When Can You Delay Taking Medicare?

 

While you are eligible to apply for Medicare when you are 65, there are circumstances where you might not want to, particularly if you are working full time for a larger employer or contributing to a health savings account. However, there can be penalties if you don't sign up at the right time, so it is important to know when you can delay signing up for Medicare without facing a penalty.

You can first sign up for Medicare during your Initial Enrollment Period, which is the seven-month period that includes the three months before the month you become eligible (usually age 65), the month you are eligible and three months after the month you become eligible. If you do not sign up for Medicare Part B during this period, your Part B premium may go up 10 percent for each 12-month period that you could have had Part B, but did not take it. Your Medicare Part D premium will increase at least 1 percent for every month you wait. There is an exception to these penalties for some people who are still working.

If you work for an employer with 20 or more employees, you can usually delay signing up for Medicare Part B without penalty because your employer's insurance will be considered the primary insurer. However, if your employer has fewer than 20 employees, you will probably need to sign up for Medicare Part B when you are first eligible or face penalties down the road.  Check with your employer to make sure your current insurer will expect Medicare to be your primary insurer.

If you are working or have other private insurance, you may be able to delay Medicare Part D without a penalty. Beneficiaries are exempt from the penalties if their insurance is at least as good as Medicare's. This is called "creditable coverage. Your insurer should let you know if their coverage will be considered creditable.  You may also be able to avoid or delay getting Part D if you enroll in a Medicare Advantage plan that offers prescription drug coverage.

If you are working, you generally can enroll in Medicare Part A, which is free for most people, without consequences. However, if you are contributing to a health savings account (HSA) at work, you cannot sign up for Medicare. This is true even if your employer has fewer than 20 employees. Part A covers institutional care in hospitals and skilled nursing facilities, as well as certain care given by home health agencies and care provided in hospices, so you will need to analyze whether the HSA is worth losing out on the Medicare Part A coverage. If you are already receiving Social Security, you will be automatically enrolled in Part A, so you will have to stop contributing to the HSA.

IRS Issues Long-Term Care Premium Deductibility Limits for 2017

 

The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2017 taxes as a result of buying long-term care insurance.

Premiums for "qualified" long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured's adjusted gross income, or 7.5 percent for taxpayers 65 and older (for 2016; this rises to 10 percent in 2017).

These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)

However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for 2017. Any premium amounts for the year above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year	Maximum deduction for year
40 or less	$410
More than 40 but not more than 50	$770
More than 50 but not more than 60	$1,530
More than 60 but not more than 70	$4,090
More than 70	$5,110

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day.  These benefits are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $360 per day, whichever is greater.

  

What Is a "Qualified" Policy?

To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold.

It's Time to Reassess Your Medicare Choices

 

Are your Medicare plans still working for you? Medicare's open enrollment period, in which you can enroll in or switch plans, runs from October 15 to December 7.  Now is the time to review your options to determine if switching plans could save you money.

During this period you may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. In addition, during the seven-week period you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change Advantage plans. Beneficiaries can go to www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227) to make changes in their Medicare prescription drug and health plan coverage.

Even beneficiaries who were satisfied with their plans in 2016 need to review their choices for 2017. Be sure to carefully look over the plan's "Annual Notice of Change" letter. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions, and appeals. Medicare Advantage plans can change their benefit packages, as well as their provider networks.

Avalere Health, a consulting and research firm, reports that premiums for the 10 most popular drug plans will rise an average of 4 percent next year. According to the Centers for Medicare and Medicaid Services, the average Medicare Advantage premium is expected to decrease from $32.59 on average in 2016 to $31.40 in 2017.

Remember that fraud perpetrators will inevitably use the open enrollment period to try to gain access to individuals' personal financial information.  Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited.  If you think you've been a victim of fraud or identity theft, contact Medicare.  For more information on Medicare fraud, click here. 

 Here are more resources for navigating the Open Enrollment Period:

• The 2017 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at: https://www.medicare.gov/medicare-and-you/medicare-and-you.html or https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf

• The Medicare Rights Center: www.medicareinteractive.org

• Your State Health Insurance Assistance Program, which offers independent counseling: https://www.shiptacenter.org

• Kiplinger's "How to Compare Medicare Advantage Plans"

• Medicare Plan Finder: www.medicare.gov/find-a-plan

5 Things to Know to Reduce Your Tax on Capital Gains

 

Although it is often said that nothing is certain except death and taxes, the one tax you may be able to avoid or minimize most through planning is the tax on capital gains. Here's what you need to know to do such planning:

1. What is capital gain? Capital gain is the difference between the "basis" in property -- usually real estate or stocks, but also including artwork and collectibles -- and its selling price. The basis is usually the purchase price of property. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 - $250,000 = $200,000). However, the basis can be adjusted if you spend money on capital improvements. For instance, if after buying your house you spent $50,000 updating the kitchen, the basis would now be $300,000 and the gain on its sale for $450,000 would be $150,000 ($450,000 - ($250,000 + $50,000) = $150,000). Just make sure you keep good records of any capital improvements in order to prove them in the event of an audit. (The residence exclusion and the step-up in basis are discussed below.)
2. How much is the tax? It depends, but assume 15 percent federally unless you have either very low or very high income, and whatever your state’s tax is (let’s assume 5 percent, for a total of about 20 percent). Using those assumptions, the tax on $200,000 of gain would be about $40,000. There are three exceptions. First, if you owned the property for less than a year, you would be subject to short-term capital gains tax rates, which are essentially the same rates as for income tax. Second, if your taxable income, including the capital gains, is less than $37,650 for a single person and $75,300 for a married couple (in 2016), there's no federal tax on capital gain. But beware that the capital gains will be included in the calculation and could put you over the threshold. Third, if your income is more than $415,050 for a single person and $466,950 for a married couple (in 2016), the federal capital gains tax rate is 20 percent, bringing the combined federal and assumed state rate up to just over 25 percent.
3. The personal residence exclusion. You may exclude up to $250,000 of gain on the sale of your personal residence and if you're married you can exclude $500,000. To qualify, you (or your spouse) must have lived in and owned the house for at least two out of the five years prior to the sale. Those two years don't have to be the same. For instance, if you lived in the house from 2012 to 2014 and owned it from 2014 to 2016, but rented it out, you could still qualify for the exclusion. If you are a nursing home resident, the two-year requirement is reduced to one year.
4. Carry-over basis. If you give property such as a family heirloom or real estate to someone else, they receive it with your basis. So, if your parents bought a vacation home many years ago for $25,000 and now its fair market value is $500,000, if they give it to you, your basis will also be $25,000. If you sell it, you'll have a gain of $475,000 and no personal residence exclusion, unless you move in for two years first. The combined state and federal tax would be $118,750.
5. Step-up in basis. On the other hand, the basis in inherited property gets adjusted to the value on the date of death. In the example of the vacation home, if your parents passed it on to you at death rather than giving it to you during life, the basis would be adjusted to $500,000, potentially saving you $118,750 on its sale. On the other hand, depending on the size of your parents' estate, it may be subject to estate tax, which would be payable within nine months of their death, while the tax on capital gain would not be due until you sold the property, perhaps decades in the future. President Obama has proposed getting rid of this so-called "step-up" in basis. His reasoning is that it is regressive, benefiting people with property, and the more property they have, the more tax they save. But an argument for retaining the step-up rules is that they can save a tremendous amount of administrative hassle.  If you inherited stock from your father that he inherited from his mother, it may be impossible to establish what it was she paid for it. It's much easier to determine what it was worth at your father's death.
6. Offsetting losses. If during the tax year you realized capital gain through the sale of property, you can offset it with capital losses.  Say, for example, you sell your home and realize a lot of gain. You could also sell some stock that has gone down in value, creating a loss that offsets some of the gain on the house sale. In some instances, you can carry over loss from one tax year to the next to offset future gains.

By understanding and considering these rules, you can save on capital gains taxes and avoid a number of possibly expensive mistakes.

Nursing Home Residents Win Back Right to Sue

 

In recent years, nursing homes have increasingly asked -- or forced -- patients and their families to sign arbitration agreements prior to admission. By signing these agreements, patients or family members give up their right to sue if they believe the nursing home was responsible for injuries or the patient's death. 

Now, in an unexpected move, the federal Centers for Medicare and Medicaid Services (CMS) is forbidding nursing homes from entering into binding arbitration agreements with a resident or their representative before a dispute arises.  The agency has issued a final rule prohibiting so-called pre-dispute arbitration agreements in facilities that accept Medicare and Medicaid patients, affecting 1.5 million nursing home residents. After a dispute arises, the resident and the long-term care facility could still voluntarily enter into a binding arbitration agreement if both parties agree.

For years, patient advocates have contended that those seeking admission to a nursing home are in no position to make a determination about giving up their right to sue. Families are focused on the quality of care, and forcing them to choose between care quality and forgoing their legal rights is unjust, the advocates said.  Courts have sometimes struck down arbitration agreements as unfair, but others have upheld them. 

“Clauses embedded in the fine print of nursing home admissions contracts have pushed disputes about safety and the quality of care out of public view,” the New York Times wrote in its coverage. “With its decision, [CMS] has restored a fundamental right of millions of elderly Americans across the country: their day in court.”

The nursing home industry has countered that the new rule will trigger more lawsuits that could increase costs and force some homes to close.  Mark Parkinson, the president and chief executive of the American Health Care Association, said that the change “clearly exceeds” CMS’s statutory authority. 

Although the rule could be challenged in court, for now it is scheduled to take effect on November 28, 2016, and will affect only future nursing home admissions. Pre-existing arbitration agreements will still be enforceable.

What Is a Life Estate?

 

The phrase "life estate" often comes up in discussions of estate and Medicaid planning, but what exactly does it mean? A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner. Life estates can be used to avoid probate and to give a house to children without giving up the ability to live in it.  They also can play an important role in Medicaid planning.

In a life estate, two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate -- the life tenant -- possesses the property during his or her life. The other owner -- the remainderman -- has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out, and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant's death the ownership will pass automatically to the holders of the remainder interest. Because the property is not included in the life tenant's probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property.

Although the property will not be included in the probate estate, it will be included in the taxable estate. Depending on the size of the estate and the state's estate tax threshold, the property may be subject to estate taxation.

The life tenant cannot sell or mortgage the property without the agreement of the remaindermen. If the property is sold, the proceeds are divided up between the life tenant and the remaindermen. The shares are determined based on the life tenant's age at the time -- the older the life tenant, the smaller his or her share and the larger the share of the remaindermen.

Be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if you apply for Medicaid within five years of the transfer. Purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else's home, pay an appropriate amount for the property and live in the house for more than a year. 

For example, an elderly man who can no longer live in his home might sell the home and use the proceeds to buy a home for himself and his son and daughter-in-law, with the father holding a life estate and the younger couple as the remaindermen. Alternatively, the father could purchase a life estate interest in the children's existing home. Assuming the father lives in the home for more than a year and he paid a fair amount for the life estate, the purchase of the life estate should not be a disqualifying transfer for Medicaid.  Just be aware that there may be some local variations on how this is applied, so check with your attorney.

Execute a Power of Attorney Before It's Too Late

 

A durable power of attorney is an extremely important estate planning tool, even more important than a will in many cases.  This crucial document allows a person you appoint -- your "attorney-in-fact" or "agent" -- to act in place of you -- the "principal" -- for financial purposes when and if you ever become incapacitated due to dementia or some other reason.  The agent under the power of attorney can quickly step in and take care of your affairs. 

But in order to execute a power of attorney and name an agent to stand in your shoes, you need to have capacity.  Regrettably, many people delay completing this vital estate planning step until it’s too late and they no longer are legally capable of doing it.

What happens then? Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, the representative may have to seek court permission to take planning steps that he or she could have implemented immediately under a simple durable power of attorney.

This is why it’s so important that you have a durable power of attorney in place before the capacity to execute the document is lost.  The standard of capacity with respect to durable powers of attorney varies from jurisdiction to jurisdiction. Some courts and practitioners argue that this threshold can be quite low: the client need only know that he trusts the agent to manage his financial affairs. Others argue that since the agent generally has the right to enter into contracts on behalf of the principal, the principal should have the capacity to enter into contracts as well, and the threshold for entering into contracts is fairly high.

If you do not have someone you trust to appoint as your agent, it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable power of attorney that simply nominates the person you want to serve as your conservator or guardian. Most states require the court to respect your nomination "except for good cause or disqualification."

Because you need a third party to assess capacity and because you need to be certain that the formal legal requirements are followed, it can be risky to prepare and execute legal documents on your own without representation by an attorney. To execute a durable power of attorney before it’s too late, contact your elder law attorney. 

Life Insurance Can Still Play a Key Role As Part of an Estate Plan

 

Life insurance can be beneficial in replacing lost income for young families, but as people get older, it can also serve a purpose as part of an estate plan.

Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so big (in 2016, estates can exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes. However, life insurance can still be helpful in a number of other ways.

• Immediate cash. Life insurance provides cash to use for the payment of debt, burial fees, or estate administration fees. In addition, life insurance can be used to pay state estate taxes, if the state requires it.
• Wealth replacement. It can replace income or assets lost to pay for long-term care. It can also be used to fund a trust for a minor child or a child with special needs.
• Buy out business interests. It can allow a partner or a family member to buy out the deceased partner's interest in a closely held business to ensure the business can continue.
• Fund a charity. Proceeds from a life insurance policy can be used to fund a charity. The policy can be donated directly to the charity, which also has the benefit of giving the donor a charitable income tax deduction. Alternatively, the charity can be named as the beneficiary of the policy. 
• Treat family equally. A life insurance policy can be used to make sure children receive an equal inheritance. For example, if one child is inheriting a certificate of deposit, a life insurance policy can ensure that the other child receives the same amount.

To find out if you should include life insurance as part of your estate plan, talk to your attorney.

Revoking a Power of Attorney

 

If for any reason, you become unhappy with the person you have appointed to make decisions for you under a durable power of attorney, you may revoke the power of attorney at any time. There are a few steps you should take to ensure the document is properly revoked.

While any new power of attorney should state that old powers of attorney are revoked, you should also put the revocation in writing. The revocation should include your name, a statement that you are of sound mind, and your wish to revoke the power of attorney. You should also specify the date the original power of attorney was executed and the person selected as your agent. Sign the document and send it to your old agent as well as any institutions or agencies that have a copy of the power of attorney. Attach your new power of attorney if you have one.

You will also need to get the old power of attorney back from your agent. If you can't get it back, send the agent a certified letter, stating that the power of attorney has been revoked.

Because a durable power of attorney is the most important estate planning instrument available, if you revoke a power of attorney, it is important to have a new one in place. Your attorney can assist you in revoking an old power of attorney or drafting a new one.

Jumbo Reverse Mortgages Are Increasingly Available for High-Value Homes

 

Seniors with pricier homes now have an increased ability to get a jumbo reverse mortgage in order to raise cash for retirement. As the housing market has improved, jumbo reverse mortgages are becoming more popular even though they carry some risk.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower, and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house, or permanently moves out. Homeowners can use money from a reverse mortgage to pay for improvements to their home, to allow them to delay taking Social Security, or to pay for home health care. 

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. The national limit on the amount a homeowner can borrow is $625,000. 

High-end borrowers must look to the proprietary reverse mortgage market, which imposes no loan limits. Proprietary or jumbo reverse mortgages allow buyers to borrow millions of dollars. For example, American Advisors Group, a reverse mortgage lender, allows borrowers to obtain a reverse mortgage on properties valued up to $6 million. Qualified borrowers can borrow up to $3 million in loan proceeds. While HECM loans limit the amount a borrower can have access to in the first year, these jumbo mortgages may allow the borrower to access the entire loan right away.

The downside of a jumbo reverse mortgage is that because it is not insured, it doesn't have to have the protections set by the federal government for HECM reverse mortgages. For example, loan counseling isn't required and fees are not restricted. During the housing market collapse most lenders stopped offering jumbo reverse mortgages, but as the market has improved, the jumbo is returning.

A reverse mortgage is not the right step for everyone. Talk to your attorney about whether a reverse mortgage is right for you.

Fighting Nursing Home Discrimination Against Medicaid Recipients

 

While it is illegal for a nursing home to discriminate against a Medicaid recipient, it still happens. To prevent such discrimination, nursing home residents and their families need to know their rights.

The potential for discrimination arises because Medicaid pays nursing homes less than the facilities receive from residents who pay privately with their own funds and less than Medicare pays. Nursing homes are not required to accept any Medicaid patients, but Medicaid payments are a steady guaranteed payment, so many nursing homes agree to accept Medicaid recipients.

When a nursing home agrees to take Medicaid payments, it also agrees not to discriminate against residents based on how they are paying. Medicaid recipients are entitled to the same quality of care as other residents. A nursing home cannot evict residents solely because they qualified for Medicaid.

Unfortunately, discrimination against Medicaid patients does occur, and the discrimination can take different forms. The nursing home may refuse to accept a Medicaid recipient or may require that a resident pay privately for a certain period of time before applying for Medicaid. When a resident switches from Medicare or private-pay to Medicaid payments, the nursing home may transfer the resident to a less desirable room or claim that it doesn't have any Medicaid beds.

There is at least one way that nursing homes can treat Medicaid recipients differently, however. Nursing homes are allowed to switch residents who were privately paying for a single room to a shared room once they qualify for Medicaid. In addition, the nursing home is not required to cover personal and comfort care items, such as a telephone or television. In some states families are allowed to pay the difference to get a private room or the care item. Other states do not allow any supplementation.

About to Turn 65? Your Health Insurer May Be Automatically Enrolling You in Its Own Medicare Plan

 

As people approach age 65, they should be thinking about their Medicare enrollment choices, including whether to sign up for traditional Medicare or with a Medicare Advantage plan, and if so, which one.  But it turns out that some Medicare-age people are having these important decisions made for them, often without their knowledge.

Before they become eligible for Medicare, many Americans are covered by a commercial or a Medicaid health care plan run by an insurance company. These insurers often also operate Medicare Advantage plans, which are the privately run managed-care alternative to traditional Medicare. Under a little-known process authorized by the federal government, insurers can shift their beneficiaries who are turning 65 to their own Medicare Advantage plan.  It’s called “seamless conversion,” and all it requires is that the health plan obtain Medicare’s prior approval and send a letter to the beneficiary explaining the new coverage, which takes effect unless the member opts out within 60 days.

The idea is to preserve continuity for those who want to stay with the same company, but some seniors are unaware that they have been signed up, in part due to the flood of mail they get from insurers around age 65.  In a recent Kaiser Health News expose, reporter Susan Jaffe related the stories of several new Medicare beneficiaries who were shocked to learn that they had been enrolled in a Medicare Advantage plan.  One, Judy Hanttula of Carlsbad, New Mexico, signed up for traditional Medicare and then ignored the subsequent mail, which apparently included the notice from her insurer telling her that it had automatically enrolled her in its Medicare Advantage plan.

“I felt like I had insured myself properly with Medicare,” she said. “So I quit paying attention to the mail.”

Unfortunately for Ms. Hanttula, before she became aware of the automatic assignment to a Medicare Advantage plan, she had surgery that her new plan subsequently refused to cover, leaving her with a $16,622 bill.  Eventually, with the help of David Lipschutz, a senior attorney at the Center for Medicare Advocacy in Washington, Medicare officials disenrolled Ms. Hanttula from her unwanted Medicare Advantage plan, restored her traditional Medicare coverage and agreed to cover her medical bills, reports Jaffe.

Medicare officials won’t say which insurance companies have sought or received approval to seamlessly convert their members to their own Medicare Advantage plans, but Jaffe reports that among the insurers that are already automatically enrolling members into Medicare plans in at least some parts of the country include Aetna and United Healthcare, and that Humana, the nation’s second largest Medicare Advantage provider, has asked for federal permission to also do auto-enrollment.

Medicare officials are developing procedures for seamless conversion requests and implementation, but in response to complaints from her constituents and health care advocates, Rep. Jan Schakowsky (D-Ill.) wants to build in stronger consumer protections. 

In the meantime, those enrolled in a health plan offered by a Medicare Advantage organization when they become eligible for Medicare should “be attentive,” advises attorney Lipschutz of the Center for Medicare Advocacy.  “Be on the lookout for written notice regarding conversion and carefully consider whether to opt-out of the [Medicare Advantage] plan.”

How to Vote While in a Nursing Home

 

Although voting is the hallmark of a democracy, it isn't easy if you are in a long-term care facility. Nursing home and other long-term care facility residents face several challenges to voting, from registering to vote to actually casting a ballot.

When you move into a nursing home or assisted living facility, your address changes, which means you probably need to register to vote based on the new address. You can register in person, by mail, or, in some states, online. To register in person, visit your local elections office or your local department of motor vehicles. To find out where to register in your state, go here:http://www.eac.gov/voter_resources/contact_your_state.aspx.  Alternatively, there is a national voter registration application that you can use to register by mail. The form includes state-specific instructions. Finally, more than 30 states have online registration.

Once you are registered, you still need to physically cast your ballot. This can be difficult if you have trouble leaving your facility. There are several methods that nursing home residents may be able to use to vote. All states allow absentee voting, but the requirements are different in each state. Some states require an excuse –- such as a physical disability -- to vote absentee. In many states being at least aged 60 to 65 (depending on the state), is a reason to qualify for an absentee ballot.

Twenty-three states allow mobile polling, which is supervised absentee voting conducted in the residential facility. Mobile polling is often based on demand, so to get mobile polling in your facility, contact your local elections office.

If it is difficult for you to get to the polls on Election Day, 37 states offer early voting. Early voting allows voters to visit an election office and vote in person without providing an excuse. This can give you the flexibility to vote when it works for you.

Do Frequent Flier Miles Expire When You Do?

 

Accumulated frequent flier miles can be valuable assets, but what happens to those miles after somene dies?  Can a spouse or other heirs inherit them, or do the miles simply evaporate like a contrail?

The answer to whether they can be inherited depends on the airline, but consumer experts say that even if the airline’s official policy is “no,” with a little perseverance the answer could still be “yes.”

“What you often find is that the formal policy, as found in their terms and conditions, says that frequent flier miles cannot be given away through wills, but when you call the customer service center you find out that yes, in fact they will allow that,” Tim Winship, editor of FrequentFlier.com, told The New York Times in 2012. “What you get is two very different versions of what they will and won’t do.”

For ecample, JetBlue’s official policy seems unambiguous and airtight: “14. Miscellaneous Provisions. 14.1 Points are non-transferable and may not be combined among TrueBlue Members, their estates, successors and assigns. Accrued Points and Award Travel do not constitute property of Member and are non-transferable (i) upon death, (ii) as part of a domestic relations matter, or (iii) otherwise.”

However, the website NerdWallet reported in January 2014 that when it called JetBlue’s customer service department, it was told that a beneficiary could inherit by supplying a death certificate and proof of beneficiary status.

Other airlines put their mixed message right in their official policy statement.  American Airlines currently states that: “Neither accrued mileage, nor award tickets, nor status, nor upgrades are transferable by the member (i) upon death, (ii) as part of a domestic relations matter, or (iii) otherwise by operation of law. However, American Airlines, in its sole discretion, may credit accrued mileage to persons specifically identified in court approved divorce decrees and wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.” [emphasis added]

United is more succinct: “Accrued mileage and certificates do not constitute property of the member and are not transferable other than as authorized and/or sponsored by United.” [emphasis added]

In 2013, the website airfarewatchdog made five separate calls to United sales reps about inheriting MileagePlus accounts and reported that it “received a myriad of answers from a flat-out ‘no’ to a full-on ‘yes.’ It appears that some agents will allow you to transfer miles between the account of the deceased and a beneficiary.”  But, as do many airlines, United charges a fee for transfers -- in their case $150. 

 “It never hurts to ask,” advises The Points Guy. “Airline employees have shown themselves to be endearingly human when faced with a customer’s grief.”

This has been the case with Delta, which caused some turbulence among its customers a couple of years ago when it announced it was disallowing transfers of miles after death, an abrupt shift from its former policy of permitting them via an affidavit. Although miles are now officially forfeited upon death, when airfarwatchdog contacted Delta in 2013 “a phone agent admitted that Delta would not know of one's death unless notified (hinting that the onus is on the family member to enforce this policy).”  A year later, NerdWallet reportedthat “If you have access to the [SkyMiles] account in question, miles can be transferred for a processing fee and a fee per mile. WorldPerks accounts should have already been transferred, but if not can be transferred at no cost.”

If you know your deceased spouse’s or other relative’s frequent flier number and password, what’s to stop you from simply using the miles?  That’s certainly possible, although misrepresenting yourself would violate mileage program rules.  Moreover, you could easily have miles left over that are not sufficient for a ticket unless transferred to another account.  You could also run into problems if you use a different credit card than the one linked to the deceased frequent flier’s account, or have a different address or last name. 

“I make it a point not to recommend that my readers break program operators’ rules, even if they are rules I disagree with,”FrequentFlier.com’s Tim Winship writes. “So I will leave you with a question: Is it worth the risk of being discovered and losing the miles to avoid the hassle and, possibly, the expense of going through authorized channels?”

Your spouse or heir will probably have a better argument with the airline if you specify in your will who should inherit your miles or points. And, as The Points Guy points out, “If you’re in the unfortunate situation of knowing you’ll soon die, either use the heck out of those miles, or start transferring them now.” 

Most Caregivers Are Now Entitled to Minimum Wage and Overtime Pay

 

The federal government recently extended minimum wage and overtime protections to most home health care workers. If you are hiring a caregiver for yourself or an elderly loved one, you need to become familiar with the rules, even if the paid caregiver is a family member.

Under the Fair Labor Standards Act (FLSA), employers who hire casual babysitters and domestic service workers to provide "companionship services" to elderly persons or persons with illnesses, injuries, or disabilities are not required to pay the minimum wage or provide overtime pay. Therefore, if you directly hire a caregiver whose job it is to solely keep the elderly person company (for example, taking the client for walks, playing games with the client, reading, or accompanying the client on errands), then FLSA protections do not apply.

However, the companionship services exemption is not applicable when the caregiver spends more than 20 percent of his or her workweek performing "care services." Care services are defined as assisting the client with activities of daily living, including dressing, feeding, bathing, toileting, transportation, light housework, managing finances, taking medication, and arranging medical care. Caregivers who perform tasks for the entire household and caregivers who perform medical services are also not covered under the companionship exemption. In addition, if a home health care agency is the caregiver's employer, the home health care agency cannot ever claim the companionship exemption.

The rules for live-in caregivers are slightly different. If you hire the live-in caregiver directly, you must pay the caregiver minimum wage, but you are not required to pay overtime. Third-party employers (such as health care agencies) that hire live-in workers are required to pay overtime. Under the FLSA, to be a "live-in" home care worker, the worker must either live at the client's home full-time or spend at least 120 hours or five consecutive days or nights in the client's home per week. Caregivers who live with clients are not necessarily working the entire time they are at the house, and employers do not need to pay for sleep time, mealtime, or other off-duty time.

You can hire family members as care workers and the same rules apply to them as to non-family care providers. If you hire family members, you must pay them overtime and minimum wage as long as they are spending more than 20 percent of their time on care services. However, it is very important to have a written plan of care detailing the family member's working hours and obligations, so it is clear what is work time and what is family time.

The federal minimum wage in 2016 is $7.25 per hour, but states may have higher rates. Employees who are entitled to overtime pay can receive one and a half times their normal rate for every hour worked over 40 hours a week.

Regardless of whom you hire to provide care for yourself or your loved one, you should have a written caregiver contract detailing the caregiver's rights and responsibilities. Contact your attorney to make sure you are following the law when it comes to hiring a caregiver.

Beware of Non-Lawyers Offering Medicaid Planning Advice

 

In recent years a number of non-lawyers have started businesses offering Medicaid planning services to seniors. While using one of these services may be cheaper than hiring a lawyer, the overall costs may be far greater.

If you use a non-lawyer to do Medicaid planning, the person offering services may not have any legal knowledge or training. Bad advice can lead seniors to purchase products or take actions that won't help them qualify for Medicaid and may actually make it more difficult. The consequences of taking bad advice can include the denial of benefits, a Medicaid penalty period, or tax liability.

As a result of problems that have arisen from non-lawyers offering Medicaid planning services, a few states (Florida, Ohio, New Jersey, and Tennessee) have issued regulations or guidelines providing that Medicaid planning by non-lawyers will be considered the unauthorized practice of law. For example, in Florida, a non-lawyer may not render legal advice regarding qualifying for Medicaid benefits, draft a personal service contract, determine the need for or execute an income trust, or sell income trust kits. In Florida the unlicensed practice of law is a felony that is punishable by up to five years in prison, while in Ohio practicing law without a license is subject to civil injunction, civil contempt, and civil fine

Applying for Medicaid is a highly technical and complex process. A lawyer knowledgeable about Medicaid law in the applicant’s state can help applicants navigate this process. An attorney may be able to help your family find significant financial savings or better care for you or your loved one. This may involve the use of trusts, transfers of assets, purchase of annuities or increased income and resource allowances for the healthy spouse.

Called for Jury Duty? You May Be Excused Based on Your Age

 

In many states, seniors have the right to decline jury duty based on their age. But the age limits and rules vary by state and by type of court, so if you are summoned for jury duty, check with the court to determine if you are exempt.

The majority of states have a rule in place that allows individuals over a certain age to choose not to serve on a jury if called. How this works varies by state and by court. Some states allow anyone over a certain age to be permanently exempted; other states allow seniors to be excused from serving if they are called. Some states require notice in writing; other states have a box the senior can check on the jury summons form. The ages at which seniors can be exempted or excused are 65 (Mississippi and South Carolina), 70 (Alabama, Alaska, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada, Oklahoma, Oregon, Texas, Virginia, and West Virginia), 72 (North Carolina and Wyoming), 75 (Arizona, Indiana, New Jersey, New Mexico, New York, Ohio, and Pennsylvania), and 80 (Hawaii and South Dakota).

Some states have more complicated rules regarding seniors and jury duty. In Nevada, for example, everyone over age 65 who lives 65 miles or more away from the court is exempt from serving on a jury. Once you reach age 70 in Nevada, you are exempt from serving on a jury no matter where you live. In California, individuals with a permanent health problem can be exempted from jury duty, but if you are 70 years or older, you don't need a doctor's verification of the health problem.

Each of the federal district courts has its own rules about jury service. Many federal courts offer excuses from service, on individual request, to designated groups, including people over age 70.

What Is Required of an Executor?

 

Being the executor of an estate is not a task to take lightly. An executor is the person responsible for managing the administration of a deceased individual's estate. Although the time and effort involved will vary with the size of the estate, even if you are the executor of a small estate you will have important duties that must be performed correctly or you may be liable to the estate or the beneficiaries.

The executor is either named in the will or if there is no will, appointed by the court. You do not have to accept the position of executor even if you are named in the will.

The average estate administration takes one year, though you won't need to work full time on it. Following are some of the duties you may have to perform as executor:

• Find documents. If there is a will, but you don't already know where the will is or the will hasn't already been brought to court, you may need to find it among the deceased's belongings. If all you have is a copy of the will, you may need to get the original from the lawyer who drafted it. You will also need to get a copy of the death certificate.
• Hire an attorney. You are not required to hire an attorney, but mistakes can cost you money. You may be personally liable if something goes wrong with the estate or the payment of taxes. An attorney can help you make sure all the proper steps are taken and deadlines met.
• Apply for probate. If there is a will, the court will grant you letters testamentary. If there is no will, you will receive letters of administration. This will officially begin your work as the executor.
• Notify interested parties. Notify the beneficiaries of the will, if there is a will, as well as any potential heirs (such as children, siblings, or parents who may or may not be named in a will). In addition, you will have to place an advertisement for potential creditors in a newspaper near where the deceased lived.
• Manage the deceased's property. You will need to prepare a list of the deceased's assets and liabilities, and you may need to collect any property in the hands of other people. One of the executor's jobs is to protect the property from loss, so you will need to assure the property is kept safe. You will also need to hire an appraiser to find out how much any property is worth. In addition, if the estate includes a business, you may have to make sure the business continues to run.
• Pay valid claims by creditors. Once the creditors are determined, you will need to pay the deceased's debts from the estate's funds. The executor is not personally liable for deceased's debts. The estate usually pays any reasonable funeral expenses first. Other debts include probate and administration fees and taxes as well as any valid claims filed by creditors.
• File tax returns. You need to make sure the tax forms are filed within the time frame set under the law. Taxes will include estate taxes and income taxes.
• Distribute the assets to the beneficiaries. Once the creditors' claims are clear, the executor is responsible for making sure the beneficiaries get what they are entitled to under the will or under the law, if there is no will. You may be required to sell property in order to fulfill legacies in a will. In addition, you may have to set up any trusts required by the will.
• Keep accurate records. It is very important to keep accurate records of everything you do. You will need to create a final accounting, which the beneficiaries must review before the distribution of the estate can be finalized. The accounting should include any distributions and expenses as well as any income earned by the estate since the deceased died.
• File the final accounting with the court. Once the final accounting is approved by the beneficiaries and the court, the court will close the estate. File a final report with the court and close the estate.

Activities of Daily Living Measure the Need for Long-Term Care Assistance

 

Most long-term care involves assisting with basic personal needs rather than providing medical care. The long-term care community measures personal needs by looking at whether an individual requires help with six basic activities that most people do every day without assistance, called activities of daily living (ADLs). ADLs are important to understand because they are used to gauge an individual’s level of functioning, which in turn determines whether the individual qualifies for assistance like Medicaid or has triggered long-term care insurance coverage.   

The six ADLs are generally recognized as:

• Bathing. The ability to clean oneself and perform grooming activities like shaving and brushing teeth.  
• Dressing. The ability to get dressed by oneself without struggling with buttons and zippers.
• Eating. The ability to feed oneself.
• Transferring. Being able to either walk or move oneself from a bed to a wheelchair and back again.
• Toileting. The ability to get on and off the toilet.
• Continence. The ability to control one's bladder and bowel functions.

There are other more complicated tasks that are important to living independently, but aren't necessarily required on a daily basis. These are called instrumental activities of daily living (IADLs) and include the following:

• Using a telephone
• Managing medications
• Preparing meals
• Housekeeping
• Managing personal finances
• Shopping for groceries or clothes
• Accessing transportation
• Caring for pets

Long-term care providers use ADLs and IADLs as a measure of whether assistance is required and how much assistance is needed. In order to qualify for Medicaid nursing home benefits, the state may do an assessment to verify that an applicant needs assistance with ADLs. Other state assistance programs also may require that an applicant be unable to perform a certain number of ADLs before qualifying. In addition, long-term care insurance usually uses the inability to perform two or more ADLs as a trigger to begin paying on the policy.  

Medicaid's Benefits for Assisted Living Facility Residents

 

Assisted living facilities are a housing option for people who can still live independently but who need some assistance.  Costs can range from $2,000 to more than $6,000 a month, depending on location. Medicare won’t pay for this type of care, but Medicaid might.  Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

Unlike with nursing home stays, there is no requirement that Medicaid pay for assisted living, and no state Medicaid program can pay directly for a Medicaid recipient’s room and board in an assisted living facility. But with assisted living costs roughly half those of a semi-private nursing home room, state officials understand that they can save money by offering financial assistance to elderly individuals who are trying to stay out of nursing homes. 

As of May 2016, 46 states and the District of Columbia provided some level of financial assistance to individuals in assisted living, according to the website Paying for Senior Care, which features a“State by State Guide to Medicaid Coverage for Assisted Living Benefits” that gives details on each state’s programs.   According to the website, the Medicaid programs of Alabama, Kentucky, Louisiana and Pennsylvania are the only ones that provide no coverage of assisted living, although non-Medicaid assistance may be available.

Nevertheless, the level and type of support varies widely from state to state.  Prevented from paying directly for room and board, some states have devised other strategies to help Medicaid recipients defray the cost of assisted living, including capping the amount Medicaid-certified facilities can charge or offering Medicaid-eligible individuals supplemental assistance for room and board costs paid for out of general state funds. States typically cover other services provided by assisted living facilities.  These may include, depending on the state, coverage of nursing care, personal care, case management, medication management, and medical assessments and exams.   

In many states, this coverage is not part of the regular Medicaid program but is delivered under programs that allow the state to waive certain federal rules, such as permitting higher income eligibility thresholds than regular Medicaid does.  To qualify for one of these waiver programs, applicants almost always must have care needs equivalent to those of nursing home residents.  These waiver programs also often have a limited number of enrollment slots, meaning that waiting lists are common.  In some states, the support programs may cover only certain regions of the state.  And one state’s definition of “assisted living” may differ from another’s, or other terms may be used, such as “residential care,” “personal care homes,” “adult foster care,” and “supported living.”

If your state does not cover room and board at an assisted living facility, help may be available through state-funded welfare programs or programs run by religious organizations. If the resident is a veteran or the surviving spouse of a veteran, the resident’s long-term care may be covered. 

Nursing Home Care Costs Are Only Slightly Higher in 2016

 

The median cost of a private nursing home room in the United States has increased slightly to $92,378 a year, up 1.24 percent from 2015, according to Genworth's 2016 Cost of Care survey, which the insurer conducts annually. Genworth reports that the median cost of a semi-private room in a nursing home is $82,125, up 2.27 percent from 2015. The rise in prices is modest compared to the 4.2 percent and 3.8 percent gains, respectively, in 2015.

The price rise was even lower for assisted living facilities, where the median rate ticked up only .78 percent, to $3,628 a month.  The national median rate for the services of a home health aide was $20 an hour, the same rate as 2015, and the cost of adult day care, which provides support services in a protective setting during part of the day, actually fell from $69 to $68 a day. 

Alaska continues to be the costliest state for nursing home care, with the median annual cost of a private nursing home room totaling $297,840. Oklahoma again was found to be the most affordable state, with a median annual cost of a private room of $60,225, which did not increase in 2016.

While prices may not have increased drastically from last year, the survey found that Americans underestimate the cost of in-home long-term care by almost 50 percent. Thirty percent believe it will be less than $417 a month. In fact, an in-home aide working 44 hours a month would cost $3,861, according to Genworth.

The 2016 survey was based on responses from more than 15,000 nursing homes, assisted living facilities, adult day health facilities and home care providers. The survey was conducted by phone during January and February of 2016.

Should an Annuity Be Part of Your Retirement Planning?

 

Annuities can be valuable retirement and longevity planning tools, but they are complex financial products that can be misused. There are two kinds of annuities: variable and immediate. Variable annuities have gotten a bad reputation in recent years because they are often sold to people, especially seniors, for whom they are inappropriate. Immediate annuities, on the other hand, may be undersold.

Variable Annuities

Let's start with an explanation of what an annuity is: It is a contract with an insurance company under which you, the consumer, pays a lump sum in exchange for certain benefits. In the case of a variable annuity, those benefits are based on an investment package. Often the insurance company will guarantee a minimum rate of return on the annuity even if the investments perform poorly. For instance, if you put $200,000 into an annuity with a guaranteed 5 percent rate of return, the annuity will pay you $10,000 a year even if the value of the investments dropped to $160,000, for which a 5 percent return normally would be just $8,000 a year. But if you chose to cash out the annuity, you could only withdraw $160,000. In addition, you might be hit with a penalty for early withdrawal. Typically, variable annuities charge penalties of up to 10 percent for withdrawal over the first few years of the investment, with the penalty gradually declining each year. In addition, you are not taxed on the investment earnings but are taxed on income when the annuity is withdrawn, whether in regular payments or as a lump sum.

Immediate Annuities

Immediate annuities are fixed contracts under which the insurance company pays the consumer a fixed amount, usually on a monthly basis, and usually for life. For instance, you might pay the company $200,000 in exchange for a guaranteed income stream of $1,000 a month for the rest of your life. The amount of the payment and the cost of the annuity will depend on your age since the company, in determining these numbers, will be making an estimate of how long it will have to pay, or in other words what it thinks your life expectancy is.

In our example, if you live longer than 17 years, you will "win" because the insurance company will ultimately pay you back more than $200,000, but if you live for a shorter period of time, you will "lose" (in more ways than one) because you will receive back less than your investment. If the buyer of the annuity in our example passed away after just five years, she would have received only $60,000 in payments on her $200,000 investment. For this reason, many consumers purchase annuities with guaranteed terms of payment ("term certains") meaning that if you were to pass away before the end of the term, payments would continue for your beneficiaries or they would receive a lump sum upon your death. For instance, if you were to buy the annuity in our example with a 10-year term certain and were to pass away after five years, the insurance company would still pay out an additional $60,000 to your heirs, either by continuing the monthly payments or in a lump sum. Of course, the length of the term certain will affect the amount of the monthly payments since the insurance company will be committing to pay for a longer period of time no matter how long you live. If you want a longer term certain, you will either have to pay more for the annuity or accept a smaller monthly payment.

The Rap on Variable Annuities

Variable annuities are extremely complex products and it is doubtful that very many consumers fully understand them when they purchase them. That doesn't mean that these products are bad, just that they're confusing. In addition, they pay generous premiums to the brokers who sell them, payments which many of the brokers don't disclose. They also generally don't disclose whether they are paid more or less by one insurance company than another or whether the annuity being sold is the best option for the consumer.

This relates to another debate going on in the financial services industry. Broker dealers are held to a "suitability" rather than to a "fiduciary" standard. This means that they need only sell products and give advice that is "suitable" for the client. A fiduciary standard would require them to act in the best interest of the client. (This article more fully explains the difference.) The Obama administration is working to adopt the higher fiduciary standard for retirement accounts.

All of this means that the purchaser of a variable annuity needs to be cautious and should seek a second opinion.  Some people have been greatly helped by variable annuities, receiving higher retirement income due to the guaranteed rate of return even after the sharp drop in investment values and low interest rates after the recent recession. For others, however, variable annuities have been problematic. This is especially the case when a senior needs to access capital to pay for long-term care or accounts need to be transferred between spouses to qualify an ill spouse for Medicaid benefits. In either case, this may require withdrawal of funds after the underlying asset value has dropped and often means paying early-withdrawal penalties. For these reasons, older or sicker seniors should be wary of purchasing variable annuities. The products may not be in their best interest and may not even be suitable. It's always important to get a second opinion from an advisor who will not benefit from the sale of the annuity.

The Benefits of Immediate Annuities

Immediate annuities, on the other hand, are much less complicated products. They are often used in Medicaid planning, but they can also be used to guarantee a retirement income no matter how long you live. Some people call this "longevity protection." For instance, let's assume you plan to retire at age 65 and you have calculated that with your Social Security income, savings and investments you have enough money to live comfortably for 20 years, taking into account likely inflation during that time. That's fine if you only live to age 85, but what happens if live past that age?

A bit more than a fifth of men and a third of women who are 65 today will make it to age 90. Your own health and your family's longevity may give you even more guidance as to whether you will need income past age 85. But based on these statistics, if you're a woman (or are married to one) your planning should make sure that you have sufficient income until age 90. (You may not need to be as concerned after age 90 since only 13 percent of 65-year-old women and a measly 7 percent of 65-year-old men make it to age 95.) An immediate annuity can be a solution since it will continue paying for the rest of your life even if you run through your savings and even if you live to 100 or beyond.

Variations can enhance the usefulness of immediate annuities for this purpose. For instance, if you calculate that you can give up current income in exchange for more income in the future, insurance companies will pay you a higher monthly benefit. If at age 65 you were to purchase an annuity that did not begin paying until age 85, it would pay you far more than if it were to begin paying immediately.  According to one on-line annuity calculator, a 65-year-old woman paying $100,000 for an immediate annuity that pays out for her life beginning now would receive $528 a month. If she postponed payments until age 85, she would receive $3,608 a month beginning then, almost seven times as much (and more than three times the $1,125 a month she would receive if she purchased the annuity at age 85). She would, of course, have given up both the income of $126,708 ($528 x 12 x 20) and the use of her capital, but it might be a good hedge against outliving her savings.

Final Thoughts

For both variable and immediate annuities, because the payments may have to last a lifetime, you want to be sure the insurance company you pick will still be around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moodys, Standard & Poor's, or Weiss.  And don't put too much of your savings into any one type of investment, whether that be variable annuities, immediate annuities, stocks or bonds.