Life Events That May Have Tax Consequences for Seniors and Retirees

Many significant life events often come with a related tax consequence. Here are some issues that may be facing seniors and retirees with links to more information on their tax impact.

elder law nycAs listed by the IRS

Planning for Retirement?

Mutual Fund Distributions

Job Loss or Starting a New Career or Job

Persons with Disabilities

Decedents

  • Publication 559, Survivors, Executors and Administrators
  • Form 56, Notice Concerning Fiduciary Relationship
  • Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer
  • Form 4810, Request For Prompt Assessment Under Internal Revenue Code Section 6501(d)

Divorce or Separations

Marriage

Disaster

Moving?

Did You Receive a Notice?

Filing or Paying Late – Information Taxpayers Should Know!

Many people today need more time to prepare their federal tax return. They may want to consider an  for time to file. However, extension of time to file a return does not grant any extension of time to pay a tax liability.

Additional Assistance

News Releases and Tax Tips

Regards,

Brian

The Law Offices of Brian A. Raphan, P.C.

www.RaphanLaw.com

What’s the Difference Between Medicare and Medicaid in the Context of Long-Term Care?

Although their names are confusingly alike, Medicaid and Medicare are quite different programs. Both programs provide health coverage, but Medicare is an “entitlement” program, meaning that everyone who reaches age 65 and is entitled to receive Social Security benefits also receives Medicare (Medicare also covers people of any age who are permanently disabled or who have end-stage renal disease.)

Brian Raphan, P.C.

Medicaid, on the other hand, is a public assistance program that that helps pay medical costs for individuals with limited income and assets. To be eligible for Medicaid coverage, you must meet the program’s strict income and asset guidelines. Also, unlike Medicare, which is totally federal, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state’s Medicaid costs. (The state picks up the rest of the tab.)

Medicare and Medicaid Coverage of Long-Term Care

The most significant difference between Medicare and Medicaid in the realm of long-term care planning, however, is that Medicaid covers nursing home care, while Medicare, for the most part, does not. Medicare Part A covers only up to 100 days of care in a “skilled nursing” facility per spell of illness. The care in the skilled nursing facility must follow a stay of at least three days in a hospital. And for days 21 through 100, you must pay a co-payment of $152 a day (in 2014). (This is generally covered by Medigap insurance.) In addition, the definition of “skilled nursing” and the other conditions for obtaining this coverage are quite stringent, meaning that few nursing home residents receive the full 100 days of coverage. As a result, Medicare pays for less than a quarter of long-term care costs in the U.S. In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a longterm care insurance policy, most people pay out of their own pockets for long-term care until they become eligible for Medicaid. The fact that Medicaid is a joint state-federal program complicates matters, because the Medicaid eligibility rules are somewhat different from state to state, and they keep changing. (The states also sometimes have their own names for the program, such as “Medi-Cal” in California and “MassHealth” in Massachusetts.)

Both the federal government and most state governments seem to be continually tinkering with the eligibility requirements and restrictions.

This is why consulting with your elder law attorney is so important. As for home care, Medicaid has traditionally offered very little — except in New York, which provides home care to all Medicaid recipients who need it. Recognizing that home care costs far less than nursing home care, more and more states are providing Medicaid-covered services to those who remain in their homes. It’s possible to qualify for both Medicare and Medicaid. Such recipients are called “dual eligibles.” Medicare beneficiaries who have limited income and resources can get help paying their out-of-pocket medical expenses from their state Medicaid program. For details, click here.

How You Can Use Your Social Security Benefits as an Interest-Free Loan

One little-known Social Security retirement benefits rule is the so-called “do-over rule.” Under this rule, an individual 62 years or older can start collecting benefits but stop the benefits within 12 months of the start, repay the benefits collected, and then still be eligible for their higher benefit amount when they collect at full retirement age or older.
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What’s the advantage if the benefits must all be immediately repaid? The strategy can work as a short-term interest-free loan. It makes sense, for example, in cases where an individual has a need for income in the immediate short term, due to an emergency such as a sudden loss of employment, but anticipates income within the year that would allow for full repayment, i.e., finding a new job or collecting a pension. Many individuals in their early 60s have most of their assets tied up in retirement and investment accounts, and withdrawals from these accounts would trigger hefty penalties. After “emergency” liquid funds run out, the do-over rule offers a short-term solution. In addition, by drawing on a Social Security “loan” instead of investments, you allow your investments to continue growing.

What if you are unable to pay back the benefits after the 12 months are up? You may still be able to suspend your benefits and increase your ultimate pay-out amount. For example, if you start collecting at 62 but no longer need the income at 66, you could suspend benefits until 70. Then, between the ages of 66 and 70, you would earn delayed retirement credits which would increase the ultimate benefit amount when you collect at age 70.

(Note that up until December 2010, it was possible for you to collect benefits and repay at any time. The law has since changed so that you are limited to a 12-month pay back period. You are also only allowed one “do-over.”)

For more information on how to collect, suspend and pay back benefits, contact or visit your local Social Security district office. You can click here to find your local office.

Maybe it’s time for a geriatric care manager

Geriatric care

Why do we hear so much about geriatric care management these days? It’s because there are so many benefits they can provide to seniors and care givers. Let’s first clarify the term: A professional Geriatric Care Manager (GCM) is a health and human services specialist who helps families who are caring for older relatives. The GCM is trained and experienced in any of several fields related to care management, including nursing, gerontology, social work, psychology, and logistics of health care and often finances relating to the elderly. They are trained to assess, plan, coordinate, monitor and provide services for the elderly and their families. Although not lawyers, they are often aware of legal issues elders may be soon facing.

The benefits to you, the child or care giver of the elder range from saving time (vetting out various needs), saving money (knowing financial pitfalls of some decisions in advance), making better care decisions (with insight from someone who has seen it all) and most importantly –reducing stress.  The stress of being alone in the decision making process, relief of now being informed about your various options and what may be right for the specific needs of the elder, ranging from doctor decisions, how to provide care, assisted living, home care and nursing care options. Doing it alone takes an enormous amount of time, energy, resources and self reliance.

According to Gladys Harris Geriatric Care Manager of The Olive Group, you may need a Geriatric Care Manager if:

•    A person has limited or no family support available

•    Family has just become involved with helping the individual and needs direction regarding available senior services

•    A person has multiple medical or psychological issues

•    A person is unable to live safely in his / her current environment

•    Family is either “burned out” or confused about care solutions

•    Family has a limited time and / or expertise in dealing with loved one’s chronic care needs

•    Family is at odds regarding care decisions

•    Individual is not pleased with current care providers and requires advocacy

•    Individual is confused regarding his / her own financial and / or legal situation

•    Family needs education and / or direction in dealing with behaviors associated with dementia

Gladys is a recommended resource of ours and helps families and elders in New Jersey. They offer a unique combination of compassion, knowledge, a ‘can-do’ attitude and a wide range of services which also include:

Solution Focused Counseling: Life transitions are a common reason for counseling. We focus on empowering individuals to find solutions in their life by figuring out what a person’s goals are, and supporting them to find ways to achieve those goals.

Care Coordination: Our holistic assessment includes a physical, psychological and social functioning evaluation of the older adult, as well as a home safety inspection. Based on the assessment, we will develop a customized client care plan to identify private and public resources available to support the older adult. We coordinate the support systems needed to keep the older adult safe and happy at home.

Wellness Monitoring: Regular visits with the older adult to help ensure that they receive the best care available. During our visits we ensure older adults are receiving help with things that they want done, computer skills, organize photos, plan family events, etc.

Accessibility Issue Resolution: Aging-in-place often requires making changes to the home to help maintain independence.  This may be de-cluttering, home improvements, home safety inspection

Relocation Services: We support families during transitions from home to another location or facility.   These services include cleaning, de-cluttering, downsizing, and setting up in the older adult’s new home.

Cost savings is also a key component to good geriatric care management. You can learn more about it and find out more about the range of services by clicking here: www.TheOliveGroup.llc.com

Regards,

Brian

Why Not Just Use an Off-the-Shelf Power of Attorney Form?

poaA durable power of attorney is one of the most important estate planning documents you can have. It allows you to appoint someone to act for you (your “agent” or “attorney-in-fact”) if you become incapacitated. Without a POA, your loved ones would not be able to make decisions for you or manage your finances without asking the court to appoint a guardian or conservator, which is an expensive and time-consuming process.

There are many do-it-yourself power of attorney forms available; however, it is a good idea to have an attorney draft the form for you. There are many issues to consider and one size does not fit all.

The agent’s powers

The power of attorney document sets out the agent’s powers. Powers given to an agent typically include buying or selling property, managing a business, paying debts, investing money, engaging in legal proceedings, borrowing money, cashing checks, and collecting debts. They may also include the power to consent to medical treatment. Some powers will not be included unless they are specifically mentioned. This includes the power to make gifts and the power to designate beneficiaries of your insurance policies.

The power to make gifts of your money and property is a particularly important power. If you want to ensure your agent has the authority to do Medicaid planning on your behalf in the event you need to enter a nursing home, then the power of attorney must give the agent the power to modify trusts and make gifts. The wording in a power of attorney can be significant, so it is necessary to consult an attorney.

Springing or immediate

The power of attorney can take affect immediately or it can become effective only once you are disabled, called a “springing” power of attorney. While a springing power seems like a good idea, it can cause delays and extra expense because incapacity will need to be determined. If the power of attorney is springing, it is very important that the method for determining incapacity is clearly spelled out in the document.

Joint agents

While it is possible to name more than one person as your agent, this can lead to confusion. If you do have more than one person named, you need to be clear whether both parties need to act together or whether they can each act independently. It might make more sense and be less confusing to name an alternative agent to act in case the first agent is unable to.

Appointing a guardian

Another use of a power of attorney can be to nominate a guardian in case guardianship proceedings become necessary. Including your preference for a guardian can allow you to have some say over who will be managing your affairs. Usually, the court decides who will be chosen as a guardian, but in most circumstances, the court will abide by your nomination in the durable power of attorney.

Executing the power of attorney

To be valid a power of attorney must be executed properly. Some states may require a signature, others may require the power of attorney to be notarized, and still others may require witnesses. It is important to consult with an estate planning attorney in your state to ensure your power of attorney is executed properly.

Accepting a power of attorney

Even if you do everything exactly right, some banks and other institutions are reluctant to accept a power of attorney. These institutions are afraid of a lawsuit if the power of attorney is no longer valid. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute the forms offered by the institutions with which you have accounts. According to a MarketWatch.com article, you need to be careful that you don’t sign a bank’s document that inadvertently restricts a power of attorney’s ability to deal with other assets, and you should check that any documents you sign with a bank match the original power of attorney.

For more information on the subject, visit this section on our website.

Regards, Brian A. Raphan, PC