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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/

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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

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The 5 Golden Rules Of Lending Money To Your Adult Children

When you think about the price of having kids, the costs that come to mind may include things like child care, camp, braces and college tuition.

What probably doesn’t spring to mind are mortgages, car payments or personal loans.

The reality, however, is that your bank account will likely continue to be tapped long past the day your kids turn 21. According to a 2015 Pew Research Center report, six in 10 Americans with at least one adult child say they’ve provided their kids with some financial support within the past year.

And the dollar amounts they doled out were probably a bit steeper than $100 here or $500 there: A TD Ameritrade survey released in August found that parents supporting adult kids gave them an average of $10,000 over the past 12 months.

When dealing with an amount of that size, it’s very possible that parents expect to be paid back at some point. But entering into parent-child lending territory can be fraught with complications that could lead to big financial burdens and broken family ties.

So we rounded up some financial pros to provide tips on how to loan your adult children money in a way that helps minimize monetary strife and keep family drama at bay.

1. Only lend money you won’t miss.

Your child is just a few thousand dollars shy of a down payment on her dream home, and you’d really like to help her get into that three-bedroom Colonial. Before you reach for your checkbook, however, make sure it’s an amount you can stand to part with, rather than money you need for your own financial stability.

“The question I ask my clients [who are faced with lending to kids] is: ‘Are you willing to lose the money?’ If you can’t answer with a resounding yes, then I suggest you don’t loan the money,” says Tom Till, owner of APPS Financial Group, a financial advisory firm located near Houston.

And that advice doesn’t apply just to funds you use to pay your monthly bills; it’s also applicable to any money you’re setting aside for your future.

“If you don’t have enough in savings or retirement or haven’t reached your personal goals, then tell them you can’t help them at this time,” suggests Debbi King, a personal finance and life coach and author of “The ABC’s of Personal Finance: 26 Essential Keys to Winning With Your Money.” “Don’t mortgage your future and put it at risk.”

If you still get the pleading looks, explain your no in a way that shows why your financial stability can actually be a good thing for them. One client of Till’s used this approach to tell her daughter why she couldn’t lend her money for a home down payment: “She told her child that I had recommended against the loan because it would greatly affect her retirement income—even to the point where she might have to move in with the child at her new home.”

2. Be clear on how your kids will use the funds.

You think you’re lending your child money to help pay off a student loan, but you suddenly notice some sweet electronics and brand-new furniture popping up in his pad.

Coincidence? Perhaps not.

Consider that if your child is asking you for money, it may be a sign that he doesn’t have the firmest grasp on his finances to begin with. So if you’re not completely sure where those dollars are going, think about placing parameters on how you fork over the funds.

For starters, consider paying the lender directly, suggests ReKeithen Miller, a Certified Financial Planner™ with Palisades Hudson Financial Group who is based in Atlanta. “That way, the child can’t divert the funds for other purposes,” he says.

You could choose to disperse the loan in smaller amounts over time to help ensure that your child isn’t tempted to splurge with such a large amount, Miller adds. This also provides the option to refuse to release further funds if your child isn’t using them for their intended purpose.

Finally, if you feel your child needs to learn a serious money lesson, you can require that they get smarter about money management before you fork over any cash. “Parents have the option of making the loan conditional,” Miller says. “For example, if a child has issues with budgeting or credit card debt, you can require them to enroll in credit counseling before you agree to lend them the money.”

3. Set terms for late payments or defaults.

Your child likely has every intention of paying you back—but you can’t deposit good intentions in your bank account. To help keep your child accountable, lay out what happens if she is unable to pay you back in a timely manner.

“Treat [the situation] as if you were the bank giving the loan,” King says. “There have to be consequences, such as interest and fees for late payments and defaults, just like with a ‘real’ loan.”

There’s another potential benefit to charging interest: The IRS may be less likely to view your loan as a gift, says Miller, which means it won’t count toward your annual gift-tax exclusionamount. He suggests choosing an interest rate in line with the Applicable Federal Rate (AFR), an interest rate calculated by the IRS each month. Remember to consult with your tax advisor to be clear on how you report the interest to the IRS.

It’s also important to consider baking in how the payment terms might be adjusted if your family member’s financial circumstances change, either because of job loss or another income hardship. Could you, for example, reduce the payment amount temporarily, but raise the interest rate? Give them quarterly rather than monthly deadlines? Reduce the amount they’ll eventually inherit by the amount of the loan?

It may seem awkward at first, but not agreeing on those types of details up front only stands to heighten the tension later. King recalls one story about a colleague whose mother-in-law loaned her a few thousand dollars to buy a new car. They settled on a monthly repayment amount, but the colleague lost her job and was unable to make the payments. Even after finding a new job, the colleague was making much less and still couldn’t afford to the payments.

“She felt as if she were being judged by every purchase she made. She got the feeling that the mother-in-law was saying, ‘If you can afford that, you can pay me what you owe,’ ” King says. “And every time [her husband] sees his mom, he’s always waiting for her to bring it up—not knowing what to say if she does.”

4. Present a unified front.

Your child probably figured out pretty quickly that when Mom said no to cookies for breakfast, he might get a more favorable response from Dad.

That good-cop, bad-cop dynamic, however, can have much bigger consequences when you’re talking money. So before saying yes to a loan, make sure you and your spouse have agreed uponall of the loan terms. This will not only help avoid an argument later, but could also help protect one spouse in the unfortunate event that the other isn’t around to enforce the agreement.

“A common scenario I’ve seen is where Dad discusses the terms of the loan with the child without involving Mom. Dad dies without communicating the loan terms, and Mom is in a situation where she has to decide if her child is telling the truth—or trying to shirk responsibilities,” Miller says. Plus, “If Mom forgives one child’s debt, she may be obligated to do the same for the other children to avoid tension within the family—and she may not be in a financial position to do so.”

One other piece of advice? Consider getting input from a financial advisor, who may be able to help you and your spouse settle disagreements on loan terms, as well as help play bad cop to the kids, if necessary. “Inserting a third party into the mix may make the children more apt to abide by the terms of the agreement, since they know someone outside of the family is monitoring the situation,” Miller says.

5. Get *everything* in writing.

As with any other bank, the Bank of Mom and Dad should have a promissory note signed by both parties that lays out all of the loan terms, including the principal amount, the interest rate, the payment structure, and any other conditions you’re expecting your child to meet in order to be “approved” for the loan.

“Even though the money transaction is between family, it is best if it is treated like a business transaction. Be as clear as possible on the expectations, and it will cut down on family disputes down the road,” Till says. “[And] it’s important to stay firm to the agreement. This can be a learning opportunity for your adult child—no matter the age.”

Read the original article on LearnVest. Copyright 2016.


Firms Offering Social Security Advice Scramble To Update Systems

The elimination of two popular Social Security claiming strategies has left companies that offer Social Security advice scrambling to incorporate the new rules into their systems.

Last week, Congress put an end to “file and suspend” and a restricted application for spousal benefits—Social Security strategies that together made it possible for both members of a couple who are 66 or older to delay claiming benefits based on their own earnings records while one pockets a so-called spousal benefit based on the other’s earnings.

While some people can still take advantage of the strategies—which can add tens of thousands of dollars to a couple’s lifetime retirement income—they are now generally off limits to people born after 1953.

The change took the fast-growing Social Security advisory industry by surprise. “Given the secretive nature of the budget negotiations, very few people knew that this was going to be included in the budget bill. This is not normally the way changes in Social Security are done,” said Christopher Jones, chief investment officer at Financial Engines Inc.,which in 2014 introduced a free Social Security calculator.

Added Joe Elsasser, founder of Social Security Timing, a program for advisers: “The speed with which this measure went through Congress and was signed into law was unheard of. Normally, we would have had more time” to digest the specific proposals before enactment.

That has left companies that offer the services—from mutual-fund giant Fidelity Investments to independent Los Altos, Calif., advisory firm Bedrock Capital Management—scrambling to interpret the new law to update the computer code that sifts through dozens of possible claiming strategies to determine which of thousands of possible outcomes will yield the most money over a client’s projected lifespan. The services run the gamut from free online tools intended mainly to educate users about claiming strategies to sophisticated programs that charge up to $250 and pair computer-generated recommendations with a human adviser.

Many of the firms have posted notices on their websites explaining the rule change and warning clients to rerun their numbers after the programs are updated. Some have gone a step further and temporarily suspended their services while software engineers retool the programs for the married and divorced couples who are affected by the changes.

Social Security Choices, which plans to have its program back online by the end of next week, isn’t currently issuing reports to married or divorced couples, but continues to give widows, widowers and single clients—who are unaffected by the new law—access to its $40 software.

Likewise, Fidelity took its program—available to the 4,000 customer representatives who work in its retail offices and with 401(k) plans—offline last Thursday “as soon as news broke that this was likely to pass,” said Tom McGirr, senior vice president of workplace products. The company expects to have the software up and running again by late next week, he added.

A few companies have already finished the process of revamping their programs. “We dedicated our entire team to it between last Wednesday and Monday,” said Mr. Elsasser, whose Social Security Timing was back online Monday. “We had folks working very late nights over Halloween weekend.”

In contrast, the tool sponsored by T. Rowe Price Group on Thursday was still issuing recommendations based on the old rules—under which file-and-suspend and restricted applications for spousal benefits were available to all couples—without alerting users to the impending changes.

T. Rowe Price is preparing to restrict access to its Social Security Benefits Evaluator and will use the opportunity to “assess the tool and its usefulness” before deciding whether to reprogram it with the new rules or replace it with other educational content on Social Security claiming strategies, said senior financial planner Judith Ward.

Adding to the complexity are different rules for different groups of people. Those who are 66 or older—or will turn 66 within the next six months—can still file for benefits and then suspend them, so their spouses and children under 18 can claim spousal and dependent benefits, but they have to act within six months. Also, those who are 62 or older by the end of this year will retain the ability at full retirement age to file a restricted application for only spousal benefits and not an earned benefit.

Companies working to revamp their services are contending with a flood of calls and emails from confused clients. Based on calls her company has received, Robin Brewton,vice president of client services at Social Security Solutions, said it appears that Social Security Administration employees incorrectly told some callers who are grandfathered under the old rules that they can no longer file and suspend.

Asked about possible misinformation, the Social Security Administration said in a statement: “Our legislative and policy staffs are diligently working with Congress to analyze the intent of the legislation and update our instructions.”

The advisory companies are taking steps to inform clients—both individuals and advisers—of the new rules. Like Fidelity, Financial Engines is preparing to contact thousands of clients who have used its program to alert them “that there has been a change and they should re-evaluate their claiming strategy,” said Mr. Jones. Mr. Elsasser said Social Security Timing hosted two webinars this week on the new rules, one attended by more than 400 advisers. And Ms. Brewton is preparing to send Social Security Solutions’ adviser clients FAQs on the new law, case studies that illustrate who is affected, and a PowerPoint presentation for use in presentations on Social Security.

For many companies, the immediate challenge has involved figuring out how to interpret the law in the absence of guidance from the Social Security Administration. “Everybody is scrambling,” says Ms. Brewton from Social Security Solutions. “We are all trying to read the bill and go back to the Social Security Act and make decisions on what to tell people they will and will not be allowed to do.”

Sharon Lacy, wealth planning manager at Bedrock Capital Management, said she spent 10 hours this past weekend revamping the firm’s free Social Security calculator, SSAnalyze!, only to discover that she had changed the code to conform to language that was ultimately changed slightly. Ms. Lacy said the confusion was over the treatment of people who will be 62 or older by the end of 2015—and whether they can file a restricted application for spousal benefits on a spouse’s suspended benefit when they reach full retirement age, even if full retirement age is a few years away. (The answer: yes.)

“I had to go back and change the code again,” said Ms. Lacy, who is now testing her results and plans to get the new version online Thursday.

There is always a risk, she added, that the Social Security Administration will differ in its conclusion of how the law ought to be interpreted and implemented. But because the agency has yet to offer official guidance, Mr. Jones of Financial Engines said, “we will have to make some appropriate assumptions.”

“It seems that for the most part that [major industry players] are all shaking out with the same interpretations,” said Ms. Brewton, who said SocialSecuritySolutions’s software is now updated to reflect the new law.

One area many say remains unclear involves divorced people. Starting about six months after the budget bill was signed into law on Nov. 2, Social Security will no longer allow family members to submit a new claim for spousal benefits on a suspended benefit. If that applies to divorced people—and some believe it might—that could pave the way for a vindictive individual to file and suspend to block an ex-spouse from claiming a spousal benefit during the suspension period. (Under current law, someone who is divorced can collect a benefit based on an ex’s work record even if the ex isn’t yet collecting a benefit, as long as the ex is at least 62.)

“Eventually we will need clarity on this,” said Mr. Jones.

Ms. Brewton said another point of confusion relates to language in the new law that indicates the new file-and-suspend restrictions will go into effect “beginning at least 180 days after” Nov. 2.

Does the inclusion of that “at least” language “mean the Social Security Administration can extend that six-month deadline to implement the law? I don’t know the answer,” she said.

Source: http://www.wsj.com/articles/firms-offering-social-security-advice-scramble-to-update-systems-1446750389

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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

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Portability – The great estate tax break

You can’t take a tax break with you, but it’s becoming easier to leave to your beneficiaries. The IRS released final rulings detailing an estate and gift-tax break for married couples, known as “portability”. It allows a married spouse to pass nearly $11m in assets to heirs, free of estate tax. Without this, couples would only qualify for one exemption, as opposed to two.

The exemption, indexed for inflation, is $5.43m per individual in 2015. But the rules come with important caveats. Estate tax returns must be filed, usually within nine months of death, to take advantage of portability. Experts worry that executors will overlook this deadline, especially if an estate is smaller than the exemption and there is no reason to file a return.

Since ’81, the laws have allowed spouses to leave assets to one another free of tax. But at the 2nd death, only one exemption is left. Planners devised trusts to deal with this issue, but they can be costly and cumbersome. People should be willing and able to plan for the future.

Portability allows the surviving spouse to pick up the remaining portion of the partner’s gift and estate-tax exemption if the executor makes an election on Form 706, the estate tax return. In addition, portability doesn’t prevent the survivor’s estate from getting a benefit at death, which can cancel or reduce future capital gains tax on assets. If a couple’s combined assets are less that in this example (perhaps below $5m) experts still recommend taking advantage of portability because assets can grow, especially if the 2nd death is decades away.

For most people who aren’t rich, the downside of portability is the cost of estate-tax preparation, which requires professional help. The good news is that if the assets are below the $5.43m limit, expensive appraisals aren’t mandatory. The executor can file a list with reasonable estimates.

These new rules are likely to increase a rise in federal estate-tax filings, which totaled $34,000 in 2015. They also may increase business for accountants, enrolled agents, and lawyers to prepare estate-tax returns.

Source: WSJ- July, 2015