New Medicaid and VA Figures for 2020 (Part 1)
The Social Security Administration announced last month the cost of living adjustment for 2020. This adjustment is also applied to many of the government programs besides Social Security, that affect our clients’ lives. So here it is. Following an increase last year of 2.8%, this year the increase is smaller, only 1.6%. In December, Social Security recipients will receive notices calculating their new monthly benefit amount with the increase. This includes people receiving traditional retirement Social Security, Social Security Disability and needs based Supplemental Security Income benefits. All are administered by the Social Security Administration. The Medicaid income cap, which is tied to Social Security will rise by the same 1.6% to $2349 per month. This number is the limit on income per month needed to qualify for most Medicaid programs. For Medicaid recipients whose income exceeds this limit a Qualified Income Trust (commonly known as a Miller Trust) must be used to achieve and maintain eligibility. Because the VA Aid and Attendance program adjustments is also tied to the same percentage increase, this means that those benefits will increase by the same 1.6%. The maximum benefit for a single veteran will increase to $1912. For a married veteran the maximum monthly benefit
Self-Proving Will (Part 2)
Last week I wrote about the process of probate and how easy it is to admit a will to probate without the need to appear before judge if it is a self-proving one. But what exactly is a self-proving will? New Jersey law sets out clear instructions on how to make a will self-proved. The testator (person signing his/her will) must sign the will before a notary public or attorney at law and the witnesses must sign an affidavit before a notary public or attorney at law. The affidavit should state that the testator signed the will willingly, that the witnesses signed in the presence of the testator as witness to the testator signing the will and, to the best of the witness’ knowledge that the testator is 18 years of age or older, of sound mind and not under any undue influence. The statute even includes a form which, if followed, will meet the requirements. Attorneys who practice in the area of wills and trusts understand the requirements. Problems generally occur when the testator decides to save the legal cost by doing it him/herself, which has certainly become easier in the age of the internet. This approach, however, reminds of the
Self Proving Will (Part 1)
Probating a will is the process by which a will is presented before a court of law for the purpose of having it established to be the last will of the person who died. Probate means “to prove”. In New Jersey most wills do not need to be presented before a judge. They can be submitted to the office of the Surrogate of the county in which the decedent lived at the time of his/her death. The Surrogate acting as the clerk of the probate court examines the will to be sure it meets certain requirements before admitting it to probate. In this way presentment to a judge can be avoided, allowing probate to happen more quickly and with minimal expense, usually no more than a $200 or so filing fee. The reason this can happen is a change in the law that was made more than 40 years ago allowing for something called a self proving will. In order to understand the significance of this change it is helpful to examine what it means to “prove” a will. It must be established that the testator (the person who signed it) wished it to be his will and wanted the instructions
Tax Deductibility of Long Term Care Expenses (Part 2)
In last week’s post I was talking about the tax deductibility of long term care expenses. Some medical expenses can be deducted from gross income before calculating any tax due and owing. Long term care expenses can be deductible if within the definition set out by the IRS. (See last week’s post) Let’s now look at how this can positively impact a senior who is spending $100,000 to $150,000 per year or more for long term care. In most cases that senior will not have enough income to pay the entire cost. He or she will need to spend some of any accumulated nest egg. That’s where the opportunity lies. Suppose that senior has a retirement account, a nonretirement account invested in stocks and a savings account. One may be better to liquidate than another because of the income tax implications. Retirement accounts are tax deferred accounts. Most or all of the growth in these accounts has never been taxed. The owner pays the tax when money is withdrawn from the retirement account. The stock held in the nonretirement account may have appreciated if the stock’s price is higher than when the owner purchased the stock. This capital gains in “unrealized”, meaning
Tax Deductibility of Long Term Care Expenses – Part 1
When clients seek out our advice on preserving assets while being able to pay for long term care, we spend much time discussing government benefits such as Medicaid and the VA Aid and Attendance programs and ways to qualify for them. There is, however, another important aspect to consider. When using your own funds to pay for care, there are some assets that are better than others to spend on care – which can stretch out a nest egg. That’s because of the issue of income taxes. At an average cost of $150,000 or more per year for nursing home level care most of our clients do not have enough income to cover the entire cost. Most need to liquidate different accounts and investments to meet this expense. This of course can have significant income tax implications if stocks, annuities or retirement accounts are being liquidated. First, let’s run through some basic income tax concepts. When calculating income taxes, certain deductions are permitted to be taken against income before calculating the tax owed. Many people take a standard deduction but sometimes it is beneficial to itemize the deductions if they turn out to be greater than the amount of the standard deduction.
Protecting the Home – Part 2
A continuation of last week’s topic concerns protecting the home when applying for Medicaid. I explained that John’s daughter, Amy should not have to sell her Dad’s home and spend down the proceeds before qualifying for Medicaid if Amy is living in the home and she intends to bring him back home from the nursing facility where he currently is staying after she graduates from college. But, I also said that because John and Amy did not seek advice before filing the application they missed an opportunity to protect the home completely. Even if Amy does not sell the home now, it must remain in John’s name. If he ever does sell it he will have to spend down the entire proceeds before requalifying for Medicaid. If he doesn’t sell it and owns the home when he dies, Medicaid will assert a lien on the home to secure repayment of all the benefits it paid out on his behalf during his life. What they missed out on was the option to transfer the home to Amy under a Medicaid exception that does not cause a Medicaid penalty – an ineligibility period – to result from the transfer. Medicaid regulations provide that a