 News & Announcements |
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| Brad Frigon was a featured speaker at the Wealth Counsel "Planning for the Generations Symposium" in Chicago earlier this month.
Brad's article on the new Carry Over Basis Rules will be this month's featured article in Elder Law Answers.
Brad and Eric updated Appendix L to the West Publishing Colorado Practice Series on Colorado Personal Injury Practice.
The Law Offices of Bradley J. Frigon is a new member of the Better Business Bureau (BBB).
Are you looking for a speaker for your next group luncheon or networking event? Call us at 720-200-4025 and schedule a speaking event with one of our attorneys. It will be informative and interesting!
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| Upcoming Programs |
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Have questions about attending local programs? Contact us at 720-200-4025 for more information.
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Legal Link
Your Personal Guide to Estate, Probate and Long-Term Care Planning
August, 2009 |
Dear Clients and Friends,
"Negative Inheritance" is the term economists use to describe a situation where the time and cost of caring for an aging family member outweigh any gifts or inheritance the surviving spouse or children receive. To learn more about how to avoid this predicament, see this month's article "Negative Inheritance."
Did you know that the cost for living at an assisted living facility may be tax deductible? This month we look at how to claim an income tax deduction for assisted living expenses. To find out more, read our article "Income Tax Deduction for Assisted Living Costs."
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The Law Offices of Bradley J. Frigon is committed to providing quality personalized legal services with the highest level of integrity and professionalism. We assist clients with wills, trusts, probate and trust administration, probate litigation, Medicaid and public benefits planning, tax planning, guardian & conservatorships, special needs trusts, and small business planning.
As always, we hope that you enjoy the articles in our newsletter. Your comments and questions are important to us. You may send them to tlusk@bjflaw.com. |
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Client Testimonial "Dear Brad,
Thank you very much for speaking at our national conference last week. You did a terrific job! I look forward to working with you on future projects. Thanks again."
- Valerie, Chicago, IL
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Negative Inheritance
by Bradley J. Frigon |
Unfortunately, more and more families are becoming familiar with a concept known as "negative inheritance." Economists use this term to describe the situation where the time and cost of caring for an aging or sick family member outweigh any gifts or inheritance the surviving spouse or children receive. Negative inheritance can destroy a child's retirement or leave the surviving spouse unable to pay for their own care.
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Income Tax Deduction for Assisted Living Costs
by Bradley J. Frigon |
Did you know that a portion of the costs for living at an assisted living facility may be tax deductible? Medical expenses, including some long-term care expenses, are deductible if the expenses are more than 7.5 percent of your adjusted gross income.
For assisted living expenses to be tax deductible, the resident must be considered "chronically ill." This means a doctor or nurse has certified that the resident either:
- cannot perform at least two activities of daily living, such as eating, grooming, transferring, bath, dressing, or continence; or
- requires supervision due to a cognitive impairment (such as Alzheimer's disease or another form of dementia).
Read more
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Negative Inheritance (continued) |
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For example, if a child planned to withdraw a small percentage from his or her portfolio each year, but now must increase that percentage by fifty percent to take care of aging parents, then the child's financial plan won't work. Another common situation for a negative inheritance involves the surviving spouse. If the spouse taking care of the family finances develops dementia, money problems will quickly follow and a lifetime of savings can be wiped out in a matter of months.
Bad investment choices and management will also contribute to the problem. Many seniors do not change their investment allocation to protect against dramatic market losses or they have tied up all of their money in annuity products with high surrender charges.
The most critical element to avoid negative inheritance is a proactive family discussion. The family dynamics may be difficult, but if the family does not discuss possible scenarios in advance, then the care giving inevitably falls to one child. This can cause tension and resentment and can damage family relationships. In some situations, it may be necessary for the family to enter into a family settlement agreement. This agreement will outline duties and specify any compensation arrangements.
Elder law attorneys often ask their clients for permission to talk with their aging parents to review the status of their assets, and to determine what plans the parents have in place for their long-term care. Legal documents should be reviewed and a series of financial projections should be run to determine if the parents' assets are sufficient for their care. If the parents cannot qualify for long-term care insurance because of their age or medical conditions, then it is essential to actively manage the parents' assets. This may include dealing with the family home or taking advanced steps for the parents to qualify for Medicaid. Often, people are house-rich and cash-poor. Obviously, selling the family home in order to provide funds for care or to diversify assets can be stressful for all concerned. Sometimes, however, it will be the inevitable option.
Studies show that middle-aged care-givers can suffer emotionally and vocationally, as well as financially. Some baby boomers will work at part time jobs so they can care for their parents. The care-giving workload can increase from an average of five hours per week to forty hours per week when the parent suffers from Alzheimer's or severe dementia. The care-giver has less time to save for their own retirement and spend time with their families. This emotional toll does not appear on a balance sheet, but it is real.
It is critical to receive independent qualified advice when dealing with family finances. The attorneys at the Law Offices of Bradley J. Frigon can assist clients and their families with their estate, long-term care, and financial planning needs.
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Income Tax Deduction for Assisted Living Costs (continued) |
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To qualify for the tax deduction, the personal care services must be provided according to a plan of care prescribed by a licensed health care provider. This means a doctor, nurse, or social worker must prepare a plan that outlines the specific daily services the resident will receive. Though not required by law, most assisted living facilities prepare care plans for their residents. Generally, only the medical component of assisted living costs is deductible and ordinary living costs like room and board are not. However, if the resident is chronically ill and residing in the facility primarily for medical care and the care is being performed according to a certified care plan, then the room and board may be considered part of the medical care and the entire cost may be tax deductible.
Assisted living expenses are not deductible if they are reimbursed by insurance or any other programs. Residents who are not chronically ill may still deduct the portion of their expenses that are attributable to medical care, including entrance or initiation fees. The assisted living facility is responsible for providing residents with information as to what portion of the fees is attributable to medical costs.
In some circumstances, adult children may also get a tax deduction if their parents or other immediate family members (including in-laws) live at an assisted living facility and qualify as their dependents. The family member must be a U.S. citizen or legal resident or resident of Canada or Mexico and the adult child must provide more than half of the family member's support for the year. Even if the adult child is not paying more than half the family member's total support for the year, the child may still be eligible for a deduction if he or she contributes to the family member's support according to a "multiple support agreement." The adult child must pay more than 10 percent of an individual's total support for the year, and, with others who also support the resident, collectively contribute to more than half of the resident's support. All those supporting the individual must agree on and sign a Multiple Support Declaration.
Contact the tax experts at the Law Offices of Bradley J. Frigon to determine if you or a family member can receive this valuable income tax deduction.
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Question
"I am being told that I have to spend down all of my money before I apply for Medicaid. Is this sound advice?"
Answer
Spending down is almost always unnecessary for a married couple. If the only advice you are receiving is to spend down your money, then you are talking to the wrong person.
Call us at 720-200-4025 today to set up an initial consultation to discover your options.
Sincerely,
Law Offices of Bradley J Frigon |
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