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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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

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

Advice for Those Considering Going Through a “Gray Divorce”

This is an article I recently added to my website.

Argument of senior couple is no joke

The idea of getting divorced after 50 used to be considered taboo, but in recent years so-called “gray divorce” rates have grown significantly across the United States. As the Washington Post reports, the divorce rate for those 50 and older doubled between 1990 and 2010. As many Baby Boomers begin entering retirement, the prospect of a later-in-life divorce has both its upsides and its downsides. While a gray divorce can provide a level of freedom and emotional well-being to some, there are risks, particularly financial ones, of divorcing after 50. Below is a brief look at what makes gray divorce so unique.

Preparing for retirement

 Those going through divorce in their 50s or 60s have one thing in common that younger divorcees typically do not: they are often preparing for an upcoming retirement. Divorce can have a big impact on one’s finances and it could leave either spouse with half of what he or she was expecting for retirement. Furthermore, pension plans and retirement funds are almost always considered marital property, meaning they can be divided between both spouses. Dealing with a gray divorce’s impact on one’s retirement planning will depend on one’s unique circumstances. For some, taking an extra few years to work may be a necessity, while for others downsizing may be a more practical approach.

Spousal home

Speaking of downsizing, one asset that often causes plenty of consternation in a gray divorce is the spousal home. Instances often arise when one or both parties will insist on holding onto the spousal home, especially given the emotional attachment people often feel towards their home. From a financial perspective, however, holding onto the spousal home could be a mistake. Trying to maintain a home that was built for more than one person while also on a reduced budget could leave one spouse house poor and less able to enjoy his or her upcoming retirement. While keeping the home can make financial sense in some cases, for many people a better idea may be trading the home in exchange for something that will prove more useful during retirement, such as a pension fund.

What about the kids?

As U.S. News and World Report points out, although most gray divorcees do not have to deal with issues surrounding child custody and visitation, disagreements about providing financial support to grown children may still arise. Because it is more common today for parents to provide assistance to their children even into adulthood, a plan may need to be worked out between both divorcing spouses about dividing responsibility for helping any adult children get on their feet.

Family law

 Divorce can bring up many contentious issues, especially later in life when the financial stakes tend to be much higher. A qualified family law attorney can help those who are going through a divorce, no matter their age. By providing strong legal representation, an experienced attorney can help clients negotiate a divorce settlement that will likely be most beneficial to them in the years after their divorce.

Planning for Old Age

Business partners

Wow. I cannot believe it has been almost two months since my last blog post. I wrote last time that I had herniated a disk in my back; however, that has not been the end of my woes. The first week in April I tore the Achilles tendon from my heel. Ultimately, both my back and my Achilles tendon required surgery. Currently, I am recovering from both procedures, and my right leg is in a non-weight bearing cast. Fortunately, the numbness from my herniated disk is mostly gone, and I am regaining strength in my left leg.  I am grateful to have good health care coverage, but even so the last months have been extremely stressful. I cannot emphasize enough how important it is to be prepared for the curves we all have thrown at us. I never expected to undergo what I have recently, but it happened nonetheless.

With this in mind now is the time to prepare for our later years. When most of us think of Medicaid we think of a program for poor people. The reality is that many of us will need it in the future because long-term care costs are so high. The problem with waiting until a need arises is that doing so places one’s assets at risk.

But before we get into a deeper discussion understand that Medicaid is a federal program administered by the states. Each state has enacted legislation governing its implementation of Medicaid, and the rules are changing all the time.  The reason for the constant state of flux is that as health care costs rise the states are seeking ways to cut their costs. The result is that strategies for protecting assets that used to work may not today.

Accordingly, the key when thinking about Medicaid is to plan early. As most are aware, there is a five year, or 60 month lookback period. What this means is that Medicaid will look back five years from the date of eligibility to determine if any assets owned by the applicant were transferred without receiving adequate compensation for the asset sold or disposed of. If it is determined that an uncompensated transfer did occur then Medicaid can impose a penalty period during which the applicant will have to fund his or her own care. Consequently, as noted, the key is to plan early so that any transfers necessary can be made early enough so they fall outside the look-back period so that no penalty is incurred. This generally means beginning Medicaid planning as one approaches retirement age.

Next time: What are countable assets and what constitutes an uncompensated transfer? Take care until then, and if we can help please contact us.

What to Do When Mom or Dad or Both Move In Redux

(As I mentioned in the previous blog this subject was suggested by a follower, so if you have an issue you want addressed let me know, and if I can address it I will try to do so.)

Herniated disc with pressure on spinal cord

26 years ago I fractured my back at the T7 vertebrae. I was participating in a training exercise and I had a partial parachute malfunction. I actually heard my back break when I hit the runway; it did not help that I was carrying 60 pounds in radios alone. Anyway, I recovered, but I have had back issues since then, and last week I blew out a disc in my back. I was doing something I should not have been: I was getting out of bed. I can only tell you the pain was excruciating; it went on and on for hours, and then around 3 pm it stopped. The negative to this was that I then had nerve impairment, and as a consequence I cannot make my left ankle and the associated muscles work.

I have a number of consults set up, but right now I do not know what will happen with my back and leg.

While I am optimistic, I would give a great deal to “know” that everything will be alright. So it is with most of you as you face the uncertainty of how to care for elderly loved ones. I can only say that the best advice I can give is to prepare now. Old age is coming for us all, and we all need to plan accordingly. Last week I talked about the importance of powers of attorney, and this week I will address advance planning.

Long-term care is incredibly expensive. Right now it costs around $7000 per month to provide the care my mother needs. She has received such care for nearly 18 months; as you can see this amounts to $126,000. My mother-in-law has been in a facility for over 3 1/2 years, amounting to over $315,000!I don’t know about most of you, but I don’t have this amount just lying about. This means you need to plan ahead. One tool for doing so is to invest now in long-term care insurance. I will not mislead you; long-term care insurance is expensive.

The principal advantage to purchasing long-term care insurance is that it will protect family assets in the event long-term care is required. It might be a better idea to think about a whole life policy that allows an individual to use the cash value for long-term care. I am not an expert in this area, but contact me and I can put you in touch with people who can give you more information. Candidly, most people fail to pursue either option, so next week we will talk about Medicaid and other planning options. Until then take care.