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Medicaid Asset Protection

Friday, August 22nd, 2008

What is Medicaid Asset Protection?
Medicaid Asset Protection is the process of protecting assets from having to be completely spent to pay for the devastating expenses of long-term care, while helping to ensure that you (or your loved one) get the best possible long-term care and maintain the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home. This process is also called Life Care Planning because it is designed to be an ongoing, life-long process.

When Should You Start This Type of Planning?
Medicaid Asset Protection can be started any time after a person enters the “long-term care continuum,” meaning that a person is starting to need assistance with Activities of Daily Living (eating, dressing, bathing, toileting, transferring, and walking) or Instrumental Activities of Daily Living (such as cooking, cleaning, caring for pets, paying bills and managing finances). This type of planning can be started while you are still able to make legal and financial decisions, or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care assistance. In fact, the majority of our Medicaid Asset Protection clients come to us when nursing home care is already in place or is imminent.

If you are still healthy and not yet on the “long-term care continuum,” then instead of Medicaid Asset Protection Planning you should consider our Living Trust PlusTM Asset Protection Trust, which is a simpler and less expensive method of asset protection for clients who will most likely not need any long-term care for at least five years.

What are the Objectives of Medicaid Asset Protection Planning?
With proper planning, families can obtain Medicaid assistance for a loved one without having to first deplete their life savings.

Protecting The Spouse:

With proper planning, a spouse who is able to stay at home can keep all of the couple’s assets and much or all income while Medicaid pays for the nursing home. The most important goal is typically to ensure that the spouse remaining at home is able to live the remaining years of his or her life in utmost dignity and not have to suffer a catastrophic reduction in his or her standard of living.

Protecting Quality of Life:

If you are single or widowed, the most important reason for you to engage in Medicaid Asset Protection Planning is for you to be able to enjoy the highest quality of life possible in the event you are forced to enter a nursing home. For instance, money that we protect for you in the process of getting you qualified for Medicaid can be used, once you are receiving Medicaid benefits, to provide you with an enhanced level of care and a better quality of life while you are in a nursing home. For instance, we will often encourage the families of our clients to use the protected assets to hire a private “sitter” or “helper” – someone to keep you company, help you with meals, etc., somewhat like a “surrogate daughter.” Money that we protect for you in the process of getting you qualified for Medicaid can also be used to purchase services or items for you that are not covered by Medicaid, such as dental work, vision aids, hearing aids, incontinence supplies, personal clothing and toiletries, and haircuts.

Protecting Children:

Some parents have saved and sacrificed their entire lives and have a strong desire to leave a financial legacy for their children. With proper Medicaid Asset Protection planning, this goal can be achieved while still qualifying for Medicaid.

Protecting Disabled Persons:

There are asset protection strategies that will allow you to protect your home and an unlimited amount of assets for the benefit of a disabled child or other disabled family member.

What Happens at the Initial Consultation?
During the initial consultation we will typically:

- Assist you in identifying your goals and objectives;
- Review the strategies that are available to help you achieve these goals; and
- Explain how we can help you achieve your goals by preparing a specially-designed Asset Protection Plan tailored to your assets and your goals and objectives.

After the Initial Consultation.

After the initial meeting, Mr. Farr will spend a great deal of time analyzing your situation, applying his specialized knowledge and experience, and performing the dozens of calculations necessary in order to come up with the best asset protection strategies for your situation, customized to achieve your specific goals on the basis of your income, assets, expenses, and medical condition. All of this information is then put into a written Asset Protection Plan, which will set out all of the strategies in detail, along with any options and alternatives that need your consideration. After your review, you will meet again with Mr. Farr or another attorney in the firm to go through and finalize the Asset Protection Plan so that it can then be implemented.

What is an Asset Protection Plan?
The Asset Protection Plan is broken down into a number of sections:

Background:

In this section, we confirm what you’ve told us about your health, income, assets, and expenses. This is important because the entire plan is based on this information. If your information is different, the plan will be different. We want to be sure that we understand your situation completely.

Objectives:

Why do we do asset protection planning? As mentioned above, most of our clients are interested in protecting their assets (a) for themselves, to be able to enjoy the highest quality of life possible within the confines of a nursing home; (b) for their spouse, if married, who will be remaining in the community, and (c) possibly for the benefit of their children. Some people also have specific goals relating to disabled beneficiaries, or related to their home or to federal and state income taxes, or federal and estate gift taxes. Every plan must be customized to achieve your specific goals on the basis of your specific income, assets, expenses, and health conditions.

Applicable Law:

We discuss the Medicaid law, tax law, and, where appropriate, the laws relating to Veteran’s Aid and Attendance.

Strategy:

There are dozens of different strategies that can be employed to protect assets. We walk you through each of these strategies that apply to your situation and discuss them with you to determine which ones appeal to you and would work for you and which ones are inappropriate. Whenever possible, we compare strategies and give alternatives.

Assumptions:

Our clients are often unable to give us all of the information which we would need to make a perfect plan. For example, many people do not know what day they will enter a nursing home, what nursing home they will enter, how much it will cost, when and how often the nursing home will raise its rates, how much will be covered by Medicare, and how much private pay money is required by the nursing home as a condition of admission. The plan is based on assumptions and is usually very accurate. However, as these variables become known, the plan is revised from time-to-time. In addition, the law changes frequently and the plan may need to be revised periodically to be sure that it complies with current law.

Additional Considerations:

This section is an attempt to answer the common questions which people have and avoid the ordinary pitfalls.

Action Plan:

This is a summary of the exact steps that need to be taken to implement the plan.

Implementation:

Our office assists you to the extent possible in seeing that this is done. For example:

- If real estate needs to be transferred to a spouse or child, our office will prepare the deed and record it for you.
- If you need to deal with financial institutions or insurance companies, our office will obtain all the necessary forms for your signature.
- If the plan calls for the purchase of an annuity, our office will assist you in dealing with the insurance company to be sure that a policy is furnished that will meet the ever-changing Medicaid requirements.
- Filing the Medicaid Application: The final phase of the process for the Medicaid long-term care assistance. Every item on the application must be documented and explained. We will do everything needed to prepare and file the application for you, and we will also be the ones to answer questions that the Department of Social Services may have about the application.

Our general rule is that if you can do it or we can do it, we will do it for you. We have people who do this every day, and it is easier for them to do it than it is for you to do it. Public benefits’ planning is extremely complex. Even our finest judges are often baffled — click here to see what the top Judges in our land say about Medicaid. Our job is to guide you through the Medicaid maze so that you can protect the maximum amount of assets with the least amount of effort on your part.

How Much Can You Protect?
This varies from client-to-client, but as a general rule, for a married couple we can protect one-hundred percent (100%) of your assets. For an unmarried client, we can typically protect anywhere from forty percent (40%) to seventy percent (70%) of your assets, though sometimes we can protect all of your assets, depending on the specifics of your situation. Remember that we are talking here about asset protection planning at or near the time that the long-term care will be needed — often when nursing home care is already in place or is imminent.

Many people have heard that you must do Asset Protection planning three or five years prior to entering a nursing home. This is simply not true. There is a Medicaid rule known as the “lookback period,” which is currently 5 years. However, this does not mean you have to do this type of planning 5 years prior to the nursing home; rather, it means there are penalties, in the form of periods of ineligibility for Medicaid, for certain types of planning done within five years prior to applying for Medicaid. We are of course fully aware of these rules and penalties and all other Medicaid requirements, and very careful to comply completely with the law. Having to deal with the 5-year lookback period is why for unmarried clients we are typically able to protect only forty to seventy percent of your assets.

Remember, if you are still healthy and not yet on the “long-term care continuum,” then instead of Life Care Planning and Medicaid Asset Protection Planning you should consider our Living Trust PlusTM Asset Protection Trust, which is a simpler and less expensive method of asset protection for clients who will most likely not need any long-term care for at least five years.

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Aging is Not a Disease

Monday, June 30th, 2008

It is natural that health care providers such as doctors, pharmacists and nurses will have the same attitude towards aging as other Americans. Without proper geriatric care training, these people can fall into the same trap of treating the elderly differently from younger people. According to the Alliance for Aging Research,

“In recent years evidence has been mounting to suggest that, at all levels in the delivery of healthcare, there is a prevailing bias – ageism – that is at odds with the best interests of older people. This prejudice against the old in American healthcare is evidenced by scores of recent clinical studies, surveys and medical commentaries, many of which are referenced here. In this report, we outline five key dimensions of the ageist bias in which U.S. healthcare fails older Americans:

- Healthcare professionals do not receive enough training in geriatrics to properly care for many older patients.
- Older patients are less likely than younger people to receive preventive care.
- Older patients are less likely to be tested or screened for diseases and other health problems.
- Proven medical interventions for older patients are often ignored, leading to inappropriate or incomplete treatment.
- Older people are consistently excluded from clinical trials, even though they are the largest users of approved drugs.”

A fictional story, often used in the training of geriatric physicians, goes this way:

“A 90 year old man meets with his doctor and complains about pain in his right knee. The doctor tells him, “Well Henry, what do you expect? You’re 90 years old.”

Henry replies, “But doctor my left knee is the same age as my right knee, there’s no pain and it feels just fine!”

Many in the health-care profession consider old age to be a disease itself. Any medical problems are inappropriately attributed to old age as if it were a medical condition. And since there is no cure for old age, appropriate tests and treatment are never performed. Thus, medical problems that may not be related to age and may just as frequently occur in younger people are often not treated.

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Life Estate Law Changing Soon

Monday, June 16th, 2008

In Virginia, a life estate in real estate has always been treated as an exempt asset for the purposes of Medicaid eligibility. Unfortunately, the Virginia General Assembly recently passed legislation that instructs DMAS (the Department of Medical Assistance Services, the agency that oversees the Virginia Medicaid program) to amend the State Medicaid Plan to count all life estates as countable assets in the determination of Medicaid eligibility. This means that in the near future, life estates will no longer be considered exempt assets when applying for Medicaid.

Life estates have been used throughout Virginia history for many different purposes – Medicaid asset protection planning, estate planning, probate avoidance, and tax planning. This significant new change in the law, once implemented, will negatively affect many Virginians wishing to protect their homes from the devastating expenses of long-term care.

A Call to Action

Because DMAS has not yet amended the State Medicaid Plan, Medicaid still considers a life estate as an exempt resource, but this will soon change. If you own a home, or live with a child in the child’s home, and have been considering Medicaid Asset Protection, it is imperative that you contact us today. Together we can determine whether a life estate fits your long-term care planning needs.

What Is a Life Estate?

A life estate in real estate is a type of “split interest” ownership somewhat similar to a timeshare. If you own a timeshare, you have the exclusive right to use your timeshare property during your period of ownership, typically a certain week each year. If you own a life estate, you have the right to live in the property for the rest of your life, and your ownership interest terminates upon your death.

As of today, a life estate is still considered an “exempt asset” for Medicaid purposes, meaning you can own a life estate and still get Medicaid. However, the window of opportunity will soon be closing, though at this point we don’t know exactly when.

How Are Life Estates Used in Medicaid Asset Protection Planning?

One Medicaid planning strategy involves the sale of real estate, coupled with the retention of a life estate. For example, a mother can transfer a home to her daughter by deeding the property to the daughter with the mother keeping a “retained life estate.” This allows the mother the right to live in the home for her remaining lifetime and to be considered the owner of the home for most purposes.

Another Medicaid planning strategy involves a parent purchasing a life estate in the home of a child. Medicaid allows these asset protection techniques so long as the parent actually resides in the home for at least a year after the transaction.

A third Medicaid planning strategy involves the gift of real estate, coupled with a retained life estate. A gift of this nature (technically called a gift of the “remainder interest”) has many advantages over an outright gift of real estate. A few of the advantages are:

1) The parent, as owner of the life estate, continues to qualify for any property tax exemptions such as senior citizens exemptions that were available prior to the transfer.
2) The parent will not lose the legal right to live in the property.
3) The recipient(s) of the property receive a stepped-up basis for capital gains tax purposes.
4) Since the value of the remainder interest is lower than the full value of the entire piece of real estate, a gift of a remainder interest results in a shorter Medicaid penalty period than a transfer of the entire house.

Life Estate Deeds and the calculations that must be made in connection with the purchase or sale of life estates and/or remainder interests are extremely complicated, and should only be done by an experienced elder law attorney such as Evan Farr, and in connection with a comprehensive Asset Protection Plan.

If you own a home, live with a child in the child’s home, or are planning to live with a child in the child’s home in the future, please contact us today for a consultation to determine whether a life estate is right for you.

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The Living Trust PlusTM Asset Protection Trust

Saturday, September 1st, 2007

A typical revocable living trust protects your assets from the expenses of probate, but does not otherwise protect your assets. Evan Farr’s Living Trust PlusTM Asset Protection Trust is a living trust that not only protects your assets from the expenses and difficulties of probate, but also protects your assets during your lifetime from a multitude of other financial risks, including the threat of lawsuits, auto accidents, creditor attacks, medical expenses, and — most importantly for our elderly clients – the catastrophic expenses often incurred in connection with nursing home care.

The Living Trust PlusTM Asset Protection Trust  is a special type of irrevocable, income-only trust.  Even though the trust is “irrevocable,” you will remain in control of your assets because you will:

- retain the right to receive all of the trust income;
- retain the right to live in and use your real estate;
- retain the right to change trustees; and
- retain the right to change beneficiaries.

Our Living Trust PlusTM Asset Protection Trust has no effect on your income and no effect on your income taxes. Along with our Asset Protection Trust, you will also be enrolled in our Lifetime Protection System, which entitles you to unlimited consultations with our firm as necessary to carry out your Estate Plan and Asset Protection Plan consistent with your needs and desires. As part of our annual fee, we will modify your documents as often as necessary due to changes in the law, changes in your family or financial circumstances, changes of address, or changes in your wishes. If and when necessary, we will: assist you with selection of appropriate long-term care facilities; review, prior to signing, all admission documents; and obtain Medicaid benefits for you at the appropriate time. 

For more information about the Living Trust PlusTM Asset Protection Trust or the Living Trust PlusTM Lifetime Protection System, please click here to contact us .

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What is Alzheimer’s Planning?

Saturday, September 1st, 2007

Persons with Alzheimer’s disease and their families face special legal and financial needs. Controlling the high costs of caring for a loved one with Alzheimer’s, and navigating the emotionally and physically demanding requirements of caregiving, require the assistance of a highly skilled and specialized expert in the field of Alzheimer’s Planning.

 Alzheimer’s Planning is a sub-specialty of Elder Law. It involves a unique and complex combination of estate planning, long-term care planning, asset protection, geriatric care coordination, Medicaid planning, and nursing home planning. It requires a specialized knowledge of the legal and financial problems and issues that are unique to families dealing with this devastating illness. Evan H. Farr is a Certified Elder Law Attorney with a focus on the financial and legal issues surrounding Alzheimer’s disease. Evan and his Alzheimer’s Planning Team — comprised of a geriatric care manager, a financial planner, and various paralegals and asset protection specialists — provide life-long guidance, management, and oversight on vital issues such as medical and nursing care, housing options, financial management, estate planning, asset protection, Medicaid eligibility, and more.

One of the primary goals of Alzheimer’s Planning is to ensure the highest possible level of personal dignity and quality care for the remaining lifetime of the Alzheimer’s patient. To achieve this goal, it is often necessary to protect assets as quickly as possible, so that if the Alzheimer’s patient must enter a nursing home, Medicaid can be obtained as soon as possible. Money that is protected through Alzheimer’s Planning can be used to provide the Alzheimer’s patient with an enhanced level of care and a better quality of life while in the nursing home and receiving Medicaid benefits.

For more information about Alzheimer’s Planning, please click here to contact us .

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Reverse Mortgage Home Equity Loans

Thursday, February 1st, 2007

For many seniors the equity in their home is their largest single asset, yet it is unavailable to use unless they use a conventional home-equity loan. But a conventional loan really doesn’t free up the equity because the money has to be paid back with interest.

A reverse mortgage is a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person’s lifetime. Instead of making payments the cash flow is reversed and the senior receives payments from the bank. Thus the title “reverse mortgage”.

Many seniors are finding they can use a reverse mortgage to pay off an existing conventional mortgage, to create money for a down payment for a second home or to pay off debt. Popularity is skyrocketing. Over the last five years the number of reverse mortgages nationwide has tripled. The uses of this untapped wealth are only limited by a person’s imagination.

For those seniors who earn low incomes but own a home, a reverse mortgage can allow them to remain in the home by creating extra income. It can also allow for remodeling or repairs and when the time comes to sell, the investment in the home can make it more valuable.

False Beliefs about Reverse Mortgages

- “The lender could take my house.” The homeowner retains full ownership. The Reverse  Mortgage is just like any other mortgage; you own the title and the bank holds a lien. You can pay it off anytime you like.
- “I can be thrown out of my own home.” Homeowners can stay in the home as long as they live, with no payment requirement.
- “I could end up owing more than my house is worth.” The homeowner can never owe more than the value of the home at the time the loan is due.
- “My heirs will be against it.” Experience demonstrates heirs are in favor of Reverse Mortgages.

To qualify for a reverse mortgage, you must be at least 62, own and live in, as a primary residence, a home [1-4 family residence, condominium, co-op, permanent mobile home, or manufactured home].  There are no income, asset or credit requirements. It is the easiest loan to qualify for.

A reverse mortgage is similar to a conventional mortgage. As an example:

- The bank does not own the home but owns a lien on the property just as with any other mortgage
- You continue to hold title to the property as with any other mortgage
- The bank has no recourse to demand payment from any family member if there is not enough equity to cover paying off the loan
- There is no penalty to pay off the mortgage early
- When the loan becomes due, you can refinance and keep the house.

The proceeds from a reverse mortgage are tax-free and can be used for any legal purpose you wish, for example:

- daily living expenses
- home repairs and improvements
- medical bills and prescription drugs
- pay-off of existing debts
- education, travel
- long-term care and/or long-term care insurance
- financial and estate tax plans
- gifts and trusts
- to purchase life insurance
- or any other needs you may have.

The amount of reverse mortgage benefit for which you may qualify, will depend on  your age at the time you apply for the loan, the reverse mortgage program you choose, the value of your home, current interest rates, and for some products, where you live.  As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be (up to certain limits, in some cases). The reverse mortgage must pay off any outstanding liens against your property before you can withdraw additional funds.

The loan is not due and payable until the borrower no longer occupies the home as a principal residence (i.e. the borrower sells, moves out permanently or passes away). At that time, the balance of borrowed funds is due and payable, all additional equity in the property belongs to the owners or their beneficiaries. If the heirs want to keep the home with the additional equity, they can refinance with a conventional loan.

There are three reverse mortgage loan products available, the FHA – HECM (Home Equity Conversion Mortgage), Fannie Mae – HomeKeeper®, and the Cash Account programs. Over 90% of all reverse mortgages are HECM contracts.

The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs. With a reverse mortgage, all of these costs will be financed as part of the mortgage prior to your withdrawal of additional funds.

You must participate in an independent Credit Counseling session with an FHA-approved counselor early in the application process for a reverse mortgage. The counselor’s job is to educate you about all of your mortgage options. This counseling session is at no cost to the borrower and can be done in person or, more typically, over the telephone. After completing this counseling, you will receive a Counseling Certificate in the mail which must be included as part of the reverse mortgage application.

You can choose 3 options to receive the money from a reverse mortgage:

1) all at once (lump sum);

2) fixed monthly payments (for up to life);

3) a line of credit; or a combination of a line of credit and monthly payments.

The most popular option, chosen by more than 60 percent of borrowers, is the line of credit, which allows you to draw on the loan proceeds at any time. The line of credit also earns interest which in essence is allowing the equity in the home to grow. For example $120,000 in a line of credit earning 5% would be worth almost 200,$000 10 years from now.

Keeping money in a reverse mortgage line of credit in Virginia, and in most other states, will not count as a resource for Medicaid eligibility purposes so long as the house itself is an exempt resource. (For Medicaid payment of long-term care, the applicant’s principal residence is excluded from countable resources for the six months of continuous institutionalization provided the applicant intends to return home and provided the equity in the home property does not exceed $500,000. Regardless of the amount of home equity, after six months of continuous institutionalization the nursing home resident’s home will become a countable resource, unless the home is occupied by a spouse, dependent child under age 21, or a blind or disabled child.)

However, transferring the money to an investment or to a bank account would convert the exempt home equity into a countable resource and therefore might delay Medicaid eligibility.  This important  distinction between countable resources and exempt assets is not a simple black and white issue – if you or your loved one is facing the possible need for long-term care,  you need to get an opinion from an experienced elder attorney.

If a senior homeowner chooses to repay any portion of the interest accruing against his borrowed funds, the payment of this interest may be deductible (just as any mortgage interest may be). A reverse mortgage loan will be available to a senior homeowner to draw upon for as long as that person lives in the home. And, in some cases, the lender increases the total amount of the line of credit over time (unlike a traditional Home Equity Line where the credit limit is established at origination). If a senior homeowner stays in the property until he or she dies, his or her estate valuation will be reduced by the amount of the debt.

At the death of the last borrower or the sale of the home, the loan is repaid from equity in the home. Any remaining equity (which is often the case) goes to the heirs.

Almost all reverse mortgages are the HECM loan which is guaranteed by FHA mortgage insurance. If there is not enough equity to cover the loan, the insurance satisfies the loan by paying the deficit. With a HECM loan, the bank will never come after the heirs to satisfy the mortgage obligation.

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New LTC Insurance Premium Deductibility Limits

Friday, December 1st, 2006

The Internal Revenue Service has announced the 2007 limitations on the deductibility of long-term care insurance premiums from taxes. Premiums for “qualified” (see explanation below) long-term care policies are treated as an unreimbursed medical expense. These premiums – what the policyholder pays the insurance company to keep the policy in force – are deductible to the extent that they, along with other unreimbursed medical expenses (including “Medigap” insurance premiums), exceed 7.5 percent of the insured’s adjusted gross income. Long-term care insurance premiums are deductible for the taxpayer, his or her spouse and other dependents. If you are self-employed, the 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 7.5 percent 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 2007. Any premium amounts above these limits are not considered to be a medical expense.

Attained age before the close of the taxable year Maximum deduction
40 or less $290
More than 40 but not more than 50 $550
More than 50 but not more than 60 $1,110
More than 60 but not more than 70 $2,950
More than 70 $3,680

What Is a “Qualified” Policy?
To be “qualified,” policies issued on or after January 1, 1997, must adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are that the policy must offer the consumer the options of “inflation” and “non-forfeiture” 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. For more on the “qualified” definition, click here and scroll down to “The tax deductibility of long-term care insurance premiums”.

The Taxation of Benefits
Benefits from reimbursement policies, which pay for the actual services a beneficiary receives, are not included in income. Benefits from per diem or indemnity policies, which pay a predetermined amount each day, are not included in income except amounts that exceed the beneficiary’s total qualified long-term care expenses or $260 per day (for 2007), whichever is greater.

 The Georgetown University Long-Term Care Financing Project has a two-page fact sheet entitled ”Tax Code Treatment of Long-Term Care and Long-Term Care Insurance.” To download it in PDF format, click here .

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Average Nursing Home Room Tops $90,000 a Year

Friday, December 1st, 2006

The average daily cost of a private room in a nursing home in Northern Virginia is $91,615 a year, or $251 a day, according to the 2006 MetLife Market Survey of Nursing Home and Home Care Costs.

The average daily cost of a private room in a nursing home in the United States is $75,190 a year, or $206 a day, according to the survey. This is a 3.9 percent increase over last year, when the average daily rate for a private room in a nursing home was $74,095 a year, or $203 a day, according to MetLife.

Once again, the highest rates for a private room in 2006 were found in Alaska, where the cost is $578 a day on average. The lowest rates were again found in Shreveport, Louisiana, at $111 a day, a $4 drop from last year. 

The survey also reports on the cost of a semi-private room, which in Northern Virginia now averages $208 a day, or $75,920 a year.

The study also found that the cost of a home health care aide averaged $19 per hour both here in Northern Virginia nationally, the same as last year.

For the full 2006 report, including a list of average daily nursing home and home health care costs in selected cities, click here .

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When Should You Take Your Social Security Benefits?

Monday, November 13th, 2006

As you approach retirement, you must decide when to begin taking your Social Security benefits. You have three options: You may begin taking benefits between age 62 and your full retirement age, you can wait until your full retirement age, or you can delay benefits and take them anytime up until you reach age 70.

More than two-thirds of people take their benefits early. Some of them don’t have a choice — they need the money right away. But for others, it might make more sense to delay benefits, even past their full retirement age. Ultimately it is a personal decision that depends on whether you plan to keep working, your health and life expectancy, your spouse’s needs, and the availability of other retirement plans.

If you were born before 1937, your full retirement age was 65. For those born after 1937, the retirement age gradually increases until it reaches age 67 for people born in 1960 or later. If you take Social Security between age 62 and your full retirement age, your benefits will be reduced to account for the longer period you will be paid. If you delay taking retirement, depending on when you were born, your benefit will increase by 6 to 8 percent for every year that you delay, in addition to any cost of living increases.

For example, suppose you are born in 1944 and are eligible for your full Social Security retirement benefit at age 66, but delay taking benefits until age 70. Your annual percentage increase in benefits will be 8 percent. By delaying your benefits by four years, the Social Security check you will receive will be 32 percent higher (4 years x 8 percent per year). If your monthly benefit would have been $1,000 had you taken it at age 66, the monthly benefit you will receive at age 70 will be $1,320 (not counting cost of living increases, which are around 4 percent a year).

If you are lucky enough to have the choice of when to take your benefits, consider the following factors:

Whether you plan to keep working . If you plan to work until your full retirement age or beyond, it probably won’t make sense to take benefits early, especially if you earn considerable income. Any income you earn above Social Security’s income thresholds will be taxed. So not only will you be receiving reduced Social Security benefits, but you will pay tax on the income as well, and the extra income may mean that more of your Social Security benefits will be taxed.

Health and life expectancy. To get the full advantage of delaying benefits until age 70, you will need to live past age 80 (not taking into account cost of living increases). The average life expectancy for men who reach 62 years of age is around 80, while for women it is around 83. You can’t predict exactly how long you will live, but if you are healthy and have a long life expectancy, you may receive more benefits if you delay.

Spouse’s needs. Another important consideration is your spouse’s needs. An older spouse (and especially if he or she is the only breadwinner), might want to delay benefits as long as possible so as to increase the surviving spouse’s survivor benefits and provide additional protection to the surviving spouse. Note: Even if you delay taking your benefits past your full retirement age, your spouse can still take his or her spousal benefits anytime after age 62 (while you are still alive, your spouse is entitled to one-half of your full benefit if it would be greater than what he or she would receive from his or her own earnings).

Other retirement plans. Experts disagree on whether it makes sense to take benefits early and defer using other retirement plans. Some claim that if you are going to get a higher rate of return on a tax-deferred retirement plan than you would get by waiting to take Social Security, you should take Social Security early. On the other hand, other experts argue that letting a retirement account build up could create greater tax obligations. If your retirement account and Social Security combine to put you above the income thresholds, you will have to pay taxes on the Social Security. Delaying Social Security may reduce the taxes by providing you with more Social Security income (which is at most 85 percent taxable) and less retirement-account income (which can be 100 percent taxable).

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How Will the New Congress Affect Key Elder Law Issues?

Monday, November 13th, 2006

The Democratic Party’s takeover of both houses of Congress is likely to have financial implications for the elderly and their families, although how profound these changes will be remains to be seen.

Of greatest interest to elder law attorneys and their clients is what the change in leadership on Capitol Hill will mean for the fate of the Deficit Reduction Act of 2005 (DRA). The DRA is particularly important to the elderly because it severely restricts their ability to transfer assets before qualifying for Medicaid coverage of nursing home care. Democrats in Congress maintain that the law is unconstitutional because the version passed by the Senate and signed by President Bush was different from the version passed by the House.

After President Bush signed the measure last February, Democrats in the House fought to have the DRA’s two differing versions reconciled and voted on again, while Republican leaders said they were content to rely on the courts to straighten the matter out.

“We’re going to keep pressing on this,” Brendan Daly, a spokesman for Nancy Pelosi (D-CA), told ElderLawAnswers at the time. “It could be [resolved legislatively] if they wanted to do it. It wouldn’t be that difficult a thing; they could just fix it and then call for a re-vote, but they don’t want to do that because it’s a controversial bill.”

When the Democrats got nowhere legislatively, eleven Democratic House members filed suit to have the law overturned.

Daly has not yet commented on whether the Democrats will force a re-vote on the DRA once the new Congress is in session. Narrowly passing in the Republican-led Congress, the measure now would almost certainly be defeated.

Other areas of interest to the elderly and their advocates include:

The estate tax : A Democratic Congress spells the death of efforts to repeal the “death tax,” as it is referred to by its critics. But while Democrats have opposed full repeal of the estate tax, many support increasing the exemption amount, which currently stands at $2 million and will rise to $3.5 million in 2009 before the current law expires.

Social Security privatization : The election means the final nail in the coffin for President Bush’s efforts to allow Social Security beneficiaries to set up private accounts.

Prescription drugs :Drug prices could fall as a result of the Democratic victory, and drug company stock prices have already dipped in anticipation. Rep. Pelosi, who will be the new House Speaker, says changing Medicare to allow the federal government to negotiate drug prices is a top priority. But President Bush would likely veto any bill that mandates negotiations. Look for Democrats to attempt other fixes to Medicare Part D as well, although their changes will have to be moderate enough to garner bipartisan support and avoid a presidential veto.

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