons: (i) IRC Section 121 Exclusion; and (ii) Step-up in Income Tax Basis.

  • IRC Section 121 Exclusion

Oftentimes, the personal residence is sold during a Medi-Cal recipient’s lifetime for various reasons. If the home is in the recipient’s name, the personal residence will now be converted to a non-exempt asset, cash, and the recipient will no longer qualify for Medi-Cal. To overcome this result, the recipient may transfer the home to a loved one; however, if this is done, the sale will no longer qualify for the IRC 121 exemption for the first $250,000 of appreciation. The result is similar with a retained life estate as the portion of the sale attributed to the remainder beneficiary will not qualify for the exemption.

If the personal residence is sold after it has been transferred to a MAPT, the sale will not only qualify for the IRC 121 exemption, the cash resulting from the sale will also not be counted as an asset of the recipient.  Now the recipient has cash to supplement their care and the sale results in little or no capital gains tax.

  • Step-up in Income Tax Basis

Generally speaking, when an appreciated asset is transferred because of death, that asset will receive a step-up in income tax basis, meaning that the tax basis becomes the asset’s fair market value on the decedent’s date of death.  Conversely, if an asset is gifted away during lifetime, that asset keeps the same basis that the donor had.  With a MAPT, property will receive a step-up in basis on the recipient’s death.  A property with a retained life estate will also receive a step-up in basis.

For example, let’s say Suzanne bought her personal residence for $50,000 and it now has a fair market value of $500,000. If Suzanne gifts that property to her children to avoid a Medi-Cal recovery claim and her children then sell the personal residence for $500,000, the children now have to pay capital gains tax on the $450,000 of gain. If the property is transferred to a MAPT and Suzanne dies when the fair market value of the house is $500,000, the children will receive a stepped up basis from $50,000 to $500,000.

There are many other advantages of the MAPT, such as asset protection and retained control and flexibility by the recipient.  Planning for Medi-Cal and avoiding a Medi-Cal recovery claim is definitely not a one size fits all approach, it is very important to obtain help from an attorney who is knowledgeable about Medi-Cal rules and who has experience is this area. I have done this type of planning for many clients which has literally saved people hundreds of thousands of dollars in taxes and Medi-Cal recovery claims.

If you would like to discuss this strategy further, please don’t hesitate to contact me. We also offer free initial consultations for Medi-Cal planning.

–Stephen Wood


, , , ,

Why Death Doesn’t Take a Holiday Break

Each winter, a strange phenomenon repeats itself as people gather to celebrate the holiday season: Deaths spike.

The surge was particularly extreme in early 2015, when nearly a third more senior citizens died than normal in the first two weeks of the New Year.

Researchers have known for some time that more people die in winter. But even when they adjust for the expected increase, an irrepressible bulge that begins to swell in December persists.
Experts aren’t quite sure what causes it, but it affects nearly every age and disease group. It fells both men and women. And, curiously, after researchers adjust for it, three days emerge as the deadliest for deaths of natural causes: Dec. 25, Dec. 26 and Jan. 1.

“These increases are above and beyond what you would expect for that season,” said David Phillips, a sociology professor at the University of California, San Diego, who has studied the phenomenon. “We did not find equivalent spikes on any other major holiday. There’s something about Christmas and New Year.”

Dr. Phillips examined 57.5 million U.S. death certificates from 1979 through 2004. He compared the actual number of deaths with the expected number and found that over two weeks beginning with Christmas, an excess of 42,325 deaths from natural causes occurred over the 25-year period.

“People have known forever that mortality from a wide variety of causes is higher in the winter, but nobody knew before we did about the spike above that hill, particularly on Dec. 25, Dec. 26 and Jan. 1,” he said.

Although Dr. Phillips appears to be the only researcher who has broken the trend down by day and factors such as demographics and type of disease, the others have documented the overall seasonal effect.

Legacy.com, which hosts obituaries for 1,500 newspapers around the world, noticed it a few years after it launched in 1998.

“If you have people reading literally millions of tributes a year, if it fluctuates by as much as 20% in one part of the year, you need to know that to have correct staffing to handle the volume,” said Stopher Bartol, Legacy’s founder and executive chairman.

Once the company noticed the variation, it used government data to model the trend and verify what it suspected. As Mr. Bartol reported on the company blog: “Yes, it’s true: More people die in January.”

To try and explain the holiday spikes, Dr. Phillips, who focused on deaths from natural causes, examined five major groups of disease, including circulatory ailments; diseases of the respiratory system; cancer; endocrine, nutritional and metabolic disorders; and diseases of the digestive system.

The spikes occurred in all but cancer.

By age, only children appeared to be exempt from the trend. The increases occurred in all settings combined, but were especially acute among patients who died in the emergency room or who were dead on arrival, suggesting, Dr. Phillips said, that overcrowded and understaffed emergency rooms might contribute or that patients delay seeking medical help this time of year until it’s too late. No single cause seems to bear full responsibility, he said, although actuaries at the Reinsurance Group of America believe flu played a part last year, when the U.S., U.K. and Japan reported spikes that were significantly higher than in any of the previous 10 years.

“By about week two of the year, they were 130% of what they have been on average for ages over 65 in the U.S.,” said Peter Banthorpe, the head of actuarial research for RGA Services UK who wrote the report. “In the U.K., we saw the number spike 120% over the average.” 14 other European countries, he said, reported similar increases.

Mr. Banthorpe suspected a strain of influenza not covered by the annual vaccine contributed to the increase, a theory supported in the U.S. by the Centers for Disease Control and Prevention, which recorded the highest rate of flu-associated hospitalizations among people 65 and older since it began tracking the numbers in 2005. That year’s vaccine, the CDC reported, did not protect against the strain of H3N2 flu that was predominant early that year.

Dr. Phillips couldn’t pin down what is responsible for the holiday spikes, but he did rule out several potential contributing factors. For example, stress, winter travel and substance abuse did not explain the increase, he said, nor did the coldness itself.

“We show the effect is slightly smaller in the cold states than in the warm states,” Dr. Phillips said.

More than likely, he concluded, a variety of circumstances, not merely foul weather or the strain of the holidays, are to blame.

“A lot of times researchers wave their arms in the air and say well, it’s cold, people are depressed, they’re stressed.” Dr. Phillips said. “Probably there are several explanations.”

So, to borrow from the Bard, with the wrathful, nipping cold of winter upon us–at least in some parts of the country–perhaps it’s best to take shelter in the warmth of another’s watchful gaze. And, if needed, seek the help of a trusted physician without delay.

Source: Wall Street Journal, December 31, 2015

, ,

Possible Indicators Of Elder Financial Abuse

It is a common concept to want companionship, and elders are no exception. Unfortunately, an elder with diminishing capacity can easily become a victim of financial abuse if they and/or their advocates are not careful to watch for the indicators of elder mistreatment. Here are a handful of possible indicators of elder financial abuse to be aware of and look for:

  • Unpaid bills, eviction notices, or notices to discontinue utilities.
  • Withdrawals from bank accounts or transfers between accounts that the older person cannot explain.
  • Bank statements and canceled checks no longer come to the elder’s home.
  • New “best friends”.
  • Legal documents, such as powers of attorney, which the older person didn’t understand at the time he or she signed them.
  • Unusual activity in the older person’s bank accounts including large, unexplained withdrawals, frequent transfers between accounts, or ATM withdrawals.
  • The care of the elder is not commensurate with the size of his/her estate.
  • A caregiver expresses excessive interest in the amount of money being spent on the older person.
  • Belongings or property are missing.
  • Suspicious signatures on checks or other documents.
  • Absence of documentation about financial arrangements.
  • Implausible explanations given about the elderly person’s finances by the elder or the caregiver.
  • The elder is unaware of or does not understand financial arrangements that have been made for him or her.

The National Committee for the Prevention of Elder Abuse