Can I Get a Tax Break for Long-Term Care?

The skyrocketing costs of long-term care (LTC) can ruin your retirement savings. The U.S. Department of Health and Human Services found that 27% of Americans turning 65 this year will have at least $100,000 in long-term-care costs, and 18% will require care costing more than $250,000. However, the IRS allows some limited tax breaks on medical expenses and insurance premiums related to long-term care.

Kiplinger’s recent article entitled “Deduct Expenses for Long-Term Care on Your Tax Return” says that if you need LTC, you may be able to deduct a portion of the costs on your tax return. If you purchased a long-term-care insurance (LTCI) policy to cover the costs, you may also be able to deduct some of your premium payments. Since retirement planning includes long-term care, it’s important to know how these tax deductions can help to offset overall costs.

Long-Term-Care Costs

The IRS allows you to deduct unreimbursed costs for long-term care as a medical expense, if certain requirements are met. This includes eligible expenses for in-home, assisted living and nursing-home services. The long-term care must be medically necessary and may include preventive, therapeutic, treating, rehabilitative, personal care, or other services. The cost of meals and lodging at an assisted-living facility or nursing home is also included, if the primary reason for being there is to receive qualified medical care.

The care must also be for a chronically ill person and provided under a care plan prescribed by a doctor. The IRS says that a person is “chronically ill,” if he or she can’t perform at least two activities of daily living. These are things like eating, bathing, or dressing. They must be unable to do these without help for at least 90 days. This condition must be certified in writing within the last year. A person with a severe cognitive impairment, like dementia, is also considered chronically ill, if supervision is needed to protect his or her health and safety.

To get the deduction, you have to itemize deductions on your tax return. However, itemized deductions for medical expenses are only allowed to the extent they exceed 7.5% of your adjusted gross income.

An adult child can claim a medical expense deduction on his own tax return for the cost of a parent’s care, if he can claim the parent as a dependent.

Insurance Premiums

The IRS also allows a limited deduction for certain LTCI premiums. Similar to the deduction for long-term-care services, this has to be an itemized deduction for medical expenses. Again, only premiums exceeding the 7.5% of AGI threshold are deductible. (Note that self-employed individuals may be able to deduct premiums paid for LTCI as an adjustment to income without having to itemize.)

In addition, the LTCI policy is required to satisfy certain requirements for the premiums to be deductible. The policy can only cover long-term-care services, so the deduction only applies to traditional LTCI policies, not “hybrid” policies that combine life insurance with long-term-care benefits. This deduction also has an age-related cap. For 2021, the cap is $5,640 if you’re older than 70, $4,520 if you’re 61 to 70 and $1,690 if you’re 51 to 60. (For those 41 to 50, it’s $850, and for 40 or younger, it’s $450.)

These deductions can be valuable for people in their seventies and older.

Reference: Kiplinger (March 23, 2021) “Deduct Expenses for Long-Term Care on Your Tax Return”

Do I Make Too Much Money for Medicaid?

A 73-year-old single retiree is collecting Social Security and a small state pension. He recently was told that he probably collects too much money to be eligible for Medicaid assistance to help with any kind of long-term care, if it was required in the future. He owns a house with a mortgage.

What options does he have, except for buying a long-term care insurance policy, which may be extremely expensive at his age.

Nj.com’s recent article entitled “I think I make too much money for Medicaid. What can I do?” says that there are some steps a person can take. However, it may take time before these actions will help your situation.

Medicaid has a five-year lookback. Therefore, if the Medicaid applicant gave away all of his assets this year and went into a nursing home expecting Medicaid to pay, the program would “look back” over five years at what he owned. The program can claw back what it spends on the applicant.

But just because you are not eligible for Medicaid and its long-term care benefits today, that does not mean that you will not be eligible in the future.

That is because even if your income is above the limit, you still might be able to qualify for Medicaid, if you have significant medical expenses.

In order to qualify financially, you need to have very limited resources.

In many states, for long-term care, an applicant’s assets cannot be more than a certain amount, such as $2,000 if you are single. However, not all property counts towards the resource limit. A home may be exempt, if it is your primary residence and worth less than the limit.

One option is a reverse mortgage which would free up some of the equity in the home to use towards a long-term care insurance policy.

Long term care policies can still be issued for people in their 70s, but the premiums will be higher than if you had enrolled 10 or 20 years ago. However, it is still an option and would keep the retiree in his home.

There are also a number of federal and state-funded programs that make it easier for seniors to live in the community and in their homes as long as possible.

If you would like to know more about this or other topics from Calvin Curtis, click here.

Reference: nj.com (March 11, 2021) “I think I make too much money for Medicaid. What can I do?”

Caring for a Loved One from a Distance

Trying to coordinate care from a distance becomes a challenge for many, especially since as many as 80% of caregivers are working. Add COVID-19 into the mix, and the situation becomes even more difficult, reports the article “When your parent is far away and you are trying to care for them” from the Pittsburgh Post-Gazette.

The starting point is to have the person you are caring for give you legal authorization to act on their behalf with a Power of Attorney for financial affairs and a Health Care Directive that gives you authority to receive health information under HIPAA (Health Insurance Portability and Accountability Act). It is HIPAA that addresses the use, disclosure and protection of sensitive patient information.

Next, have a conversation about their finances. Find out where all of their important documents are, including insurance policies (long-term care, health, life, auto, home), Social Security and Medicare cards. You’ll want to know where their tax documents are, which will provide you with information on retirement accounts, bank accounts and investments.

Gather up family documents, including birth, death, and marriage certificates. Make sure your loved one has completed their estate planning, including a last will and testament.

Put all of this information into a binder, so you have access to it easily.

Because you are far from your loved one, you may want to set up a care plan. What kind of care do they have in place right now, and what do you anticipate they may need in the near future? There should also be a contingency plan for emergencies, which seem to occur when they are least expected.

Find a geriatric care manager or a social worker who can do a needs assessment and help coordinate services, including shopping for groceries, medication administration and help with basic activities of daily living, including bathing, toileting, getting in and out of bed, eating and dressing.

If possible, develop a list of neighbors, friends or fellow worshippers who might create a local support system. If you are not able to visit with any degree of frequency, find a way to see your loved ones on a regular basis through video calls. It is impossible to accurately assess a person’s well-being, without being able to see them. In the past, dramatic changes weren’t revealed until family members made a trip. Today, you’ll be able to see your loved one using technology.

You may need to purchase a smartphone or a tablet, but it will be worth the investment. A medical alert system will provide further peace of mind for all concerned. Regular conference calls with caregivers and your loved one will keep everyone in touch.

Caring from a distance is difficult, but a well-thought out plan and preparing for all situations will make your loved one safer.

For more information about this or other topics, click here.

Reference: Pittsburgh Post-Gazette (Sep. 28, 2020) “When your parent is far away and you are trying to care for them”

 

How Do I Talk about End-Of-Life Decisions?

With the coronavirus pandemic motivating people to think about what they prioritize in their lives, experts say you should also take the time to determine your own end-of-life plans.

Queens News Service’s recent article entitled “How to have the hardest conversation: Making end-of-life decisions” reports that in this coronavirus pandemic, some people are getting scared and are realizing that they don’t have a will. They also haven’t considered what would happen, if they became extremely ill.

They now can realize that this is something that could have an impact upon them.

According to the U.S. Centers for Disease Control and Prevention (CDC), 70% of Americans say they’d prefer to die at home, while 70% of people die in a hospital, nursing home, or a long-term care facility. This emphasizes the importance of discussing end-of-life plans with family members.

According to a survey of Californians taken by the state Health Care Foundation, although 60% of people say that not burdening their loved ones with extremely tough decisions is important, 56% have failed to talk to them about their final wishes.

“Difficult as they may be, these conversations are essential,” says American Bar Foundation (ABF) Research Professor Susan P. Shapiro, who authored In Speaking for the Dying: Life-and-Death Decisions in Intensive Care.

“Now is a good time to provide loved ones with the information, reassurance and trust they need to make decisions,” Shapiro says.

Odds are the only person who knows your body as well as you do, is your doctor.

When thinking about your end-of-life plans, talk with your doctor and see what kind of insight she or he can provide. They’ve certainly had experience with other older patients.

If you want to make certain your wishes are carried out as you intend, detail all of your plans in writing. That way it will be very clear what your loved ones should do, if a decision needs to be made. This will eliminate some stress in a very stressful situation.

Even after the COVID-19 pandemic is over, everyone will still need a will.

Talk with an experienced elder law or estate planning attorney to make certain that you have all of the necessary legal documents for end-of-life decisions.

Reference: Queens News Service (May 22, 2020) “How to have the hardest conversation: Making end-of-life decisions”

Suggested Key Terms: Elder Law Attorney, Elder Care

C19 UPDATE: Should You Bring Mom Home from the Nursing Home Now?

If you have a loved one currently living in a nursing home, you’re probably worried about them right now. You may not be able to visit them or check in on their care. You may be afraid that the next COVID19 outbreak will strike their facility.

And … you may be struggling with the decision about whether it’s best for them to stay in the facility, or if you should bring them home.

These are all reasonable concerns. There have been more than 5,670 coronavirus deaths in long-term care facilities nationwide, according to state health data reported by NBC News on April 15.

But would Mom or Dad fare better, even with all due social distancing, in the family home?

Some issues to carefully consider if you are struggling with this question now:

  • Are you prepared to shoulder the entire burden of care for your loved one now? If not, are there other family or community resources that could help – and can you access them in the current situation?
  • What does your loved one want? Do the benefits of moving them out outweigh the stress of disruption and displacement?
  • Can you really keep your elderly loved one safer at home … especially if they have chronic conditions such as heart, lung, or kidney disease?
  • How long will you be able to keep up with your loved one’s care at home … and
  • Will your loved one be able to return to the facility if you cannot keep up … or after the danger has passed?
  • Will your loved one lose their Medicare or Medicaid benefits if they leave the nursing home?

These questions, and more, should be addressed before making the decision to remove your loved one from a nursing facility. Check with an elder law attorney who is familiar with your situation, state and federal laws, and nursing home policies who can explain your options and guide you to an informed decision.

Resources: NBC News, Coronavirus deaths in U.S. nursing homes soar to more than 5,500, April 15, 2020; March 18, 2020;

 

Nursing Home Care Costs and Applying for Medicaid

Medicaid provides several programs funded through a state-federal agreement, explains the article “Planning a must: Medicaid and paying for nursing homes” from The Dallas Morning News. One of the programs provides long-term nursing home care benefits to pay for nursing home or approved residential care facilities. However, requirements to qualify for Medicaid vary widely from state to state. It’s best to speak with an elder law attorney, who will be able to help you plan in advance.

Let’s take Texas as our example. To qualify in the Lone Star state, you must have a medical need and fall under the income and asset caps, which change yearly. In 2020, the income limit for an individual is $2,349 and the asset (resource) amount is $2,000. For a married person, your spouse can have income and resources that are protected, $25,728 is the minimum SPRA (the minimum resource protected amount) and the maximum is $128,640. The monthly maintenance needs allowance for a spouse is $3,216.50. If they sound like low levels, they are. However, there are some assets that Texas does not count. The well spouse may continue to maintain the family home, as long as its value is less than $595,000. A car, burial plots and prepaid funeral arrangements are also permitted.

For most people, this presents a bad situation. Their assets are too high to qualify for Medicaid, but they don’t have enough money to pay for nursing home care. That’s where Medicaid planning with an elder law attorney comes in. The attorney will know where assets can be shielded to protect the well spouse and how to work within the Medicaid requirements.

A word of advice: Don’t start giving away assets because you think that you can do this yourself. The first rule: there is a five-year lookback period, and if assets have been distributed within a five year period of the person applying for Medicaid, their eligibility will be delayed. The rules about gifting assets are complicated and mistakes are non-negotiable.

Be careful of elder exploitation. Planning for Medicaid is one thing, being convinced to impoverish yourself so someone else can have a luxurious lifestyle is another. There’s a fine line between the two. Be aware of the difference. An attorney can play an important role here, since they have a legal and ethical responsibility to protect their client’s interests.

Be certain that you have a Durable Power of Attorney in place. Why? If you become incapacitated during the process of Medicaid planning, your agent will be able to help with Medicaid planning and file for the Medicaid application.

Don’t sell your home. In most states, the primary residence is a protected asset for Medicaid. Once it is sold, however, the proceeds of the sale are considered a personal asset and will be counted.

It’s also important to understand that Medicaid does not pay for all nursing home stays. Medicaid pays for a nursing-home designated “Medicaid bed” in a semi-private room. Depending on where you live, there may not be as many Medicaid beds as there are people who need them.

An elder lawyer will be able to help you and your family with planning for Medicaid, and with an application. You’ll be better off relying on the help of an experienced attorney.

Reference: The Dallas Morning News (March 15, 2020) “Planning a must: Medicaid and paying for nursing homes”

Long Term Care Varies, State by State

What if your parents live in Oklahoma, you live in Nebraska and your brothers and sisters live in New York and California? Having the important conversation with your aging parents about what the future might hold if one of them should need long-term care is going to be a challenge, to say the least.

It’s not just about whether they want to leave their home, reports the article “What is the best state for long term care” from The Mercury. There are many more complications. Every state has different availability, levels of care and taxes. If the family is considering a continuing care retirement community, or if the parents already live in one, what are the terms of the contract?

The differences between states vary, and even within a state, there can be dramatic differences, depending upon whether the facility being considered is in a metropolitan, suburban or rural area. There’s also the question of whether the facility will accept Medicaid patients, if the parents have long-term care insurance or any other resources.

Here’s what often happens: you open up a glossy brochure of a senior community in a warm climate, like Florida or Arizona. There are golf courses, swimming pools and a great looking main house where clubs and other activities take place. However, what happens when the active phase of your life ends, slowly or suddenly? The questions to ask concern levels of care and quality of care. Where is the nearest hospital, and is it a good one? What kind of care can you receive in your own apartment? Are you locked into to your purchase, regardless of your wishes to sell and move to be closer to or live with your adult children?

And what happens if you or a “well” spouse runs out of money? That’s the question no one wants to think about, but it does have to be considered.

For people who move to Florida, which has a very generous homestead exemption for property taxes and no state tax, the incentives are strong. However, what if you become sick and need to return north?

For seniors who live in Pennsylvania and receive long-term care and other services, the well spouse’s retirement funds are exempt for Medicaid regardless of the amount. However, if you move over the state’s border to New Jersey, and those accounts will need to be spent down to qualify for Medicaid. The difference to the well spouse could be life changing.

Delaware and New Jersey have Medicaid available for assisted living/personal care. Pennsylvania does not. The Keystone State has strict income limitations regarding “at home” services through Medicaid, whereas California is very open in how it interprets rules about Medicaid gifting. Utah also has Medicaid available for nursing home care and has a segment that helps with assisted living cost called the New Choice Waiver.

The answer of where to live when long-term care is in play depends on many different factors. Your best bet is to meet with an estate planning elder care attorney who understands the pros and cons of your state, your family’s  situation and what will work best for you and your spouse, or you as an individual.

Reference: The Mercury (March 4, 2020) “What is the best state for long term care”

 

Q & A – Medicaid for Nursing Home Care

As we approach our third act, new terminology comes into our daily lives that we may have heard before, but maybe never gave much thought to. Terms like Medicare, Medicaid, Social Security, Long-Term Care, and so on, can become sources of anxiety, if we don’t truly understand them. Therefore, today we’re answering some of the fundamental questions about Medicaid for nursing home care, in the hopes that we can alleviate at least one source of anxiety for you.

Question #1 – What is Medicaid?

Medicaid is a state and federal government-funded program that provides medical services to financially eligible individuals. Unlike Medicare, you do not have to be elderly to qualify for Medicaid, and many elderly individuals receive Medicaid benefits, including nursing home care. Every state administers its own version of Medicaid. For more information on Medicaid programs in your state, visit the Medicaid website, and select your state.

Question #2 – What are Medicaid’s basic financial eligibility requirements for nursing home care?

To determine your eligibility for nursing home benefits under Medicaid, the government will look at your income and resources in a given month to ensure you are within the legal limits for Medicaid benefits. To qualify for Medicaid, your monthly income must be less than the Medicaid rate for nursing home care, plus your typical monthly healthcare expenses. If you are eligible, you are allowed to keep $70 of your income for personal use. The rest is taken to pay for your care.

Question #3 – What is the Medically Needy Program under Medicaid?

For individuals that may exceed the financial limits to receive Medicaid, they may still qualify to receive Medicaid benefits under the medically needy program. This program allows individuals with medical needs to “spend down” their income to acceptable rates, by paying for medical care for which they have no insurance. For individuals over the age of 65, states are required to allow you to spend down your income regardless of medical necessity.

Question #4 – What resources can we have if my spouse is applying for Medicaid?

When a married couple applies for Medicaid, both spouses’ income and resources are included in the qualifying calculations. You may have all of the “exempt” resources, like an automobile and a house, along with one non-exempt item that does not exceed a set value (currently just over $58,000), such as cash or investments. Once your spouse qualifies for Medicaid, after one year, all excess income and resources must be transferred to the non-Medicaid-benefitted individual. That spouse may also accrue income and resources over and above the limits that Medicaid imposes on the benefitted spouse.

More information can be found on the Medicaid website, including requirements and benefits information for the state in which you reside. If you are interested in more information about long term care planning, speak with a qualified elder law attorney.

References:

Medicaid.gov. (Accessed November 28, 2019) https://www.medicaid.gov/medicaid/index.html

Holiday Gatherings Often Reveal Changes in Aging Family Members

A look in the refrigerator finds expired foods and an elderly relative is asking the same questions repeatedly. The same person who would never let you walk into the house with your shoes on now, is living in a mess. The children agree, Mom or Dad can’t live on their own anymore. It’s time to look into other options like assisted living or home care.

One of the biggest questions, according to the Cherokee Tribune & Ledger-News’ article is “How to pay for long-term care.”

The first question involves the types of facilities. There are many different options but the distinctions between them are often misunderstood. Assisted living facilities provide lodging, meals, assistance with eating, bathing, toileting, dressing, medication management and transportation. However, a skilled nursing facility adds more comprehensive health care services. There’s also the personal care home, which provides assisted-living type accommodations, but on a smaller scale.

The next question is how to pay for the residential care of an elderly family. This weighs heavily on the family. That elderly person is often the one who did the caregiving for so many years. The reversal of roles can also be emotionally difficult.

There are a few different ways people pay for care for an elderly family member.

Long-term care insurance, or LTC insurance. Few elderly people have the insurance to cover their residential facility stay, but some do. Ask if such a policy exists, or go through the piles of paperwork to see if there is such a policy. It will be worth the search.

Veteran’s benefits. If your loved one or their spouse served during certain times of war, is over 65 or is disabled and received an honorable discharge, he or she may be entitled to certain programs that pay for care through the Department of Veterans Affairs.

Private pay. If your loved one has financial accounts or other assets, they may need to pay the cost of their residential facility from these assets. If they don’t have assets, the family may wish to contribute to their care.

Another route is to apply for Medicaid. An elder law attorney in their state of residence will be able to help the individual and their family navigate the Medicaid application, explore if there are any options to preserving assets like the family home, and help with the necessary legal strategy and documents that need to be prepared.

Meet with an elder law estate planning attorney to learn what the steps are to help your elderly loved one enjoy their quality of life, as they move into this next phase of their life.

Reference: Cherokee Tribune & Ledger-News (November 30, 2019) “How to pay for longterm care.”

Tips for Seniors Who Are Moving to Assisted Living

When you are planning your move into assisted living, you can quickly get overwhelmed with the endless list of things you need to do. If you are moving out of a home where you have lived for many years, the thought of having to downsize and get rid of most of your possessions can produce anxiety. If thinking about all the work ahead of you makes you feel sad or tired, it can help to have a roadmap. Here are some organizational tips for seniors who are moving to assisted living.

You will be dealing with two situations – your current house and your new home. Each one needs a tailored game plan.

How to Minimize the Stress of Packing Up Your House

When you move from a large home to a smaller environment, the logistics dictate that everything will not fit into the new space. You will have to part with some of your items.

Rule #1 is you should be the one to decide what you keep and take with you to your new home. No one should dictate what you can have. These strategies can help:

  • Some of the bulk of your items will be a simple matter, because you will have no use for some things in assisted living. For example, since the facility will likely take care of the yard work, all the lawn and gardening equipment can go to a new home. You can save someone a lot of money, by giving them these items when they buy a house.
  • If you move to a warmer part of the country, you might not need your winter gear anymore. Donating those things can help keep someone in need from being cold and reduce how much you have to move.
  • Walk into one of your rooms and make a list of the three or four things you love the most in that room. If you only keep your favorite things, when you are in your new home, everything you see will bring you joy.

Changing how you think about the process, can make it less emotional for you. Instead of thinking about losing most of your belongings, imagine how liberating it will be when you are not tied down by so many things. Most people discover a lightness and freedom, when they get rid of the clutter and things that do not matter.

Settling into Your New Home

When you pack up at your previous house, visualize how the items you keep will fit into the new space. Make sure you hold on to the things that will make you feel comfortable and at home. Arrange your favorite things, so you can see familiar items from every angle throughout your space. With a little planning, you can recreate the feel of your old home environment. Keepsakes matter. While you do not want to be crowded by clutter or create tripping hazards, a cherished clock, photographs, books and artwork can help you feel as if you belong from the first day.

If you are planning to move to an assisted living facility, reach out to your qualified elder law attorney. They may be able to help you with government benefits and are familiar with the process of transitioning.

References:

A Place for Mom. “Moving Seniors: Settling in to Senior Care.” (accessed November 21, 2019) https://www.aplaceformom.com/planning-and-advice/articles/moving-seniors