GOP Tax Plan Could Deal Blow to Seniors Paying for Long-Term Care

The tax plan put forward by the Republican-led House of Representatives would eliminate many current deductions, and getting rid of one of them in particular could deal a serious financial blow to seniors and individuals with disabilities. The plan proposes eliminating the medical expense deduction, a change that will especially affect those needing long-term care.

Currently, taxpayers can deduct certain medical expenses from their income taxes if the expenses add up to more than 10 percent of adjusted gross income. These expenses can include health insurance premiums, deductibles, nursing home fees, home health care costs and even assisted living fees, if a doctor certifies that the individual must live in the facility due to health care or cognitive needs.

While most taxpayers don’t have health care expenditures exceeding 10 percent of their income, many seniors and others with disabilities do. According to the IRS, 8.8 million households — almost 6 percent of tax filers — claimed medical deductions in 2015. The AARP estimates that 74 percent of those who take the deduction are age 50 or over and half have incomes of $50,000 or less.

“It tends to be mostly … older people who do not have long-term care insurance, and end up in a nursing home,” Richard Kaplan, a professor who specializes in tax policy and elder law at the University of Illinois College of Law, told CNBC. “For people who are receiving long-term care and are paying for it themselves, this is going to be a huge deal.”

For them, having the deduction can mean that they do not run out of funds and have to rely on Medicaid, or are at least able to postpone applying for Medicaid. Eliminating the medical expense deduction will likely mean that more people will spend down their assets more quickly, requiring them to apply for Medicaid. In addition, adult children who pay for their parents’ care can sometimes use the deduction. For more information about how ending the medical deduction might affect you, click here.

In addition to eliminating the medical expense deduction, the tax bill cuts corporate tax rates. The bill’s proponents argue that the tax changes will unleash huge economic growth that will result in higher tax revenue. However, if the bill’s supporters are wrong and the growth in tax revenues is not as large as hoped, the reduction in tax revenues will likely cause sharp cuts in government spending or an increase in budget deficits, or both. A reduction in spending could affect seniors and individuals with disabilities through cuts to Medicaid, Medicare, Section 8, Meals on Wheels, and food stamps.

The tax proposal would benefit a small number of wealthy seniors by eliminating the estate tax. Under the proposal, the estate tax exemption will be increased from $5.45 million to $10 million for individuals dying in 2018 through 2023. After 2023, the estate tax will be eliminated completely. The Tax Policy Center estimates that only about 0.2 percent of estates pay any federal tax under current rules.

The House’s tax plan is not final, and the Senate plan preserves the medical expense deduction.  The two bills, if passed, must be reconciled.

For an AARP fact sheet on Medicare beneficiaries who spend at least 10 percent of their income on out-of-pocket medical expenses, click here.

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

Last Modified: 11/10/2017

IRS Issues Long-Term Care Premium Deductibility Limits for 2018

The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2018 income as a result of buying long-term care insurance.

Premiums for “qualified” long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured’s adjusted gross income.

These premiums — what the policyholder pays the insurance company to keep the policy in force — are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for 2018. Any premium amounts for the year above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year Maximum deduction for year
40 or less $420
More than 40 but not more than 50 $780
More than 50 but not more than 60 $1,560
More than 60 but not more than 70 $4,160
More than 70 $5,200

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day.  These benefits are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $360 per day, whichever is greater.

For these and other inflation adjustments from the IRS, click here.

What Is a “Qualified” Policy?

To be “qualified,” policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of “inflation” and “nonforfeiture” protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as “qualified” as long as they have been approved by the insurance commissioner of the state in which they are sold. For more on the “qualified” definition, click here.

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

Social Security Beneficiaries Will Receive a 2 Percent Increase in 2018

In 2018, Social Security recipients will get their largest cost of living increase in benefits since 2012, but the additional income will likely be largely eaten up by higher Medicare Part B premiums.

Cost of living increases are tied to the consumer price index, and an upturn in inflation rates and gas prices means recipients get a small boost in 2018, amounting to $27 a month for the typical retiree. The 2 percent increase is higher than last year’s .3 percent rise and the lack of any increase at all in 2016. The cost of living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $127,200 to $128,700.

The increase in benefits will likely be consumed by higher Medicare premiums, however. Most elderly and disabled people have their Medicare Part B premiums deducted from their monthly Social Security checks. For these individuals, if Social Security benefits don’t rise, Medicare premiums can’t either. This “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries: those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who get both Medicare and Medicaid benefits. In the past few years, Medicare beneficiaries not subject to the hold harmless provision have been paying higher Medicare premiums while Medicare premiums for those in the hold harmless group remained more or less the same. Now that seniors will be getting an increase in Social Security payments, Medicare will likely hike premiums for the seniors in the hold harmless group. And that increase may eat up the entire raise, at least for some beneficiaries.

For 2018, the monthly federal Supplemental Security Income (SSI) payment standard will be $750 for an individual and $1,125 for a couple.

For more on the 2018 Social Security benefit levels, click here.

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

Use Your Will to Dictate How to Pay Your Debts

The main purpose of a will is to direct where your assets will go after you die, but it can also be used to instruct your heirs how to pay your debts. While generally heirs cannot inherit debt, debt can reduce what they receive. Spelling out how debt should be paid can help your heirs.

If someone dies with outstanding debt, the executor is responsible for making sure those debts are paid. This may require selling assets that you would like to leave to specific heirs. There are two types of debts you might leave behind:

  • Secured debt is debt that is attached to a piece of property or an asset, such as a car loan or a mortgage.
  • Unsecured debt is any debt that isn’t backed by an underlying asset, such as credit card debt or medical bills.

When you leave an asset that has debt attached to it to your heirs, the debt stays on the property. Your heirs can either continue to pay on the debt or sell the property to pay off the debt. If you believe this would cause a burden for your heirs, you can leave them assets in your will specifically designated to pay off the debt.

With unsecured debt, although your heirs will not have to pay off the debt personally, the executor will have to pay the debt using estate assets. You can specify in your will which assets to use to pay these debts. For example, suppose you have a valuable collectible that you want one of your heirs to have. You can specify that the executor use assets in your bank account to pay any debts before selling the collectible. And if you want to leave liquid assets, like a bank account, CD, or stocks to an heir, you should designate in your will what you would like your executor to use instead to satisfy debts.

Not everyone needs to spell out how to pay debt in a will. If your debt is negligible or your entire estate is going to just one or two people, it may not be necessary. Contact your attorney to come up with a plan for handling your debts.

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

Yahoo Is Not Prohibited From Disclosing Contents of Email Account to Estate Representatives

Massachusetts’ highest court rules that the Stored Communications Act does not prohibit an email provider from disclosing the contents of a decedent’s email account to the decedent’s personal representatives. Ajemian v. Yahoo!, Inc., (Mass., No. SJC-12237, Oct. 16, 2017).

John Ajemian had a Yahoo email account that he used as his primary email. After he died, his personal representatives sought access to the email account. Yahoo declined to provide access without a court order.

Mr. Ajemian’s estate sued Yahoo, seeking a declaratory judgment that it was entitled to access the emails in the account. Yahoo filed a motion for summary judgment, arguing that the federal Stored Communications Act (SCA), which prohibits unauthorized third parties from accessing communications stored by service providers, prevented it from disclosing the emails. The trial court judge agreed, and the estate appealed.

The Massachusetts Supreme Judicial Court reverses, holding that the SCA does not prohibit the estate from accessing Mr. Ajemian’s emails. According to the court, the SCA “permits Yahoo to divulge the contents of the e-mail account where, as here, the personal representatives lawfully consent to disclosure on the decedent’s behalf.”

For the full text of this decision, go to: https://www.mass.gov/files/documents/2017/10/16/12237.pdf

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

Nursing Home Costs Rise Sharply in 2017

The median cost of a private nursing home room in the United States has increased to $97,455 a year, up 5.5 percent from 2016, according to Genworth’s 2017 Cost of Care survey, which the insurer conducts annually. Genworth reports that the median cost of a semi-private room in a nursing home is $85,775, up 4.44 percent from 2016. The rise in prices is much larger than the 1.24 percent and 2.27 percent gains, respectively, in 2016.

The price rise was slightly less for assisted living facilities, where the median rate rose 3.36 percent, to $3,750 a month. The national median rate for the services of a home health aide was $22 an hour, up from $20 in 2016, and the cost of adult day care, which provides support services in a protective setting during part of the day, rose from $68 to $70 a day.

Alaska continues to be the costliest state for nursing home care, with the median annual cost of a private nursing home room totaling $292,000. Oklahoma again was found to be the most affordable state, with a median annual cost of a private room of $63,510.

The 2017 survey was based on responses from more than 15,000 nursing homes, assisted living facilities, adult day health facilities and home care providers. The survey was conducted by phone during May and June of 2017.

As the survey indicates, nursing home care is growing ever more expensive. Contact your elder law attorney to learn how you can protect some or all of your family’s assets.

For more on Genworth’s 2017 Cost of Care Survey, including costs for your state, click here.

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

What Expenses Can ABLE Accounts Pay For?

In passing the Achieving a Better Life Experience (ABLE) Act in 2014, Congress created a new way for potentially millions of people with special needs to save for disability related expenses without jeopardizing their eligibility for federal public benefit programs.

In fact, these savings plans, popularly known as ABLE accounts, may be used for an even broader array of products and services than many beneficiaries may realize – including housing expenses, bus fare, financial management services or even, potentially, a smart phone.

The ABLE Act itself defines “qualified disability expenses” as “expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary.” It then goes on to list a range of categories of potential uses for funds set aside in ABLE accounts, including:

“Education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary under regulations and consistent with the purposes of this section.”

In subsequent proposed regulations released in June 2015, the Treasury Department and Internal Revenue Service (IRS) reiterated that the term “qualifying disability expenses” should be “broadly construed” to include any benefit related to the designated beneficiary “in maintaining or improving his or her health, independence, or quality of life.”

This means that there is no requirement that the benefit be medically necessary, such as is the case when determining health care services covered by Medicaid, or that it benefit no one but the designated individual. As an example, the regulations specify that a smart phone could qualify as a covered expenses, provided that it serves as “effective and safe communication or navigation aid for a child with autism.”

Originally, the proposed regulations would have also required states to establish safeguards for ensuring that ABLE funds are only used for qualifying expenses, presumably by requiring beneficiaries to obtain pre-approval before distributing funds. In response to a backlash from disability advocates, many who feared that such requirements would be unduly burdensome, the Treasury Department and IRS rescinded this requirement in a notice issued November 2015.  So as things stand now, you don’t need to get approval to withdraw funds and pay for a qualified disability expense.

The Obama administration, however, never issued final regulations, although the IRS has stated that “[u]ntil the issuance of final regulations, taxpayers and qualified ABLE programs may rely on these proposed regulations.”

To protect against future inquiries from the IRS, the ABLE National Resource Center recommends that beneficiaries maintain detailed records of expenses paid for by ABLE account assets, as well as how these expenses relate to their disabilities in case the expenditures are ever questioned by the IRS.  Misuse of ABLE account funds could result in tax penalties and possible loss of public benefits.

Click here to watch a video and read a fact sheet about qualifying disability expenses from the ABLE National Resource Center.

For help in setting up an ABLE account or to find out whether something you want to use the account for is a qualified disability expense, contact your special needs planner.

This article was reprinted with the permission of SpecialNeedsAnswers.com.  Iowa’s ABLE program is described at http://www.ablenrc.org/state-review/iowa.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.

Funeral Planning

This spring, after more than 100 years of life, my great grandmother passed away.  She left a legacy of stories and traditions that will live on in our family.  What she didn’t leave, however, were directions for her funeral arrangements.  When the family began planning her memorial service, one thing became crystal clear:  a lot of people had different ideas about what she would have wanted at her funeral.  This resulted in a lot of confusion, disagreement, and ultimately hurt feelings about what was or was not going to be included in her service and who was going to do or say what.

In order to avoid these sorts of situations for our families, we can ensure that our estates are properly planned for and that actual funeral arrangements are in place.  My great grandmother had more than enough time to write down what she wanted for her memorial.  This was a person who spent more time retired than she did in the work force; she just didn’t think to do it.  The link below is to an article that deals with funeral planning, and is helpful if you are looking for a place to start.

http://estate.findlaw.com/planning-an-estate/funeral-planning-guide-faq.html

Additionally, all of our estate planning documents include a section for memorial instructions.  This way, your family can easily find your wishes at the time of your passing.

Iowa Requests Waiver of Retroactive Medicaid Requirement

Iowa officials are asking the Centers for Medicare and Medicaid Services to waive the requirement that the state provide three months of retroactive Medicaid coverage to eligible Medicaid recipients. CMS is currently accepting comments about this proposal.

Medicaid law allows a Medicaid applicant to be eligible for benefits for up to three months before the month of the application if the applicant met eligibility requirements at the earlier time. This helps people who are unexpectedly admitted to a nursing home and can’t file a Medicaid application right away.

Iowa’s amendment proposes “eliminating the three-month period of retroactive eligibility for all Medicaid beneficiaries effective for new applications or new add-on requests.” Medicaid would pay only for care starting the first day of the month of the application. The senior advocacy group Justice in Aging warns that if CMS accepts Iowa’s proposal, not only will low-income Iowans be harmed, but other states may decide to follow suit, affecting low-income recipients nationwide. CMS is accepting comments on this waiver until September 7, 2017. Justice in Aging has sample comments available. The Iowa Health Care Association said it knows of no other state for which CMS has taken away this benefit.

For a Des Moines Register article on Iowa’s request and local opposition to it, click here.

This article was reprinted with the permission of ElderLawAnswers.com.  If you have any questions regarding the material in this article, please contact Pearson Bollman Law at 515-727-0986.

Campaign Launches to Boost Enrollment in ABLE Accounts

New savings accounts for families of people with disabilities, known as ABLE accounts, are rapidly becoming available nationwide as programs continue to roll out on a state-by-state basis. But this new savings option, as potentially revolutionary as it is, contains many nuances and caveats, and is not available to everyone.

To help consumers navigate the ABLE process and accelerate the opening of accounts by eligible individuals, the ABLE National Resource Center has launched an education and information campaign called #ABLEtoSave.

“ABLE accounts are a down payment on freedom for millions of individuals with disabilities and their families,” Christopher J. Rodriguez, the Center’s director, said in a news release. “Yet, public knowledge of ABLE accounts is somewhat lacking and enrollment in ABLE programs still has significant room for growth.”

Congress passed the Achieving a Better Life Experience (ABLE) Act in 2014, amending the Internal Revenue Code to allow families to create new tax savings plans, modeled after the popular 529 savings plans for higher education, for paying for disability related expenses.  Families enrolled in ABLE plans can contribute up to $14,000 annually to these accounts, and up to $100,000 in total, without jeopardizing the account beneficiary’s eligibility for Supplemental Security Income (SSI), Medicaid and other crucial government benefit programs.

Forty-nine states have passed legislation creating their own ABLE programs. Twenty-seven of these programs are up and running, with New York State launching its program most recently, on August 10.

As part of its #ABLEtoSave program, throughout the month of August the Center rolled out videos and fact sheets focused on five main topics: 1) What Is ABLE?; 2) Who Is Eligible?; 3) What Can Funds Be Used For?; 4) How Do I Manage My Account?; and 5) How Do I Enroll?  The Center has also released an #ABLEtoSave toolkit for those who want to get the message out about the benefits of ABLE accounts for people with disabilities and their families.

“The goal of the #ABLEtoSave campaign is to significantly boost public knowledge about ABLE accounts and ultimately increase the amount of ABLE accounts opened across all ABLE programs,” Rodriguez said in the news release.

Click here for more information on the #ABLEtoSave campaign.

Read more articles about the pros and cons of ABLE accountshow three state programs differ, and practical uses for an ABLE account.

This article was reprinted with the permission of ElderLawAnswers.com.  Iowa’s ABLE program is described at http://www.ablenrc.org/state-review/iowa.  If you have any questions regarding the material in this article and how it applies to Iowa residents, please contact Pearson Bollman Law at 515-727-0986.