Many people think that estate plans are for someone else, not them. They may rationalize that they are too young or don't have enough money to reap the tax benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.
1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).
2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.
3. Dying without a will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state's laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without benefit of your direction or of trust protection. With a plan, you decide who gets your assets, and when and how they receive them.
4. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage or marriages.
5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.
6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child's spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.
7. Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.
8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.
9. Business ownership. Do you own a business? Without a plan, you don't name a successor, thus risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.
10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.
Source: www.elderlawanswers.com
Friday, January 30, 2009
Friday, January 9, 2009
What does the Recession mean for Long-Term Care?
Certainly, the current economic downturn is not going to affect the needs of some seniors for help with activities of daily living. But it could affect where that help is provided -- at home, in assisted living or in a nursing home. And it could affect who provides the care -- a family member or someone who is hired.
Here are a few likely trends:
Most nursing home care and, increasingly, care at home as well, is covered by Medicaid. This is a joint state-federal health care program for people who are "poor" under its complicated rules. Even before the current recession, Medicaid was growing and straining the ability of states to pay the cost. This has caused states to restrict eligibility for benefits. Such restrictions are likely to tighten further.
With fewer people working, more will be available to care for family members at home, perhaps delaying or avoiding the move to assisted living or a nursing home.
With money becoming scarcer for just about everyone, families will be more reluctant to pay for nursing home, assisted living or home care. This may result in more beds and services being available and a decrease in costs. In fact, according to the 2008 MetLife Market Survey of Nursing Home & Assisted Living Costs, over the past year the cost of semi-private rooms in nursing homes increased just 1.1 percent and the cost of private rooms did not change, in contrast to increases that substantially exceeded the inflation rate in most recent years.
We are likely to see bankruptcies of nursing homes and assisted living facilities if they cannot fill their beds as anticipated and if Medicaid and Medicare reimbursement rates are insufficient to cover their expenses. Facility shut downs will be very disruptive to residents as well as to their families.
With alternative jobs less plentiful, the supply of qualified care providers should grow.
Planning ahead is even more important, whether purchasing long-term care insurance, protecting assets to qualify for Medicaid, or simply making one's wishes known ahead of time.
Even prior to the onset of the recession, many more alternatives to nursing home care were being developed, including assisted living, new home care models, community partnership programs, and increased Medicaid coverage of care provided in the community. Anyone providing care for a senior needs to do much more research about the alternatives available.
These changes are not all bad. Fewer Americans working quite as hard as most adults have in recent years should allow more time for us to care for our loved ones and to find the right solutions among the increasing number of care choices available.
A qualified elder law attorney can help your family explore care alternatives and how to pay for them.
Source: www.elderlawanswers.com
Here are a few likely trends:
Most nursing home care and, increasingly, care at home as well, is covered by Medicaid. This is a joint state-federal health care program for people who are "poor" under its complicated rules. Even before the current recession, Medicaid was growing and straining the ability of states to pay the cost. This has caused states to restrict eligibility for benefits. Such restrictions are likely to tighten further.
With fewer people working, more will be available to care for family members at home, perhaps delaying or avoiding the move to assisted living or a nursing home.
With money becoming scarcer for just about everyone, families will be more reluctant to pay for nursing home, assisted living or home care. This may result in more beds and services being available and a decrease in costs. In fact, according to the 2008 MetLife Market Survey of Nursing Home & Assisted Living Costs, over the past year the cost of semi-private rooms in nursing homes increased just 1.1 percent and the cost of private rooms did not change, in contrast to increases that substantially exceeded the inflation rate in most recent years.
We are likely to see bankruptcies of nursing homes and assisted living facilities if they cannot fill their beds as anticipated and if Medicaid and Medicare reimbursement rates are insufficient to cover their expenses. Facility shut downs will be very disruptive to residents as well as to their families.
With alternative jobs less plentiful, the supply of qualified care providers should grow.
Planning ahead is even more important, whether purchasing long-term care insurance, protecting assets to qualify for Medicaid, or simply making one's wishes known ahead of time.
Even prior to the onset of the recession, many more alternatives to nursing home care were being developed, including assisted living, new home care models, community partnership programs, and increased Medicaid coverage of care provided in the community. Anyone providing care for a senior needs to do much more research about the alternatives available.
These changes are not all bad. Fewer Americans working quite as hard as most adults have in recent years should allow more time for us to care for our loved ones and to find the right solutions among the increasing number of care choices available.
A qualified elder law attorney can help your family explore care alternatives and how to pay for them.
Source: www.elderlawanswers.com
Tuesday, December 23, 2008
A NEW TAX LAW CHANGE
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.
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
WHAT A GOOD LONG-TERM CARE POLICY SHOULD INCLUDE - Part II
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
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
Tuesday, November 25, 2008
WHAT A GOOD LONG-TERM CARE POLICY SHOULD INCLUDE - Part I
As nursing home and long-term care costs continue to rise, the Deficit Reduction Act has made it more difficult to qualify for Medicaid to pay for nursing home costs. Long-term care insurance can help cover expenses, but long term care insurance contracts are notoriously confusing. How do you figure out what is right for you? The following are some tips to help you sort through all the different options.
Find a strong insurance company.
The first step is to choose a solid insurance company. Because it is likely you won’t be using the policy for many years, you want to make sure the company will still be around when you need it. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moodys, Standard & Poor or Weiss.
What is covered.
Policies may cover nursing home care, home health care, assisted living, hospice care or adult day care, or some combination of these. The more comprehensive the policy, the better. A policy that covers multiple types of care will give you more flexibility in choosing the care that is right for you.
Waiting period.
Most long-term care insurance policies have a waiting period before benefits begin to kick in. This waiting period can be between 0 and 90 days, or even longer. You will have to cover all expenses during the waiting period, so choose a time period that you think you can afford to cover. A longer waiting period can mean lower premiums, but you need to be careful if you are getting home care. Look for a policy that bases the waiting period on calendar days. For some insurance companies, the waiting period is not based on calendar days, but on days or reimbursable service, which can be very complicated. Some policies may have different waiting periods for home health care and nursing home care, and some companies waive the waiting period for home health care altogether.
In Part II, we will discuss Daily Benefits, Benefit Periods and Inflation Protection.
Source: www.elderlawanswers.com
Find a strong insurance company.
The first step is to choose a solid insurance company. Because it is likely you won’t be using the policy for many years, you want to make sure the company will still be around when you need it. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moodys, Standard & Poor or Weiss.
What is covered.
Policies may cover nursing home care, home health care, assisted living, hospice care or adult day care, or some combination of these. The more comprehensive the policy, the better. A policy that covers multiple types of care will give you more flexibility in choosing the care that is right for you.
Waiting period.
Most long-term care insurance policies have a waiting period before benefits begin to kick in. This waiting period can be between 0 and 90 days, or even longer. You will have to cover all expenses during the waiting period, so choose a time period that you think you can afford to cover. A longer waiting period can mean lower premiums, but you need to be careful if you are getting home care. Look for a policy that bases the waiting period on calendar days. For some insurance companies, the waiting period is not based on calendar days, but on days or reimbursable service, which can be very complicated. Some policies may have different waiting periods for home health care and nursing home care, and some companies waive the waiting period for home health care altogether.
In Part II, we will discuss Daily Benefits, Benefit Periods and Inflation Protection.
Source: www.elderlawanswers.com
Monday, November 10, 2008
Crucial Elder Law Numbers for 2009
The new numbers for 2009 for Medicaid, Medicare, Social Security and other figures that are of interest to the elderly and their families have been released. In an attempt not to overwhelm everyone, we will publish the updated numbers in two separate newsletters. This is Part I and will outline Medicaid, Annual Gift Tax Exclusion and Long Term Care Premium Deductibility. Next week, in Part II, we will discuss Medicare and Social Security benefits.
Medicaid Spousal Impoverishment Figures for 2009
In 2009, the spouse of a Medicaid recipient living in a nursing home (called the “community spouse”) may keep as much as $109,560 without jeopardizing the Medicaid eligibility of the spouse who is receiving long-term care. Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order. While some states set a lower maximum, the least that a state may allow a community spouse to retain in 2009 will be $21,912.
Meanwhile, the maximum monthly maintenance needs allowance for 2009 will be $2,739. This is the most in monthly income that a community spouse is allowed to have if her own income is not enough to live on and she must take some or all of the institutionalized spouse’s income. The minimum monthly maintenance needs allowance of $1,750 took effect July 1, 2008 and will not rise until July 1, 2009. The new figures are effective January 1, 2009.
Annual Gift Tax Exclusion Rises to $13,000
The annual gift tax exclusion will increase from $12,000 to $13,000 effective January 1, 2009, the Internal Revenue Service (IRS) has announced. The gift tax exclusion is the amount the IRS allows a taxpayer to gift to another individual without reporting the gift.
Long-Term Care Premium Deductibility Limits for 2009
The Internal Revenue Service has announced the 2009 limitations on the deductibility of long-term care insurance premiums from taxes. Any premium amounts above these limits are not considered to be a medical expense.
The following attained ages reached before the close of the taxable year would yield this maximum deduction:
40 or less - $320
More than 40 but not more than 50 - $600
More than 50 but not more than 60 - $1,190
More than 60 but not more than 70 - $3,180
More than 70 - $3,980
Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $280 per day (for 2009), whichever is greater.
In honor of Veterans Day, we’d like to share this trivia: Veterans Day is an annual American holiday honoring military veterans. Both a federal holiday and a state holiday in all states, it is usually observed on November 11th. It is celebrated on November 11th because major hostilities of World War I were formally ended at the 11th hour of the 11th day of the 11th month of 1918 with the German signing of the Armistice.
Medicaid Spousal Impoverishment Figures for 2009
In 2009, the spouse of a Medicaid recipient living in a nursing home (called the “community spouse”) may keep as much as $109,560 without jeopardizing the Medicaid eligibility of the spouse who is receiving long-term care. Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order. While some states set a lower maximum, the least that a state may allow a community spouse to retain in 2009 will be $21,912.
Meanwhile, the maximum monthly maintenance needs allowance for 2009 will be $2,739. This is the most in monthly income that a community spouse is allowed to have if her own income is not enough to live on and she must take some or all of the institutionalized spouse’s income. The minimum monthly maintenance needs allowance of $1,750 took effect July 1, 2008 and will not rise until July 1, 2009. The new figures are effective January 1, 2009.
Annual Gift Tax Exclusion Rises to $13,000
The annual gift tax exclusion will increase from $12,000 to $13,000 effective January 1, 2009, the Internal Revenue Service (IRS) has announced. The gift tax exclusion is the amount the IRS allows a taxpayer to gift to another individual without reporting the gift.
Long-Term Care Premium Deductibility Limits for 2009
The Internal Revenue Service has announced the 2009 limitations on the deductibility of long-term care insurance premiums from taxes. Any premium amounts above these limits are not considered to be a medical expense.
The following attained ages reached before the close of the taxable year would yield this maximum deduction:
40 or less - $320
More than 40 but not more than 50 - $600
More than 50 but not more than 60 - $1,190
More than 60 but not more than 70 - $3,180
More than 70 - $3,980
Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $280 per day (for 2009), whichever is greater.
In honor of Veterans Day, we’d like to share this trivia: Veterans Day is an annual American holiday honoring military veterans. Both a federal holiday and a state holiday in all states, it is usually observed on November 11th. It is celebrated on November 11th because major hostilities of World War I were formally ended at the 11th hour of the 11th day of the 11th month of 1918 with the German signing of the Armistice.
Friday, October 24, 2008
IRS Issues Long-Term Care Premium Deductibility Limits for 2009
The Internal Revenue Service has announced the 2009 limitations on the deductibility of long-term care insurance premiums from taxes.
Premiums for "qualified" (see explanation below) long-term care policies are tax deductible provided that they, along with other unreimbursed medical expenses, exceed 7.5 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 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 7.5 percent 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 2009. Any premium amounts above these limits are not considered to be a medical expense.
Attained age before the close of the taxable year
Maximum deduction
40 or less
$320
More than 40 but not more than 50
$600
More than 50 but not more than 60
$1,190
More than 60 but not more than 70
$3,180
More than 70
$3,980
What Is a "Qualified" Policy?
To be "qualified," policies issued on or after January 1, 1997, must adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are 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.
The Taxation of Benefits
Benefits from reimbursement policies, which pay for the actual services a beneficiary receives, are not included in income. Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $280 per day (for 2009), whichever is greater.
Source: www.elderlawanswers.com
Premiums for "qualified" (see explanation below) long-term care policies are tax deductible provided that they, along with other unreimbursed medical expenses, exceed 7.5 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 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 7.5 percent 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 2009. Any premium amounts above these limits are not considered to be a medical expense.
Attained age before the close of the taxable year
Maximum deduction
40 or less
$320
More than 40 but not more than 50
$600
More than 50 but not more than 60
$1,190
More than 60 but not more than 70
$3,180
More than 70
$3,980
What Is a "Qualified" Policy?
To be "qualified," policies issued on or after January 1, 1997, must adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are 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.
The Taxation of Benefits
Benefits from reimbursement policies, which pay for the actual services a beneficiary receives, are not included in income. Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $280 per day (for 2009), whichever is greater.
Source: www.elderlawanswers.com
Subscribe to:
Posts (Atom)