100 Years
Facebook Linked in
Davidow, Davidow, Siegel & Stern, LLP
Long Island's Elder Law, Special Needs & Estate Planning Firm

Tuesday, December 23, 2008


A recent tax law change designed to help address the financial burden facing those who have seen their IRAs or 401(k)s shrink is expected to be signed by President Bush, officially making it law, shortly. Depending on your particular situation, you might want to consider taking action before January.

The new law suspends the Required Minimum Distribution (RMD) requirement for 2009. This waiver, which is available to everyone regardless of your total retirement account balances, applies to all so-called “defined-contribution plans,” which include 401(k) plans, 403(b) plans, 457 (b) plans, and IRA accounts. Suspending the RMD requirement allows you to keep the money in your retirement account if you choose, possibly recovering some of the loss.

This new law does not change the requirement for 2008. So, if you have an RMD that must be withdrawn for 2008, that must still be withdrawn. If you turned 70 ½ in 2008, you can elect to withdraw your 2008 RMD by April 1st of 2009. The new legislation does not change that because it is still a 2008 RMD, not a 2009 RMD; you would still have to withdraw that amount by April 1st of 2009.

Some who withdraw RMDs annually have it set up to occur automatically in January. If that is the case for you, and if you want to take advantage of this new law, you should contact your IRA custodian immediately to take care of that before the RMD is automatically distributed.

Friday, December 5, 2008


Daily benefit. The daily benefit is the amount the insurance pays per day toward long-term care expenses. If your daily benefit doesn’t cover your expenses, you will have to cover any additional costs. Purchasing the maximum daily benefit will assure you have the most coverage available. If you want to lower your premiums, you may consider covering a portion of the care yourself. You can then insure for the maximum daily benefit minus the amount you are covering. The lower daily benefit will mean a lower premium.

It is important to determine how the daily benefit is calculated. It can be each day’s actual charges (called daily reimbursement) or the daily average, calculated each month (called monthly reimbursement). The latter is better for home health care because a home care worker might come for a full day, one day, and then only part of the day, the next day.

Benefit period. When you purchase a policy, you need to choose how long you want your coverage to last. In general, you do not need to purchase a lifetime policy, three to five years worth of coverage should be enough. In fact a new study from the American Association of Long-term Care Insurance shows that a three-year benefit policy is sufficient for most people. According to the study of in-force long-term care policies, only 8 percent of people needed coverage for more than three years. So, unless you have a family history of a chronic illness, you aren’t likely to need more coverage. If you are buying insurance as part of a Medicaid planning strategy, however, you will need to purchase at least enough insurance to cover the five-year look-back period. That way you can transfer assets to your children or grandchildren before you enter the nursing home, use the long-term care coverage to wait out Medicaid’s new five-year look-back period, and after those five years have passed, apply for Medicaid to pay your nursing home costs (provided the assets remaining in your name do not exceed Medicaid’s limits).

If you do have a history of a chronic disease in your family, you may want to purchase more coverage. Coverage for 10 years may be enough and would still be less expensive than purchasing a lifetime policy.

Inflation protection. As nursing home costs continue to rise, your daily benefit will cover less and less of your expenses. Most insurance policies offer inflation protection of 5 percent a year, which is designed to increase your daily benefit along with the long-term care inflation rate of 5.6 percent a year. Although inflation protection can significantly increase your premium, it is strongly recommended. There are two main types of inflation protection: compound interest increases or simple interest increases. If you are purchasing a long-term care policy and are younger than age 62 or 63, you will need to purchase compound inflation protection. This can, however, more than double your premium. If you purchase a policy after age 62 or 63, some experts believe that simple inflation increases should be enough, and you will save on premium costs.

Source: www.elderlawanswers.com