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The information discussed and/or provided is not intended as legal advice and persons should not rely on anything posted on this blog. Please also be advised that no attorney-client relationship is established until the firm has been contacted by telephone and an appointment made to discuss your situation with us.
August 20, 2010
Often people who are taking care of their elderly parents ask if they can claim the parent as a dependent on their tax return. This question usually has its basis in the fact that the adult child is spending their own money to take care of their aging parent.
There is a good posting about this issue, here: http://newoldage.blogs.nytimes.com/2010/08/18/can-i-claim-my-mother-as-a-dependent/
Also, check out the information straight from Uncle Sam about dependents on tax returns:
http://www.irs.gov/pub/irs-pdf/p501.pdf
A similar question from adult children taking care of their aging parents is if they can deduct nursing home expenses they pay for their parent who is in a nursing home? The answer is yes, if certain IRS tests are met.
1. The parent must be a “qualifying relative” or lived with you all year.
2. That person cannot be a dependent on anyone else’s tax return.
3. You must provide more than 50% of their support during the tax year.
4. You must itemize your deductions and the medical expenses must exceed 7.5% of your adjusted gross income.
In general, nursing home costs are deductible as a medical expense if the costs are more than 7.5% of your adjusted gross income.
But be mindful if more than one adult child is paying for the medical expense/nursing home care, i.e., several siblings. The IRS treats this type of arrangement as a multiple support agreement, which has some different rules. A multiple support agreement is used when two or more people provide more than half of a person’s support, but no one person provides more than half. The relevant information for the deduction of medical expenses and the multiple support arrangement can be reviewed in IRS Publication 502. http://www.irs.gov/pub/irs-pdf/p502.pdf
-Micah Huff
July 15, 2010
Love him or hate him, you have to hand it to George Steinbrenner–the guy picked the right year to die. Steinbrenner died on July 13, 2010 at the age of 80. He had an estimated fortune worth $1.1 billion, according to Forbes Magazine. If Steinbrenner had waited one more year to die, then his estate would have been on the hook for approximately $500 million in federal estate taxes.
How much does Steinbrenner’s estate owe in federal estate taxes this year? ZERO.
This quirk in the federal estate tax for 2010 is thanks to Congress’s inability to agree on a fix. The problem has only been staring Congress in the face since 2001, when as part of the tax legislation, Congress modified the estate tax rules. In 2009 for example, an individual could pass away with $3.5 million and owe no federal estate tax. In 2011, the exemption amount is set to return to 2001 levels, or $1 million.
Steinbrenner is not the only billionaire who has heirs celebrating their tax fortunes: Dan Duncan, a Texas oil tycoon, died in March 2010 with an estimated worth of $9 billion. The New York Times picked up the story of this estate escaping federal estate taxes in June 2010. See the article at: http://www.nytimes.com/2010/06/09/business/09estate.html?hp
Every day that passes, it seems more unlikely that Congress will address the federal estate tax issue before the elections in November. Some experts opine that given the state of the economy and federal deficits, that Congress is more than okay with letting the federal estate tax return to $1 million in 2011, thereby capturing more federal estate tax dollars for the U.S. Treasury. The one definite is that many more people will be scrambling at the end of 2010 to engage in estate and tax planning.
April 5, 2010
CNN’s Money Magazine recently ran an article in their April 2010 edition concerning long-term care insurance (“Solve your toughest retirement puzzle” by Lisa Gibbs). http://money.cnn.com/magazines/moneymag/moneymag_archive/2010/04/01/toc.html
The article is an eye-opening outline concerning an individual and couple’s options for long-term care in their retirement years. Perhaps the best aspect of the article is the succinct way it dispels myths or misunderstandings about Medicare paying for long-term care, i.e., nursing home care. The article offers a sobering statistic—70% of seniors will likely need a home health aide or nursing home care.
In general, Medicare will not cover most long-term care (it will pay for a limited time if you are recovering from an event like surgery or a stroke). This fact leaves three basic options for long-term care: (1)Buying long-term care (“LTC”) insurance; (2) you and your family pay the private out-of-pocket costs for a nursing home; and (3) qualifying for Medicaid.
The first option, buying LTC insurance, usually depends on three important considerations—Can I get coverage, do I need it, and can I afford it? Naturally, it is easier to get coverage the younger you are and it also depends on your health condition and medical history. The best time to consider long-term care insurance is likely in your late fifties. The longer you wait, the higher the premiums. According to the article, in your fifties, you have a 1-in-7 chance of not qualifying, and that ratio increases in your sixties to 1-in-4. But buying a policy earlier than your fifties also presents other uncertainties, such as your health, the insurer’s financial health, and your other possible priorities like paying for college or saving for retirement. The second part of the equation, is the need. While there can be a host of reasons why you need the insurance, the most general reasons are preserving assets to pass on and protecting a spouse’s lifestyle. The recommendation is to consider LTC insurance if you have assets of at least $250,000, not including your house. The third prong, is the cost. Usually this is the most prohibitive factor because for a couple in their fifties, a policy can run from $2,000 to $6,000 per year or more, depending on the plan. If an individual or couple has enough saved for retirement and can shoulder the potential cost, then buying LTC insurance is worth considering.
The second option listed above, paying for the cost of a nursing home yourself, can be equally as daunting. Money has a price comparison chart detailing the private nursing-home room payments per day from all over the country. The east coast has some of the highest rates ($335/day in New York), while the Midwest comes in at $158/day in Wichita, Kansas. Missouri’s nursing home pay rates are comparable, and usually run between $4,000 on the very low end, to $7,000 or $8,000 on the high end, depending on the facility. The math can be a painful exercise when individuals and couples realize that a skilled-nursing facility for a loved one can consume $60,000 to $72,000, annually. With these types of numbers looking back at you, sometimes LTC insurance starts to look more affordable and more of a priority.
The third consideration for long-term care is Medicaid. Medicaid is a federal-state partnership program, begun in 1965, to provide medical care to the elderly, blind, and disabled poor. Medicaid is designed as a welfare program with eligibility based on financial need, so that not all elderly, blind, or disabled citizens qualify for Medicaid benefits. Medicaid generally covers persons 65 and older, disabled persons, and blind persons whose income and available resources do not exceed a certain amount as determined by federal law. Thus, an individual can have no more than $999.99 in assets to qualify for Medicaid. There are some excluded items from this calculation, such as a house, car, and personal items. Spouses of an Medicaid-eligible individual who needs skilled nursing-home care can usually hold on to only half of their joint assets up to roughly $110,000. And shifting assets to children or other individuals is generally not a viable option because the government now has a five-year “look back” period which the government can consider all “gifts” or “transfers” and impose a penalty period where the individual cannot be eligible for Medicaid for nursing-home care. If an individual has to serve out a penalty period because assets were transferred away, then private pay for nursing-home care is usually the only option. Medicaid is sometimes the only option for individuals that need skilled-nursing care who do not have the financial capability of paying for LTC insurance or paying a private nursing-home rate for an extended period of time.
Even if insuring for long-term care is not financially viable for someone, long-term care considerations must be part of any retirement plan.
March 30, 2010
Thanks to the inaction of Congress since the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGGTRA”) as it relates to the estate tax, in 2010, your estate plan could have a serious problem. Because there is no federal estate tax imposed on an estate of any size for individuals dying in 2010, if your estate plan divides your estate using a formula referencing the estate tax, there could be unintended consequences.
Many people have this type of estate plan. It goes by various names, like: A-B Trust, credit-shelter-trust planning, or bypass-trust planning. The main purpose of this type of plan is to utilize an individual’s federal estate tax exemption amount. If you don’t specifically structure your estate plan to use your exemption, then it could be lost or wasted at your death. The main feature for an A-B Trust plan is a word formula that directs part of the decedent’s assets to a trust and part to the surviving spouse (or to a trust usually for his or her benefit). These provisions were put into your plan so that your plan could adapt to changes in the federal estate tax, like the increasing exemption amount, and to take account of gifts you may make in your lifetime.
The words used in these estate plans divide the assets by reference to the federal estate-tax law. Because there is no federal estate tax in 2010, these word formulas don’t work—they are either meaningless or can produce intended results.
For example, one formula can direct a maximum portion of your estate that is free of estate tax to the credit shelter (“B” trust or bypass trust). In 2010, since there is no estate tax, that means that if you died this year then all of your assets would go to the credit shelter trust, and your spouse may not receive anything (depending on how the trust is written). Although the spouse probably has some type of interest in the credit-shelter trust, this may not be sufficient and not what you intended when you executed your plan.
Alternatively, a different formula can provide that a certain amount goes to your spouse which is your whole estate except an amount equal to the federal estate-tax exemption amount, which should go to the credit-shelter trust. Under this type of funding formula, if you died in 2010, your entire estate would go to the surviving spouse and nothing would fund into the credit-shelter trust. This could cause significant problems for the surviving spouse if he/she has their own estate-tax concerns because the first-to-die spouse wasn’t able to shelter their federal estate-tax exemption. This situation is probably also not what was intended in the document.
If you have A-B trust/credit-shelter/bypass trust planning, then you should seriously consider fixing your estate plan for 2010, and not leave your estate-planning fate up to Congress. The fix would be to draft a simple trust amendment or codicil to your will that “fixes” your formula-funding provision. Instead of revising your entire estate plan—unless you need or want to—a trust amendment or will codicil should state that if you pass away in 2010, when there is no estate tax or generation skipping taxes and Congress does not pass retroactive legislation, then your funding formula for your estate plan should be in accordance with the Internal Revenue Code that was in effect on December 31, 2009.
This “fix” will take care of your problem for 2010, and more importantly, carry out the original intention of your estate plan. Don’t let the inaction of Congress mess with your estate plan in 2010.
October 26, 2009
Financial exploitation of the elderly is a growing concern, and no segment of society is immune, including the ultra wealthy.
On October 8, 2009, Anthony Marshall, the 85-year-old son of Brooke Astor, was convicted in New York on 14 counts, including first-degree grand larceny and scheming to defraud his mother. The co-defendant in the case, the estate lawyer, Francis X. morrissey, Jr., was convicted on five charges, including scheming to defraud, conspiracy and forgery.
Brooke Astor was a high society, ultra-wealthy scion. Astor died in 2007 at the age of 105 and suffered from Alzheimer’s disease. Brooke Astor’s third husband, Vincent Astor, was the son of multimillionaire John Jacob Astor IV. She took control of her husband’s philanthropic work after his death in 1959, and her charitable efforts won her a Presidential Medal of Freedom in 1998.
Anthony Marshall’s actions to defraud and steal from his mother ranged from scheming to inherit millions of dollars, to simply stealing valuable artwork off her walls. Francis X. Morrissey, the estate attorney, was accused of helping manipulate Astor into changing her will to leave Marshall millions of dollars that were intended for charity. Marshall’s other dark actions included buying a $920,000 yacht for himself, but refusing to buy a $2,000 safety gate to keep his mother from falling down stairs. The tip-off concerning Marshall’s theft and abuse came from one of Astor’s grandsons, who asked a court to remove Marshall from handling her affairs.
While the Astor case is a high profile example of financial abuse of the elderly, unfortunately, it is a common occurrence. It is hard to fathom the unreported cases or successful cases where the thief’s efforts were successful. The Astor case does shed more light on the considerations when dealing with the elderly who may need assistance with making financial decisions. Often, the more involvement by third parties and sometimes the court, is a good checks-and-balances approach to keeping an eye on a vulnerable senior. While there are elderly abuse statutes on the books in Missouri–including financial abuse–criminal prosecution of these types of cases is rare. This suggests that a large, trusted network of people is often a good idea when caring for a loved one and a loved one’s finances.
August 20, 2009
Advance directives have received some attention in the media recently, but this topic is not new.
On November 5, 1990, Congress passed the Patient Self Determination Act (PSDA) as an amendment to the Omnibus Budget Reconciliation Act (OBRA) of 1990. The PSDA requires health-care providers, such as hospitals and nursing homes, who received Medicare and Medicaid reimbursement for their services, to give patients, upon admission, information about Advance Directives, including: 1) the right to participate in and direct their own health-care decisions; 2) the right to accept or refuse medical or surgical treatment; 3) the right to prepare an advance directive; and 4) information on the health-care provider’s policies that govern these rights.
Almost universally, every individual has strong feelings about controlling their own self-determination for end-of-life decisions. Self-determination includes the right of each person to determine the appropriate level of medical intervention, if any. This includes the right to refuse treatment, and the right to change your mind and to change your wishes over time and throughout the course of an illness.
End-of-life decisions are the choices a person makes about continuing care or treatment options, that is, how they want to experience their dying process. Traditionally, these discussions take place with someone who is suffering from a terminal condition.
These options may include pursuing aggressive treatment, aimed at sustaining life. Or, they may include palliative care. Palliative care is often defined as care that focuses on the individual’s comfort, and on reducing the pain and severity of the symptoms of the disease process, instead of a cure. Palliative care is intended to improve the person’s quality of life.
Self-determination presumes the person is competent. The issue of competency is not addressed here.
Discussions about these very personal issues are often naturally addressed within the context of estate planning. Individuals want to include specific end-of-life wishes within their estate planning documents, health-care directives and powers of attorney. Including these specific wishes in the appropriate legal documents will allow your decisions and wishes to be respected. If this issue is important to you and your loved ones, it is crucial to that your estate-planning documents reflect your wishes about end-of-life decisions.
On October 1, 2009, the Missouri End-of-Life Coalition is holding its Fifth Annual Policy Summit in Jefferson City. The agenda includes honoring a person’s treatment preferences and access to end of life care. See http://mo-endoflife.org for more information.
June 24, 2009
This is the first blog entry for Oelbaum, Brown, & Alsop, a St. Louis-based law firm that specializes and is uniquely qualified in all topics related to Elder Law and Disability/Special Needs Law. We will focus on varying topics, issues, and news important to seniors, the disabled community, and their families. We invite you to ask questions and share your comments.
One of the most common questions from the general public is, “what is Elder Law?” In the most general sense, the term “Elder Law” covers an area of legal practice that places an emphasis on those issues that affect the growing aging population. But rigid technical definitions cannot properly encompass what elder-law attorneys do for their clients.
An attorney who practices elder law handles a wide variety of legal issues that are specific to seniors and their families. This can include general estate planning issues and client counseling about incapacity issues. Incapacity issues can be addressed with alternative decision making documents, like a durable powers of attorney for finances and health care, and health care directives. Sometimes, however, these documents cannot be executed and a guardianship and conservatorship may be necessary if there are questions about a senior’s capacity. Elder-law attorneys also assist in planning for possible long-term care needs, including nursing home care, which can include helping the client locate the appropriate type of care, coordinating private and public resources to finance the cost of care, and working to ensure the client’s right to quality care. Elder-law attorneys are also increasingly assisting with helping clients obtain VA benefits and helping individuals with life-care planning, which will be a focus of later blogs. An elder-law attorney can continue to help families even after a loved one has passed away with other legal issues such as probate, estate and trust administration, and even litigation, if it becomes necessary or unavoidable for the senior’s trust or estate.
Legal issues concerning an aging population represents a rapidly increasing segment of society. Anywhere you turn, the media continues to report on the again Baby Boomer generation. The general consensus is that the Baby Boomer generation were those individuals born between 1946 and 1964. The estimated number of baby boomers, as of July 1, 2005, is 78.2 million. According to the U.S. Census website, the number of people turning 60 each day in 2006 was approximately 7,918. That amounts to 330 every hour. The number of baby boomers living in 2030, according to projections will be 57.8 million. That year, boomers would be between ages 66 and 84.
These number suggest that the demand for attorneys with specialization in the areas of law that concern seniors will increase dramatically. Not only will attorneys need to understand issues concerning our senior population, but the general population must adjust socially and economically to the aging population. Many families have started educating themselves about senior citizen issues, usually because there is looming uncertainty about tough decisions concerning a senior family member.
Perhaps sometimes less focused on by our society are the issues concerning the disabled and special-needs community. Often, families of disabled and special-needs individuals are already overwhelmed with the tremendous care needs of their disabled loved one. The legal issues facing a disabled or special-needs individual can include: special-needs trusts, public benefits (SSI, SSDI, Medicare, Medicaid, etc.), long-term care and living arrangements. Locating an attorney familiar with the disabled and special-needs community is vital because disabled or special- needs individuals that do not utilize public benefits or do not have a special-needs trust in place could run into problems in the future.
We look forward to opening and initiating the dialogue about Elder Law and Disability Law news and topics in both the St. Louis area and on the national level.
Micah Huff, Attorney
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