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When you're at one of life's many transitions—going through a divorce, assisting elderly parents, filing for bankruptcy, or opening your own business—we can help you to navigate through the legal issues.

Eliminating the Medical Expense Deduction Would Seriously Harm People Who Are Chronically Ill

Another important announcement from NAELA.  This would have devastated us in caring for my mother-in-law!

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Older man kissing sick wifeThe House Republicans tax proposal introduced today ends the medical expense deduction. This change will cause major harm to individuals and families trying to pay for the catastrophic costs of long-term services and supports (LTSS).

Read the bill text.

Here’s how you can help:

Call your representative – Look up the direct office number in the House of Representatives Directory.

Post this or your own thoughts on social media.

Warn others in your local community organizations.

Read NAELA’s “Overview of the Medical Expense Deduction for the Chronically Ill” and NAELA’s “The Medical Expense Deduction for the Chronically Ill, Key Points.”

LTSS provides assistance with Activities of Daily Living — eating, transferring, bathing, dressing, and continence. In many instances, individuals who need LTSS must be placed in a nursing facility to receive 24-hour care. Conditions that may require LTSS include Alzheimer’s disease, Multiple Sclerosis, or spinal cord injury.

The tax code allows individuals to deduct qualified long-term care expenses if they are chronically ill, meaning those unable to perform two or more Activities of Daily Living without assistance, or who need constant supervision because of a severe cognitive impairment, such as Alzheimer’s disease.

These expenses are usually catastrophic, requiring many Americans to spend all of their income and to liquidate resources to pay for care. For instance, paying for nursing home care can quickly impoverish middle- and working-class Americans, costing a median of $97,000 a year for a private room.

According to NAELA President Hy Darling, CELA, CAP, “The problem is as much a practical issue as it is a policy one. Fundamentally, many individuals paying for these costs will not be able to pay for their care and federal income tax at the same time. Raising the standard deduction and lowering tax rates will not address the issue.”

Why wouldn’t increasing the standard deduction and lowering tax rates help? “Because many chronically ill Americans must pay all of their income towards care, and without the Medical Expense Deduction they could still have a tax liability that they cannot afford to pay,” explains Darling.

Put simply, eliminating the Medical Expense Deduction puts chronically ill Americans between a rock and a hard place. If these individuals cannot pay for the cost of LTSS, this could lead to eviction from their care facility. Yet paying for their care and not the increased tax creates an uncollectible tax liability. And, it likely would lead to an increased reliance on government programs. Many middle- and working-class individuals must “spend down” their resources to qualify for Medicaid. Without a tax subsidy, there is an increased incentive for people in need of care to participate in an already stressed federal/state program rather than assuming personal responsibility for their care or the care of their loved ones.

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The benefits of a QDRO during your divorce

Just posted this new article to my website:

A qualified domestic relations order can help people avoid one of the many common financial mistakes when going through a divorce.

Executive hands indicating where to sign contractMost people in Colorado who have gotten a divorce would agree that the process can be not only emotionally grueling but financially difficult as well. There are many things that make this a reality of the process yet there are some things people can do to protect themselves against some financial losses. Using a qualified domestic relations order when splitting a 401K or other employer-sponsored retirement plan is one of those things.

What is a qualified domestic relations order?

As explained by USA Today, a QDRO is a court order that makes it legally possible for one spouse to receive money directly from the other spouse’s 401K account. These accounts are set up in one person’s name only and that is generally the only person who can take money from them but the QDRO expands that for specific domestic situations such as a property division settlement during a divorce.

Why do I need a QDRO?

If a plan owner withdraws money from a 401K for purposes other than retirement, they may be forced to pay not only income tax on the distribution but also early withdrawal fees. Between the taxes and the fees, a large sum of the savings can be eaten up.

According to the United States Department of Labor, the QDRO bypasses the early withdrawal fees altogether. In addition, because the money is paid to a spouse, the account owner is no longer liable for any taxes. The spouse who receives the money may also be able to avoid the taxes when the money is received by reinvesting it into another retirement fund.

Are there other uses for a QDRO?

In addition to helping couples preserve more of their savings when splitting retirement funds, a qualified domestic relations order has other uses as well. If one spouse is ordered to make child support payments or spousal support payments, a QDRO can allow them to tap into their 401K funds to satisfy these obligations .

If money is taken to pay spousal support, it is once again paid directly to the spouse and the penalty and taxation is handled just as with a property division settlement. If money is taken to pay child support, it can be paid directly to the child or dependent or to a named guardian. However, in this situation it is the plan owner who retain tax responsibility. This is consistent with how taxes for child support payments are handled in general.

How do I know if I need a QDRO?

Anyone who is getting divorced in Colorado should talk with an attorney. Getting help to identify when things like a QDRO are needed is just one of the benefits of working with an experienced professional.

I Just Want to Ride…

Motorcycle Arlo Guthrie wrote the Motorcycle Song (The Significance of the Pickle) in 1967 as part of the counter-revolution then sweeping the country. Son of folk musician Woodie Guthrie, Arlo Guthrie’s best known work is Alice’s Restaurant Massacree. The chorus to the Motorcycle Song is as follows:

I don’t want a pickle

Just want to ride on my motorcycle

And I don’t want a tickle

‘Cause I’d rather ride on my motorcycle

And I don’t want to die

I just want to ride on my motorcy – cle.  Continue reading

“Burning Down the House”

Burning house I’m a connections person; I don’t have many original ideas, but I like to think I have a knack for seeing the link between what might be seemingly disparate ideas. So, I’m listening to the radio (which I rarely do), and on comes Burning Down the House by the Talking Heads. Released in 1983 this was part of the group’s fifth album, Speaking in Tongues. For those of you not in the know, speaking in tongues is known as Glossolalia which is a phenomenon in which people appear to speak in languages unknown to them.  Part of the lyrics are:  Continue reading

Medicaid – Please Lend Your Voice

helping handToday there is no personal story, no witty reference to any modern media.  I am asking for your help in determining the future of Medicaid. If you, or someone you know or love, is not currently affected by Medicaid it is almost certain that you will be at some point in your life.  Please see the below message, taken from an alert from NAELA (National Academy of Elder Law Attorneys, Inc.):
Continue reading

“To Stand in the Arena”

Parchment of the Constitution with a red background         July 4, 2017 marked the 241st anniversary of the signing of the Declaration of Independence. 41 years ago I had the good fortune to celebrate the Bicentennial in Paris, France at an outdoor barbecue held outside the US Embassy. I was 15 at the time, and I remember just feeling pride in our nation that day. As I reflect on that memory I feel that same sense of pride I felt then.

There is no doubt this nation has challenges, and to be sure there are inequalities we as a nation must address, but without question we are blessed to live in this great land. Yet, with this good fortune comes a responsibility. We must always exemplify the values espoused by our founding fathers. Were they perfect? Clearly not, but the values they founded this country on remain a standard to which we must all aspire.

It is easy to criticize who our forefathers were and to emphasize what is wrong in this nation, but I echo Teddy Roosevelt when he said:

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

We must all be that man or woman in the arena who strives to do their best because this nation is a light to other nations. Few of us know that the United States leads the world in charitable giving, but it does, and it is because the people of this nation are at their core generous. Imperfect yes, but always striving to reach a lofty ideal.

It is not something we often talk about, but this striving is exemplified in the political debate that so often vexes us. It is in the little kindnesses people of this nation often extend to others, and it is in the everyday exercise of freedoms we have that many in the world do not. It is in the struggle to ensure equality and in the wrestle to determine what the legacy to our children will be, and it is in the messiness that is this republic.

I had the good fortune to meet an immigrant from Germany who in his youth had seen Nazism first hand; as we discussed his past he told me we in this country did not know what we had, and to be candid I felt some guilt as I realized I sometimes was not grateful for what I have.

So, be that man or woman in the arena. Vote. Write your representative; give of your time; protest injustice, and engage in a cause. Celebrate freedom. Together we can continue to hold high the lamp of freedom.