Monday, August 29, 2011
The W-4 you have on file governs how much money is withheld from your paycheck for income tax purposes. The number of dependents claimed affects this amount.
The most apparent reason to make a new W-4 is because you have fewer or more dependents, but there are other reasons.
* If you paid a big tax bill this year, you probably had income from other sources, but income tax is supposed to be on a pay-as-you-go basis. You could face underpayment penalties if don't report the extra income regularly.
One way to avoid the penalty is to increase your withholding so an additional amount is deducted from each paycheck. You can also avoid penalties by paying estimated taxes every quarter, but it's easier to increase your withholding.
* If you had a big tax refund, you have to ask yourself whether it would be better to reduce your withholding and invest in an interest-paying account. You can position an automatic deposit made from your paycheck to a savings or investment account. Or you could have it deducted from your bank account.
When you have high-interest credit card bills, paying on them would be a better use of the money. The average federal income tax refund for 2010 was almost $3,000.
* If you converted an individual retirement account to a Roth IRA in 2010, increasing withholding will reduce the amount you have to pay when you file your 2011 tax return.
Your accountant can help you determine the right amount, and the IRS offers a withholding calculator at irs.gov. You'll need a pay stub and your 2010 tax return to use it.
To increase withholding, increase your number of dependents or specify an additional amount to be withheld, such as $50 or $100.
Monday, August 29, 2011
Wills and trusts lawyers in Northern Virginia frequently get inquiries about arrangements for long-term care. Life expectancy continues to rise, due in part to more effective treatments for diseases previously thought to be terminal.
This is great news, but with a larger elderly population, new dilemmas arise, including uncertainties related to assisted and rehab care facilities. Two of the most frequently asked questions are:
- “How do I pay for short-term and long-term care?” and
- “What is the difference between Medicare and Medicaid and what can each offer me?”
Medicare and Medicaid both pay for certain aspects of rehabilitation after a hospital stay, but there are specific requirements that must be met. A knowledgeable wills and trusts lawyer can give you the exact stipulations and explain the difference between Medicare and Medicaid provisions.
In general terms, Medicare provides coverage to people over the age of 65, and is similar to regular health insurance. Since Medicare is a federal program, benefits and requirements are universal for all states. An individual must have been hospitalized for at least 3 days and 3 nights before transferring to a nursing or rehabilitative facility, and the move must be made within 30 days of the hospital stay. In a sense, Medicare pays for an acute occurrence and the rehabilitation from it. Since Medicare coverage is not intended for custodial care or long-term care, the patient must demonstrate a need for skilled care, in-home or in a care facility, and show that progress is being made toward recovery. If qualified, Medicare will cover a total of 100 days, the first 20 days paid in full and the next 80 days with a co-pay of $124 per day.
On the other hand, Medicaid is a state-run entity intended for those in financial need with different rules and qualifiers which vary from state to state. Just as wills and trusts in Northern Virginia and D.C. are subject to the specifics of state law, so must certain criteria be met to be eligible for benefits. In nearly all states, the patient would need to spend down his/her assets to around two-thousand dollars, although some states exempt certain assets-- such as your house and car--up to a predetermined value. Any subsequent income the patient gets, including social security, goes first to paying for long-term care.
Unlike Medicare, Medicaid does offer custodial care, but not all facilities are Medicaid approved. Due to the small percentage of nursing homes which offer Medicaid approved housing, and possible waiting lists, it is best to explore all options with the hospital social worker prior to the patient being discharged. Anecdotally, Medicaid approved nursing homes are crowded, so it would be wise to check out a number of facilities in person ahead of time.
Wills and trusts lawyers in Northern Virginia will be the first to tell you that investigating and understanding your options, and implementing preparations before a crisis occurs is the prudent course of action to take.
We work with families every day to explore such options and also help families implement the best asset protection strategies to preserve the things they’ve worked so hard for without jeopardizing the ability to qualify for Medicaid. Visit us at LivingTrustPlus.com today, whether you’re an attorney or not!
Thursday, August 25, 2011
If you are confused or mistaken about the rules of gifting in the context of Medicaid qualification, you likely won't ever venture into the practice of Medicaid Asset Protection. If you do practice Medicaid Asset Protection, but your potential clients are confused or mistaken about the rules of gifting in the context of Medicaid qualification, they likely won't ever show up at your door.
The most common gifting misconceptions I encounter in my daily practice are:
Those who are completely unaware of any gifting rules:
- Can’t I just give all of my assets away to my children?
- How can the government tell me what I can do with my own money?
Those who are vaguely aware of the tax rules and assume they apply to Medicaid:
- If I give any gifts to my children, won't they have to pay a lot of taxes?
- Isn’t it true I can only give away $13,000 per year?
- Isn't it illegal if I give away more than $13,000 per year?
Those who are aware of Medicaid, but misinformed and confused:
- If I've made any gifts in the past 5 years, doesn't that mean I can't qualify for Medicaid?
- Once my spouse qualifies for Medicaid, doesn't that mean I can’t ever make any more gifts?
- If I make any gifts to my family, doesn't that mean I won’t ever qualify for Medicaid?
Most potential clients, and many attorneys who don't practice regularly in the field of Medicaid Asset Protection, harbor some or all of these misconceptions. Understanding the realities of gifting in the context of Medicaid Asset Protection is extremely important, because any one of these misconceptions can influence your decision as to whether to practice in this area, and can influence the decision of a potential client as to whether to hire you and engage in Medicaid Asset Protection.
Although it is true that some gifts will disqualify a person from receiving Medicaid for a specific period of time, there are extremely important exceptions and extremely complex Medicaid rules that apply. The misunderstanding that gifting is capped at $13,000 per year is of course a complete fallacy. As most attorneys understand, the annual gift tax exclusion only applies for tax purposes, and has nothing whatsoever to do with Medicaid.
Depending on the donee and the type of property, gifts of any amount may be just fine under your state’s Medicaid rules. For example, the following types of gifts are generally not penalized at all: gifting assets to a spouse; gifting assets to a disabled child or a trust for a disabled child; making regular gifts in certain small amounts; gifting a residence to a caregiver child; gifting a residence to a sibling on title; and numerous other exceptions. There are also many asset protection strategies that involve making intentional gifts that are penalized, but doing so in a controlled fashion under the guidance and supervision of an knowledgeable Elder Law attorney.
There are complex Medicaid considerations underlying all of these gifting strategies, and understanding these considerations, along with all of the complex and myriad Medicaid rules and requirements, is a daunting task for any Elder Law attorney. If you are serious about helping older clients in the midst of a long-term care crisis, you may be interested to know that in the near future, I will be offering a comprehensive, benefits-focused asset protection training program for attorneys.
In the meantime, I urge you to bring yourself up-to-speed with the Living Trust Plus™ - a pre-crisis planning tool that will protect your client’s assets from general creditors and long-term care creditors. Click here <http://instantteleseminar.com/?eventid=19375176> to listen to my teleseminar, or create an account here <http://livingtrustplus.com/> to receive further instructions on how you can offer pre-crisis Medicaid planning services to your clients tomorrow.
Tuesday, August 23, 2011
Medicaid is the most complex area of law in existence, and Medicaid Asset Protection is an intricate and nuanced field, so it shouldn’t be surprising that there are literally dozens of strategies used by Elder Law attorneys to legally and ethically protect assets for clients every day.
First I will give you a broad summary of the main types of Medicaid Asset Protection Strategies, and talk about the first type in a bit more detail. Then over the next few Tuesdays I will go through the other types of strategies and give you some insights into each strategy – how and why it works and how and when to use it.
The two main categories of Medicaid Asset Protection are:
1. Pre-Need Planning; and
2. Crisis Planning
(1) Pre-Need Planning:
Done by Elder Law attorneys and growing number of elder-savvy Estate Planning attorneys, is for clients planning well in advance of the need for nursing home care, while they are still relatively healthy and typically still living independently; these are typically clients who don’t have long-term care insurance. For these clients, the primary planning option is a specialized type of irrevocable trust generically called an income only trust. My trademarked and proprietary version is the Living Trust PlusTM Asset Protection Trust, already used by over 30 leading attorneys across the country for both Medicaid Asset Protection and traditional asset protection. If you’re not familiar with the Living Trust Plus™ Click here <http://instantteleseminar.com/?eventid=19375176> to listen to my no-cost teleseminar on the topic, or create an account here <> to receive further instructions on how you can offer pre-need Medicaid planning services to your clients right away.
(2) Crisis Planning:
Benefits-Focused Asset Protection™ -- is a very complex, but very lucrative type of asset protection done by a very small number elder law attorneys across the country. Benefits-Focused Asset Protection™ is needed when the family of a client comes to you shortly after a crisis in which a spouse or a parent has entered, or is about to enter, a nursing home and it is expected that the nursing home resident will not be able to return home. The goal of Benefits-Focused Asset Protection™ is to protect as much of the client’s assets as possible, as quickly as possible, and obtain the best benefits possible for the client – most often Medicaid but also Veterans Aid and Attendance when available. For these clients, there are dozens of legal and ethical asset protection strategies that can be utilized. These strategies break down further into two broad categories – Asset Purchase Strategies (also called “smart spenddown”) and Asset Transfer Strategies (also called “gifting strategies”). Here’s a list of the strategies used under these two categories of Benefits-Focused Asset Protection™:
The Top Ten Asset Purchase Strategies, Available in Most States, include:
(1) Prepayment of legal or other services;
(2) Payment for home improvements if home is exempt;
(3) Purchase of household goods and personal effects;
(4) Purchase of a more expensive home if the home is exempt;
(5) Purchase life estate and reside for one year;
(6) Purchase of pre-paid funeral arrangements;
(7) Purchase of a new car;
(8) Purchase Medicaid-qualified annuity for Community Spouse;
(9) Prepayment of taxes;
(10) Payment of outstanding debts.
The Top Eight Asset Transfer Strategies, Available in Most States, include:
(1) Transfer assets to blind or disabled child;
(2) Transfer assets to a trust for the sole benefit of a blind or disabled child;
(3) Transfer residence to caregiver child;
(4) Transfer residence to sibling on title for more than a year;
(5) Transfer residence subject to life estate;
(6) Transfer residence subject to occupancy agreement;
(7) Caregiver agreement between parent and child;
(8) Transfer and Cure.
There are extremely confusing Medicaid considerations underlying all of these strategies, and making sense of this confusion, along with understanding all of the complex Medicaid rules and requirements, is an immensely intimidating task for any attorney. But If you are serious about wanting to take your practice to the next level by helping older clients in the midst of a long-term care crisis, and making a better living than you ever dreamed possible, stay tuned to my next several Tuesday Tips. You may also be interested to know that in the very near future, I will be offering an all-inclusive, Benefits-Focused Asset Protection™ Training Program for attorneys called Elder Planning Plus™ -- the goal of which will be to eliminate your confusion and to provide you with all of the needed solutions.
Protect & Prosper!
Monday, August 22, 2011
Done with respect for the law and compassion for the elders that are being protected, Medicaid planning is not only ethically justified -- it is often imperative to the individual's quality of life. Within the United States, no one yet has a right to basic long-term care. Paradoxically, we do give seniors virtually universal coverage for certain types of health problems. Treatment and surgery for health conditions such as heart disease, lung disease, kidney disease, bone disease, cancer, and hundreds of other medical conditions will not impoverish most seniors because Medicare and private health insurance cover these diseases and we all pay our fair share for such coverage. But Medicare and private health insurance does not cover chronic illnesses such as Alzheimer's disease or other type of brain diseases causing dementia or loss of the ability to function independently. For these types of diseases, seniors must become officially “impoverished” under federal and state Medicaid rules in order to gain access to basic long-term care. Is this an ethical social policy that arbitrarily distinguishes among these different types of diseases? Is this an ethical social policy that provides full coverage for most diseases but forces elders with certain conditions to become impoverished in order to gain access to basic long-term care? Is it a surprise to anyone that most seniors will want to look for legal ways to preserve the efforts of their lifetime in order to protect themselves from this unfair and arbitrary social policy? Medicaid planning is not about “cheating” or “gaming” the system; it is about preserving a client’s dignity and self-worth in the face of an unfair and arbitrary social policy. The ethical scandal is America’s public policy, not the desire of seniors to avoid poverty.
For seniors over the age of 65, Medicaid has become equivalent to federally-subsidized long-term care insurance, just as Medicare is equivalent to federally-subsidized health insurance. Congress accepts the realities of Medicaid Planning through rules that protect spouses of nursing home residents, allow Medicaid Asset Protection via the purchase of qualified Long-Term Care Insurance policies, allow the exemption of certain types of assets, and permit individuals to qualify even after transferring assets to a spouse or to a disabled family members or to a caregiver child. To plan ahead and accelerate qualification for Medicaid is no different than planning to maximize your income tax deductions to minimize your income taxes. It is no different than taking advantage of tax-free municipal bonds. It is no different than planning your estate to avoid estate taxes.
For two additional and lengthier articles on why Medicaid Planning is ethical, please see http://www.tn-elderlaw.com/medicaidplanning.aspx and http://www.elderlawanswers.com/elder_info/elder_article.asp?id=1175.
Image: worradmu / FreeDigitalPhotos.net
Thursday, August 18, 2011
Americans value the appearance and aesthetics of skin.
After all, the appearance of one’s skin provides others with silent clues concerning age, vitality and health. Unfortunately, skin cancer incidence is on the rise, especially among seniors. There are more cases of skin cancer per year than all forms of cancer combined. One in five seniors aged-70 has had melanoma, and survivors are nine times more likely (compared to the general population) to develop melanoma again.
“Incapacity Planning” is especially appropriate for melanoma survivors, because of the risk of future incidence. Due to the unfortunate rate of recurrence, planning for the disease – especially after surviving a bout with it once – is difficult but smart. It’s also expensive to fight the disease: $28,000 on average, according to at least one study.
Avoiding damaging ultraviolet rays can preserve your skin. As we grow older, skin loses its smoothness and elasticity and veins and bones become more noticeable. To an extent, this aging process is unavoidable. Most seniors know to take precautionary measures such as wearing adequate sunscreen, hats, and avoiding tanning beds.
A lesser known risk factor is tobacco. Researchers found that current smokers developed “squamous cell carcinoma” 3.3 times more frequently than non-smokers. Quitting reduced that risk down to 1.9 times, so it really never is too late to quit smoking.
A recent study found that 45% of individuals diagnosed with skin cancer were diagnosed by a Dermatologist after setting up a direct visit based on a concern. Only about 14% were diagnosed after a visit for an entirely different reason. Just over 25% were referred to a Dermatologist by a General Practitioner. The key is to remain proactive. If you think something may be wrong, make an appointment.
Proper financial planning is a smart choice for families who have already courageously fought this disease once. Incapacity planning ensures loved ones that they do not have to suffer the delay, inconvenience, complexities, and expenses of the process called “living probate.” Attending seminars and meeting with your local elder law attorney will provide you with vital information. Remember, “Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing.”
Resources: National Cancer Institute; Journal of the American Medical Association & Archives of Dermatology, (March 2010); Emory University School of Medicine, Harvard Medical School; Leiden University Medical Center in the Netherlands.
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