Withdrawing IRA Funds Before Year End – Part 2
This year has been unlike any other. The pandemic has resulted in hundreds of thousands of deaths and many Americans continue to face economic hardships caused by the government imposed shutdowns and restrictions. At the same time Congress did pass a relief package back in March called the CARES Act. As I said last week, this act provided some changes to the rules governing retirement accounts for 2020. As we approach the end of the year let’s review them. Congress suspended the required minimum distribution rules for 2020. That means Americans over 70 and 1/2 years of age do not need to meet their RMD amount for this year. If you already took your RMD for the year before the law was passed you could put it back without having to pay tax on it (but you had to do this by 8/31/20). Additionally, for certain qualified individuals who are younger than 59 and 1/2, the 10% early withdrawal penalty was suspended for 2020 if they withdraw funds from their retirement accounts. You are a qualified individual if you or your spouse was diagnosed with COVID-19 or you experienced economic hardship as a result of the viruses (as defined in Section 2022 of the Act). But let’s go back to
Withdrawing IRA Funds Before Year End – Part 1
As we get to the close of the year, many seniors if they haven’t done so already must withdraw enough from their retirement accounts to meet required minimum distribution requirements. The tax deferred status of these accounts can increase their value substantially, however, eventually the government wants its share in taxes. The RMD rules force that to happen. For most, RMD doesn’t apply until the account owner reaches age 70 and 1/2. Two years ago the tax laws were change to raise the age to 72 and 1/2 for anyone not already taking RMD. Failing to take enough RMD can cause a pretty hefty penalty of 50% on top of what should have been taken but wasn’t. Everything this year, however, is different because of the pandemic. There were some changes to retirement accounts contained in the CARES Act, the comprehensive law passed in March to provide economic relief to Americans from the effects of COVID. That includes the RMD rules (which were suspended this year). Next week we’ll review what those change are.
The Problem of Unexplained Deposits – Part 2
Last week I wrote about how unexplained deposits have the potential to be more damaging to a Medicaid application than unexplained withdrawals. That’s because deposits must be explained or the application is denied for being incomplete and those same deposits must be explained in any new application unless the deposit then falls outside of the 5 year Medicaid lookback period. Often these deposits are a result of an inheritance. They could be from a spouse or another family member or friend but can come in many different ways. If the Medicaid applicant receives an inheritance by way of a last will, the Medicaid caseworker will ask to see the will as well as an accounting of all the assets of the estate. For example, the will may leave the Medicaid applicant 1/3 of an estate. Let’s say there is a deposit of $50,000 into the applicant’s account coming from that estate. This amount does not establish by itself that the applicant received everything he or she was entitled to. It is possible that some portion of the estate was disclaimed, a written statement that the person is declining to receive what he or she is entitled to. A disclaimer is the equivalent of giving the assets away - what Medicaid calls
The Problem of Unexplained Deposits – Part 1
More and more of the Medicaid applications we handle these days involve issues surrounding assets received by way of the death of a family member. More often than not it will be a spouse who died, however, it may also be a parent or other relative. As part of Medicaid applications now, the State routinely asks for documentation of withdrawals from the applicant’s accounts but also for deposits into these accounts which can be more difficult to explain. Because Medicaid rules require a 5 year look back, some of these transactions may be difficult to recall, especially if the applicant is the only person who knows. A little bit of detective work and knowledge of probate procedures can be especially important. I have always said that unexplained deposits can be more damaging than unexplained withdrawals. That’s because unexplained withdrawals will result in an approval with a Medicaid penalty. Once the penalty expires Medicaid benefits will begin. On the other hand, unexplained deposits will cause an application to be denied for lack of verification. In essence, the application is denied because it is incomplete. You can immediately refile but if you can’t explain the same unexplained deposits that caused the first denial you’ll end up with the same result - at
Medicare Open Enrollment Time
While I don’t spend much time here talking about Medicare issues, the end of the year is an important time. That’s because it is Medicare’s open enrollment period, a once a year special event. Medicare is one of the many government programs that can be confusing. There are so many different options to choose from. There is Part A which is mandatory but then Parts B, C and D are not. There is a smorgasbord of plans to select from. But, what if you opt for a plan and later change your mind? Well, that’s where the seven week period of open enrollment comes in. The government allows current Medicare enrollees to get into and out of any plan one time a year. We are about half way thru the current open enrollment period which runs between October 15 and December 7. (There are other times of the year that allow some changes but they are much more limited.) So, for example, you can switch from traditional Medicare to Medicare Advantage (Medicare’s HMO) or from Advantage back to traditional. You can switch between Medicare Advantage plans. You can also add drug plans (Part D), change drug plans or drop one entirely. Of course, having the
More Numbers for 2021
Last week I talked about some of the important Medicaid and VA numbers that will increase in 2021. This week we’ll review some more adjustments for 2021 in some of the other government programs and taxes relevant to our clients. Medicare Part B premiums will increase slightly next year. Most people pay the standard premium which will increase from $144.60 to $148.50 next year. Anyone with income at $88,000 per year or less ($176,000 for a married couple) pays the standard premium. For most people Medicare Part A is free. For those that must pay, the standard premium has increased from $458 to $471 per month. The deductible for hospitalization has increased. Last year it was $1408. For 2021 it has increased to $1484. The hospitalization copay for days 61 through 90 will increase from $352 to $371. At day 91 the copay will be $742 in 2021, up from $704 in 2020. Skilled nursing under Medicare is covered 100% for the first 20 days. There is a copay for days 21 through 100. Last year the copay was $176. For 2021 it will be $185.50 per day. After day 100 there is no coverage under Medicare. That’s when Medicaid, long term care insurance or private funds are required to pay for care.