Category : News

How Will the New Tax Law Affect You?

While most of the new tax law – the Tax Cuts and Jobs Act – has to do with reducing the corporate tax rate from 35 percent to 21 percent, some provisions relate to individual taxpayers. Before we get into the details, be aware that almost everything listed below sunsets after 2025, with the tax structure reverting to its current form in 2026 unless Congress acts between now and then. The corporate tax rate cut, however, does not sunset. Here are the highlights for our readership:

  • Estate Taxes.If you weren't worried about federal estate taxes before, you really don't need to worry now. With the federal exemption already scheduled to increase in 2018 to $5.6 million for individuals and $11.2 million for couples, the Republicans in Congress and President Trump have now nearly doubled this to $11.18 million (estimate) and $22.36 million (estimate), respectively, indexed for inflation. The tax rate for those few estates subject to taxation remains at 40 percent.

  • Tax Rates. These are slightly reduced and the brackets adjusted, with the top bracket dropping from 39.6 percent to 37 percent.

  • Standard Deduction and Personal Exemption. The standard deduction increases to $12,000 for individuals, $18,000 for heads of household and $24,000 for joint filers, all adjusted for inflation. Personal exemptions largely disappear.

  • State and Local Tax Deduction. Now referred to as “SALT,” this is now subject to a cap of $10,000,

  • Home Mortgage Interest Deduction. The limit on deducting interest on up to $1 million of mortgage interest stays in effect for existing mortgages. New mortgages taken on after December 15, 2017, are subject to a $750,000 limit. The deduction for interest on home equity loans disappears.

  • Medical Expense Deduction. After much outcry in response to the House version of the tax bill, which would have eliminated the medical expense deduction, it survived. And, in fact, it was enhanced by permitting medical expenses in excess of 7.5 percent of adjusted gross income to be deducted in 2017 and 2018, after which it reverts to the 10 percent under existing law.

  • 529 Plans. These accounts permitting tax-free accumulation of capital gains and dividends to pay college expenses can now be used for private school tuition of up to $10,000 a year.

Depending on your income and the amount of state and local taxes you have been paying, you may get a small tax cut. The bigger question is how the projected reduction in tax revenues of $1.5 trillion over the next 10 years will be paid for. This amount may simply be added to the deficit, or it may be used as a justification for “entitlement reform,” i.e., cutting Medicare, Medicaid or Social Security. It may also squeeze out other spending, such as investment in infrastructure.

AARP Sues California Nursing Home Over Resident Dumping

The legal wing of the AARP is suing a California nursing home that refused to readmit a resident whom the nursing home had sent to the hospital. The nursing home's actions are part of growing trend of resident dumping, according to the AARP.

Gloria Single and her husband were both residents of the same nursing home. When Ms. Single, who has Alzheimer's disease, became aggressive, the nursing home sent her to the hospital for a psychological evaluation. The hospital immediately determined that nothing was wrong with Ms. Single, but the nursing home refused to readmit her.

The law treats refusing to readmit a patient after a hospital stay as an involuntary transfer that a resident may appeal. Therefore, Ms. Single asked for a hearing with the California Department of Health Care Services (DHCS), the state agency in charge of monitoring nursing homes. The DHCS ruled in her favor and ordered the nursing home to readmit her, but the nursing home refused to act on the order. As a result, Ms. Single was stuck in the hospital for three months until she was eventually placed in a different facility where she remains separated from her husband.

According to the lawsuit filed by the AARP, the nursing home felt free to disobey the DHCS's order because the state refuses to enforce readmission orders. NPR found that the state fined only 7 percent of nursing homes that were found to have illegally evicted residents and that if the nursing home was fined, the fines were relatively low. The AARP is seeking an injunction to require the nursing home to readmit Ms. Single and to stop dumping residents.

“The problem is that no state agency will take responsibility for enforcing these orders,” said Kelly Bagby of AARP Foundation Litigation in a press release about the lawsuit. “Resident dumping is a growing trend and serious danger to seniors in California. Until the State does something, our only recourse is going to be filing suits like this. Three years ago the federal government told California that it had to enforce these orders, and it has done nothing. The time has come for the State to protect its elderly citizens and stop this abusive practice.”

Two Popular Medigap Plans Are Ending. Should You Enroll While You Can?

If you will soon turn 65 and be applying for Medicare, you should carefully consider which Medigap policy to enroll in because two of the most popular plans will be ending soon. In 2020, Medicare beneficiaries will no longer be able to enroll in Plans F and C.

Between copayments, deductibles, and coverage exclusions, Medicare does not cover all medical expenses. Offered by private insurers, Medigap (or “supplemental”) plans are designed to supplement and fill in the “gaps” in Medicare coverage. There are 10 Medigap plans currently being sold, identified by letters. Each plan package offers a different combination of benefits, allowing purchasers to choose the combination that is right for them.

Plans F and C are popular Medigap plans in part because they both offer coverage of the Medicare Part B deductible. Enrollees in Plans F and C do not have to pay the deductible. Plan F, the most comprehensive Medigap plan currently available, also pays for all doctor, test, and hospital fees. Plan C is similar, but it does not cover the excess fees that doctors charge over Medicare’s limits. According to the Kaiser Family Foundation, 53 percent of Medigap enrollees have either plan F or plan C.

As a result of legislation passed by Congress in 2015starting in 2020 Medigap insurers will no longer be allowed to offer plans that cover the Medicare Part B deductible – in other words, Plans F and C. (“Critics argue that Plan F makes it too easy for people to go to the doctor without thinking twice about the cost,” observed the Chicago Tribune.) However, people currently enrolled in Plans F and C, as well as those who buy policies before 2020, may keep their F and C coverage for the rest of their lives.

Although his appears to offer an incentive to “lock in” these two comprehensive plans while you still can, before enrolling in Plans F or C new Medicare beneficiaries should consider the risk. While the plans are comprehensive, without new enrollees after 2020 experts warn that premiums may go up. As the enrollees in Plans F and C age and get sicker, the companies offering Plans F and C may experience more costs that won't be offset by new younger, healthier enrollees. An alternative is Plan G, another comprehensive plan that does not cover the Part B deductible. But some experts believe that premiums will rise for this plan, too, as more beneficiaries in poor health enroll in it.

The choice of Medigap plan is important because once you choose one, it is difficult to switch. Medigap plans cannot consider pre-existing conditions when you enroll during the open enrollment period, which is a six-month period that begins on the first day of the month in which you are 65 or older and enrolled in Medicare Part B. But if you don't enroll during the open enrollment period, there is no guarantee that the insurance company won't charge you more for a pre-existing condition.

Before choosing a Medigap plan, you should weigh your need for comprehensive coverage with the risk of higher premiums. With the imminent phase-out of Plans F and C, it’s a tough choice and there are no easy answers. For more information from the Chicago Tribune about what the elimination of plans F and C means for consumers, click here.

Medicare Launches Hospice Compare Website

Patients looking for hospice care can now get help from Medicare’s website. The agency’s new Hospice Compare site allows patients to evaluate hospice providers according to several criteria. The site is a good start, but there is room for improvement, experts say.

Medicare's comprehensive hospice benefit covers any care that is reasonable and necessary for easing the course of a terminal illness. Medicare launched the hospice compare website to improve transparency and help families find the right hospice provider.

The website provides information on how hospices deal with treatment preferences, address a patient's beliefs and values, screen and assess for pain and shortness of breath, treat shortness of breath, and give a bowel regimen for patients treated with opioids. Patients can compare up to three hospices at a time.

Next year, the site plans to add more information, including allowing families to rate hospices as well as adding data on the number of staff visits a patient received in the final week before death.

Kaiser Health News reports that while the website is helpful to families looking for information about hospice care, experts believe it is of limited use right now. According to Dr. Joanne Lynn of the Altarum Institute, a nonprofit health systems research and consulting organization, patients looking for hospice care need different information, including the hospice staff's average caseload, the percentage of patients discharged alive, and the share of the hospice's resources devoted to at-home care versus nursing home care.

In addition to the uncertainty of the ratings, the website also has been experiencing a problem with its search function. When patients search for a provider by location, they may get agencies that do not serve their zip code. While the problem is being fixed, patients should call to confirm that hospice providers service their area.   

A robust hospice rating system is badly needed, according to a Kaiser Health News investigation. A review of 20,000 government inspection records found that hospice providers often missed visits and neglected patients who were dying at home. Families or caregivers have filed more than 3,200 complaints with state officials in the past five years.

To begin comparing hospice providers, click here

You Can Give Away More Tax Free in 2018

After staying the same for five years, the amount you can give away to any one individual in a particular year without reporting the gift will increase in 2018. 

The annual gift tax exclusion for 2018 is rising from $14,000 to $15,000. This means that any person who gives away $15,000 or less to any one individual (anyone other than their spouse) does not have to report the gift or gifts to the IRS.

If you give away more than $15,000, you do not necessary have to pay taxes, but you will have to file a gift tax return (Form 709). The IRS allows individuals to give away a total of $5.6 million and couples $11.2 million (in 2018) during their lifetimes before a gift tax is owed. This $5.6 million exclusion means that even if you have to file a gift tax return (Form 709) because you gave away more than $15,000 to any one person in a particular year, you will owe taxes only if you have given away more than a total of $5.6 million (or $11.2 million) in the past. As a result, the filing of a gift tax return is merely a formality for nearly everyone.

The gift tax also applies to property other than money, such as stock. If you give away property that is worth more than $15,000 you have to report that on your gift return.

Note that gifts to a spouse are usually not subject to any federal gift taxes as long as the spouse is a U.S. citizen. If your spouse is not a U.S. citizen, you can give only $152,000 without reporting the gift (in 2018). Anything over that amount has to be reported on the gift tax return. Also, you do not need to report tax deductible gifts made to charities on a gift tax return unless you retain some interest in the gifted property.

With the increase in the gift tax, the amount you can give to an ABLE account is also increasing to $15,000. ABLE accounts allow people with disabilities and their families to save up to $100,000 in accounts for disability related expenses without jeopardizing their eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits.

 

 

Medicare's Part B Premium Will Be Unchanged in 2018, But Many Will Pay More. Got That?

The announcement of the 2018 Medicare premium is good news for some beneficiaries and bad news for many others.  The good news is that the standard monthly Part B premium, which about 30 percent of Medicare beneficiaries pay, will again be $134 next year, unchanged from 2017. 

But most Medicare recipients pay a lower premium because they have been protected from any increase in premiums when Social Security benefits remain stagnant, as has been the case for the last several years.  This year, that premium has averaged $109 a month, but due to the 2 percent Social Security increase for 2018, the premiums of these formerly protected beneficiaries could rise significantly.

An estimated 42 percent of these beneficiaries will pay the full monthly premium of $134 due to the increase in their Social Security benefit. The rest will pay less than $134 because the increase in their Social Security benefit will not be large enough to cover the full Part B premium increase.  The average premium for these beneficiaries will jump from $109 to $130 a month, according to the Centers for Medicare and Medicaid Services (CMS).

So, in other words, Medicare beneficiaries who have been protected from a premium increase in past years will see their premiums go up, while those who have been unprotected in recent years will pay the same.  Beneficiaries who have been unprotected from premium rises in the past few years include those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who receive both Medicare and Medicaid benefits. Philip Moeller, author of Get What’s Yours for Medicare, offers a handy way to figure out what your Part B change will be: “Subtract your current Part B premium from $134. Then multiply your current monthly Social Security benefit by 2 percent. Your 2018 Part B premium change should be the smaller of these two numbers.”

The Part B deductible will remain at $183 in 2018, although the Part A deductible will go up by $24, to $1,340.  For beneficiaries receiving skilled care in a nursing home, Medicare's coinsurance for days 21-100 will inch up from $164.50 to $167.50. Medicare coverage ends after day 100. 

Here are all the new Medicare payment figures:

  • Part B premium for protected beneficiaries: Average of $130/month
  • Part B premium for those not protected: $134 (unchanged)
  • Part B deductible: $183 (unchanged)
  • Part A deductible: $1,340 (was $1,316)
  • Co-payment for hospital stay days 61-90: $335/day (was $329)
  • Co-payment for hospital stay days 91 and beyond: $670/day (was $658)
  • Skilled nursing facility co-payment, days 21-100: $167.50/day (was $164)

So-called “Medigap” policies can cover some of these costs.

Premiums for higher-income beneficiaries will remain the same in 2018 as they were in 2017:

  • Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $187.50 (unchanged).
  • Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $267.90 (unchanged).
  • Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 will pay a monthly premium of $348.30 (unchanged).
  • Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more will pay a monthly premium of $428.60 (unchanged).

Rates differ for beneficiaries who are married but file a separate tax return from their spouse.  Those with incomes greater than $85,000 will pay a monthly premium of $428.60.

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary's premiums. So the income reported on a beneficiary's 2016 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2018. Income is calculated by taking a beneficiary's adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary's MAGI decreased significantly in the past two years, she may request that information from more recent years be used to calculate the premium.  You can also request to reverse a surcharge if your income changes.

Those who enroll in Medicare Advantage plans may have different cost-sharing arrangements. CMS estimates that the Medicare Advantage average monthly premium will decrease by $1.91 (about 6 percent) in 2018, from an average of $31.91 in 2017 to $30 in 2018.

For Medicare’s press release announcing the new premium and deductible amounts, click here.

For Medicare's “Medicare costs at a glance,” click here.

 

Three Reasons Why Giving Your House to Your Children Isn't the Best Way to Protect It From Medicaid

You may be afraid of losing your home if you have to enter a nursing home and apply for Medicaid. While this fear is well-founded, transferring the home to your children is usually not the best way to protect it.

Although you generally do not have to sell your home in order to qualify for Medicaid coverage of nursing home care, the state could file a claim against the house after you die. If you get help from Medicaid to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called “estate recovery.” If you want to protect your home from this recovery, you may be tempted to give it to your children. Here are three reasons not to:

1. Medicaid ineligibility. Transferring your house to your children (or someone else) may make you ineligible for Medicaid for a period of time. The state Medicaid agency looks at any transfers made within five years of the Medicaid application. If you made a transfer for less than market value within that time period, the state will impose a penalty period during which you will not be eligible for benefits. Depending on the house’s value, the period of Medicaid ineligibility could stretch on for years, and it would not start until the Medicaid applicant is almost completely out of money.

There are circumstances under which you can transfer a home without penalty, however, so consult a qualified elder law attorney before making any transfers. You may freely transfer your home to the following individuals without incurring a transfer penalty:

  • Your spouse
  • A child who is under age 21 or who is blind or disabled
  • Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
  • A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
  • A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

2. Loss of control. By transferring your house to your children, you will no longer own the house, which means you will not have control of it. Your children can do what they want with it. In addition, if your children are sued or get divorced, the house will be vulnerable to their creditors.

3. Adverse tax consequences. Inherited property receives a “step up” in basis when you die, which means the basis is the current value of the property. However, when you give property to a child, the tax basis for the property is the same price that you purchased the property for. If your child sells the house after you die, he or she would have to pay capital gains taxes on the difference between the tax basis and the selling price. The only way to avoid some or all of the tax is for the child to live in the house for at least two years before selling it. In that case, the child can exclude up to $250,000 ($500,000 for a couple) of capital gains from taxes.

There are other ways to protect a house from Medicaid estate recovery, including putting the home in a trust. To find out the best option in your circumstances, consult with your elder law attorney. 

What To Do When a Loved One Passes Away

Whether your spouse has just passed away or you have lost your mom or dad, the emotional trauma of losing a loved one often comes with a bewildering array of financial and legal issues demanding attention. It can be difficult enough for family members to handle the emotional trauma of a death, let alone taking the steps necessary to get these matters in order.

If you are the executor or representative of the will, you first should secure the tangible personal property, meaning anything you can touch such as silverware, dishes, furniture or artwork. Then, take your time while bills need to be paid. They can wait a week or two without any real repercussions. It is more important that you and your family have time to grieve. 

When you are ready, you should meet with an attorney to review the steps necessary to administer the will. While the exact rules of estate planning differ from state to state, the key actions include:

  • File the will and petition in probate court in order to be appointed executor.
  • Collect the assets. This means that you need to find out about everything the deceased owned and file a list of inventory with the court.
  • Pay the bills and taxes. If an estate tax return is due, it must be filed within nine months of the date of death.
  • Distribute property to the heirs. Generally, executors do not pay out all of the estate assets until the period for creditors to make claims runs out which can be as long as a year.
  • Finally, you must file an account with the court listing any income to the estate since the date of death and all expenses and estate distributions.

While some of these steps can be avoided through trusts or joint ownership arrangements, whoever is left in charge still has to pay all debts, file tax returns and distribute the property to the rightful heirs. 

Social Security Beneficiaries Will Receive a 2 Percent Increase in 2018

In 2018, Social Security recipients will get their largest cost of living increase in benefits since 2012, but the additional income will likely be largely eaten up by higher Medicare Part B premiums.

Cost of living increases are tied to the consumer price index, and an upturn in inflation rates and gas prices means recipients get a small boost in 2018, amounting to $27 a month for the typical retiree. The 2 percent increase is higher than last year’s .3 percent rise and the lack of any increase at all in 2016. The cost of living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $127,200 to $128,700.

The increase in benefits will likely be consumed by higher Medicare premiums, however. Most elderly and disabled people have their Medicare Part B premiums deducted from their monthly Social Security checks. For these individuals, if Social Security benefits don't rise, Medicare premiums can't either. This “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries: those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who get both Medicare and Medicaid benefits. In the past few years, Medicare beneficiaries not subject to the hold harmless provision have been paying higher Medicare premiums while Medicare premiums for those in the hold harmless group remained more or less the same. Now that seniors will be getting an increase in Social Security payments, Medicare will likely hike premiums for the seniors in the hold harmless group. And that increase may eat up the entire raise, at least for some beneficiaries.

For 2018, the monthly federal Supplemental Security Income (SSI) payment standard will be $750 for an individual and $1,125 for a couple.

For more on the 2018 Social Security benefit levels, click here.  

New Yorker Article Highlights Abuses in the Guardianship System

Serious problems with the public guardianship system in the United States can lead to elder abuse, according to an in-depth article in The New Yorker titled “How the Elderly Lose their Rights.” Court-appointed guardians can take control of an elderly person’s finances and life and become wealthy while doing so. One expert interviewed describes the guardianship system as “a morass, a total mess.”

If an adult becomes incapable of making responsible decisions due to a mental disability, the court will appoint a substitute decision maker, often called a “guardian,” but in some states called a “conservator” or other term. Guardianship is a legal relationship between a competent adult (the “guardian”) and a person who because of incapacity is no longer able to take care of his or her own affairs (the “ward”). A public guardian is appointed by the court to serve wards when no family member or private guardian is available.

The New Yorker article, written by staff writer Rachel Aviv, focuses on a Nevada couple who came under the control of public guardian April Parks. As guardian for hundreds of wards, Ms. Parks, took over their lives, sold their belongings, and charged their estates hundreds of dollars an hour while doing so. Over her 12 years as a public guardian, Ms. Parks built relationships with hospitals and medical providers to refer patients to her and found doctors who were willing to declare patients incompetent. Families often found out too late that their loved one was under guardianship and beyond their legal control.

Ms. Parks was just one part of a system that fails to protect vulnerable elderly individuals the way it is meant to, Aviv suggests. The couple in the article lost their home and freedom and were moved around to various assisted living facilities and medicated. After the couple’s daughter notified the media, Ms. Parks was finally removed from the case. She was eventually investigated and indicted for perjury and theft related to her business dealings. Unfortunately, according to the article, other public guardians who are abusing the system are still working.

There are a growing number of stories of seniors who become confused and overwhelmed after losing control of their lives to a guardian they don't know. In response to such abuses, some states have begun making reforms. In March 2016, Florida’s governor signed a law creating an Office of Public and Professional Guardians that is required to create standard practices and rules for public guardians. Nevada has also enacted a number of reforms, including requiring that individuals subject to guardianship be represented by an attorney, that are set to go into effect in 2018. And in a rare display of bipartisanship, Congress recently passed and sent to the President a bill that empowers federal officials to investigate and prosecute unscrupulous guardians and conservators appointed by state courts.

While there isn't a foolproof way to prevent someone from preying on you or a loved one, there may be steps you can take to reduce the chances. A power of attorney allows a person you appoint (and trust) to act in place of you for financial purposes when and if you ever become incapacitated. Having a power of attorney in place may lessen the need for a guardian.

To find out what you can do to protect yourself and your loved ones, consult with your attorney. 

To read the New Yorker article, click here.