Some Important Numbers for 2022
Much of the economic news recently has focused on inflation rates. The current rate of inflation is at the highest its been in the last 30 years, 6.2% on an annual basis. Against that backdrop, the Social Security Administration has announced it’s cost of living adjustment for the coming year 2022. The announced 5.9% increase is the highest since 2008 although if inflation continues to increase it may not be enough to keep pace. Nevertheless recipients will see the added amount beginning in January. Medicare costs will also increase but at a much higher rate, 14.5% for 2022. This is in part because the increase last year was lower than the actual increase in costs. Medicare’s standard Part B premiums will rise from $148.50 to $170.10. The Part B deductible will also rise by $30 to $233. This will cut into some of the increased Social Security benefits people will receive. For higher income Social Security recipients who pay a greater Part B premium, the increase will also be greater. Other Medicare numbers will change as well. The Part A hospitalization deductible will rise from $1484 to $1556 for the coming year. The Social Security cost of living adjustment also affects other government programs which apply the same increased rate. The Supplemental Security
New Tax Law Changes Coming? Part 2
In my post last week I talked about recent draft legislation which would make changes to federal income, gift and estate tax laws. Many of our clients have called asking what they should do and I must remind callers that nothing has changed yet. We are at the beginning of what is usually a lengthy legislative process as we just saw with the passage last week of the $1 trillion infrastructure package. Nevertheless, what is contained in the current draft will affect certain taxpayers and not others. It is targeted more towards wealthy - high income and net worth - Americans. It is not likely to affect a majority of our clients, again, as far as what is currently on the table. For example, the federal estate and gift tax exemption - the amount that each person can pass free of estate and gift tax during and/or at death - would be cut in half. It is currently $10 million per person indexed for inflation ($11.7 million for 2021) and it would drop to $5 million. With the inflation index the exemption would be a shade over $6 million in 2022. For a married couple that would be up to $12 million they could pass on to heirs tax
New Tax Law Changes Coming ? – Part 1
We have received many calls about upcoming changes to the federal income, estate and gift tax laws. To be clear, nothing has changed yet. Draft legislation has been proposed by the House of Representative’s Ways and Means Committee but right now it is nothing but a proposal. Things can and often do change dramatically from where they start but we are just at the beginning of the legislative process. Final drafts must be voted on by both houses of Congress and any differences between the two bills must be reconciled. Understanding that, however, let’s take a look at what is currently being proposed since it is generating a lot of public discussion in the media and by our clients. Everyone wants to know how they will be affected. One noteworthy omission in the current draft is the step up in basis. Since President Biden took office there has been much talk about his effort to eliminate the step up in basis. I wrote about that here last October. No change, however, has been included in the current proposal. Of course, it still could end up in the final version but so far nothing. What is in the current draft affects estate, gift and generation skipping tax, retirement accounts and grantor trusts. Next week
On Credit Cards and Medicaid – Part 2
In last week’s post I told you about two calls I received regarding Medicaid. In each case the caller was concerned about how credit card charges on a Medicaid applicant’s card affects eligibility. A common misconception about Medicaid is that debts affect eligibility. Not true, at least in the sense that the State doesn’t care if you have debt. You can’t simply offset your debt against your assets to get under the $2000 asset limit. What the State does care about is how you spend down your assets and that includes paying down debt. For example, each time you make a payment to VISA, MasterCard or American Express to pay down or pay off your credit card bill you are spending down assets. The question, however, is whose debt are you spending down on? As I stated last week, New Jersey Medicaid is increasingly focusing on credit card statements if they see that an applicant is spending funds to pay those bills. The State is scrutinizing the charges to determine if those charges are for products or services used by the applicant or by someone other than the applicant. One of the callers told me that her mother’s credit card was used by other family members to make purchases. She said
On Credit Cards and Medicaid – Part 1
In this week’s post I want to tell you about two recent calls we received that highlight the same issue. Each caller reached out to us concerned about a family member who soon will run out of money to pay for long term care. Recognizing the need for Medicaid benefits, the callers wanted confirmation that certain charges on a Medicaid applicant’s credit cards would not pose a problem in achieving eligibility. When I asked for more details, in both cases I was told that charges appeared on the soon to be Medicaid applicant’s credit card that were actually made by other family members. In one instance the caller said it was without her mother’s knowledge. In the other case it was not known whether previous approval was given or not. One caller asserted that if her mom paid off the credit card it wouldn’t make her ineligible for Medicaid benefits. She was seeking confirmation that, based on “research done on the internet” she was making an accurate statement. Unfortunately, her statement is incorrect. In fact, Medicaid, at least in New Jersey, has focused more and more on credit card spending by applicants. This is a trend I have noticed in the past year. Now routinely, just about every county is asking
The Unknown (Half) Sibling – Part 3
In this third post of three I have been discussing Mary’s call to our office. She had taken care of her cousin, Sam in his home until his death following a long struggle with Alzheimer’s Disease. Sam had promised he would leave Mary his home but he never put that in writing in the form of a will. We filed an application asking for Mary to be appointed administrator of Sam’s estate so we could identify the heirs who would be entitled to share Sam’s estate. Mary believed that she and her sister, as first cousins, would be the heirs but as I explained last week, she mentioned the possibility that Sam’s father had a daughter from a previous marriage. We hired a search company to conduct a genealogical search. This required establishing Sam’s family tree through public records such as birth certificates and death certificates and other records such as obituary notices. With a little bit of effort we were able to get confirmation of the family rumor of a half sister. In fact, Sam’s father did have a daughter from a short previous marriage. To Mary’s knowledge, Sam never met her but that didn’t matter. Our search results showed that she died 10 years before Sam. “So is that