Caregiver Contracts – Tax Benefits

April 30, 2014

Filed under: Living at Home,MassHealth,Medicaid (MassHealth) — Alexis @ 10:28 AM

If you would like to care for your parents full-time, or close to it, and your parents want to pay you for this, then there are some tax issues that you need to be aware of.

Most importantly, if you are providing hands-on care, making meals, doing the shopping, taking your parents to doctors’ appointments, etc., then you are an employee (as opposed to an independent contractor).  And if you are an employee, then there are some rules that you need to comply with.

First, you and your parents need to report your income.  Second, you and your parents need to pay taxes (they pay employer taxes, you pay income taxes).  Now before you throw something at your computer screen, consider this: You want to pay payroll taxes.  Why?  Because FICA earnings will translate down the road into your own retirement Social Security check.  Spending years working but not contributing to FICA can result in a lower Social Security check when you eventually retire.  Same goes for Social Security Disability (SSDI) if you become disabled before 65.

Also consider this: Your parents can recapture part of the employer taxes they are paying in the form of a tax deduction – If they spend more than 7.5% of their AGI (adjusted gross income) on health care, then they can deduct health care costs.  If they are paying for your many hours of care, in addition to other out-of-pocket health care costs, it is quite likely that they are spending over 7.5% AGI on those costs.

The payroll requirements for an employer are detailed.  Rather than asking your parents to try to keep the records and handle the reporting to the IRS and DOR themselves, it is exponentially easier to hire a payroll company to take care of all the details for you.  One payroll company working exclusively for home care situations is Care.com/homepay.    I haven’t worked with them, but I think they are the only payroll company focusing on home care.

You can read here about what goes into a caregiver contract, and you can read here about how your parents can end up in big trouble later with MassHealth if they pay you without a caregiver contract in place.

Nursing Home Care & MassHealth – Eligibility Rules for the Single Person

April 24, 2014

Filed under: MassHealth,Medicaid (MassHealth) — Alexis @ 6:24 PM

As you well know, privately paying a nursing home bill is a very costly undertaking.  Should you need nursing home care someday, typically Medicare and your supplemental insurance cover up to 100 days.  After that, you either privately pay or look to Medicaid (MassHealth) to pay.  This post explains the basic MassHealth rules for a single person needing nursing home care.  See this post for the rules where one member of a couple needs nursing home care.

For a single person to receive MassHealth assistance with paying for nursing home care, generally speaking she can have no more than $2,000 to her name in liquid assets and minimal life insurance.  She can own a home and be accepted into MassHealth, but the agency will require her to sell the home and use the proceeds towards her care.  If the home does not sell during her lifetime, the agency will place a lien on the home and be paid back out of the member’s estate (“estate recovery”).

MassHealth uses a five-year look-back period.  From the date of application, MassHealth looks back five years to see if you have made any gifts (typically anything over $100 must be explained).  MassHealth disqualifies applicants who have made gifts in the last five years.  Read here about what to do if you have over $2000 in assets.

Couples: Protect Your Assets from the Cost of Nursing Home Care

Filed under: MassHealth,Medicaid (MassHealth) — Alexis @ 6:22 PM

As you well know, privately paying a nursing home bill is a very costly undertaking.  Should you need nursing home care, typically Medicare and your supplemental insurance cover up to 100 days.  After that, you either privately pay or look to Medicaid (MassHealth) to pay.

For a married person to receive MassHealth assistance with paying for nursing home care, generally speaking, the couple can have no more than $119,240 in liquid assets (technically, the nursing home spouse can keep $2000, and the at-home spouse can hold the remainder) and minimal life insurance.  The couple (or just one spouse) can own a home.  If the nursing spouse owns an interest in the home, MassHealth will place a lien on the home, to potentially be paid back out of the member’s estate (“estate recovery”).

MassHealth uses a five-year look-back period.  From the date of application, MassHealth looks back five years to see if you have made any gifts (typically anything over $100 must be explained).  MassHealth disqualifies applicants who have made gifts in the last five years.

For many couples, MassHealth is a double-edged sword.  Many at-home spouses are terrified of spending all their savings on their ill spouse’s care – MassHealth spares them that.  On the other hand, if a healthy spouse is young and seems to have a long life ahead of her, then reducing her assets to just $119,240 is a very scary proposition.  Contact our office for strategies to help the at-home spouse keep more of her assets, so that she is not living in fear of becoming impoverished.

The Single Person: Protecting Your Assets from the Cost of Nursing Home Care

Filed under: MassHealth,Medicaid (MassHealth) — Alexis @ 6:21 PM

If your loved one is single and would like MassHealth to pay her nursing home bill, then the basic rules are these: (1) She medically requires nursing home level care, (2) she has no more than $2,000 in “countable” assets (that’s money in the bank, retirement accounts, life insurance, etc.), and (3) she has not made any sizeable gifts in the last five years.  This post focuses on options if she has over $2,000 in liquid assets.

The most important thing to remember is that you want to do what you can to give your loved one in the nursing home the best quality of life you can – keeping in mind that she is frail, perhaps cognitively impaired, not living in her own home anymore, not really in charge of what she eats and when, and other basic comforts.  I usually tell clients to “spend down” on things that their loved one really enjoys – a new tv for her room?  Books on tape?  New clothes?  An iPad loaded with pictures of the grandchildren?  One client loved chocolate frappes from Friendly’s – so as part of her “spend down,” her niece bought a few hundred dollars’ worth of Friendly’s gift certificates and brought her aunt frappes at least twice a week.  The little things make a big difference.

In addition to spending down on the “little things,” you can place extra assets into a “pooled trust.”  This allows you to have a “savings account” for things that will inevitably come up while your loved one is in the nursing home.  For example, if there is a family wedding and you want to bring your loved one home for the weekend, you can use the pooled trust to pay for a wheelchair van and 24-hour aides.

Another example is the “bed hold.”  If your loved one needs to leave the nursing home, say to go to the hospital, MassHealth will pay to hold the room for only ten days.  If your loved one will be out of the nursing home for longer than that, and you want her to be able to keep her room (i.e., not be moved to a new room upon her return), then you can ask the pooled trust to pay for the room until the elder returns.  These are just two examples of things that MassHealth doesn’t cover – and the $2,000 that they permit the member to keep in her own name certainly won’t cover, either.

What happens if you own a home and sell it, putting you over the $2,000 limit?  Once you sell the home and have more than $2,000 in the bank, you are no longer eligible for MassHealth.  One approach often used at this point is to pay for the nursing home privately for some stretch of time, and then spend down on useful things and move some funds into the pooled trust to bring your own account back down to $2,000.  Again, having the funds in the pooled trust gives you a savings account for the things that MassHealth won’t cover and that the minimal assets in your own name won’t either.

If you would like to explore whether placing your funds in a pooled trust is right for you, please call our office.  We are here to help.

Consider Using a Pooled Trust with MassHealth Nursing Home Planning

Filed under: MassHealth,Medicaid (MassHealth) — Alexis @ 6:20 PM

If a single person wants MassHealth assistance with paying for nursing home care, but has more than the $2,000 in assets that MassHealth will permit her to keep, one option is to transfer the excess assets to a pooled trust.

A pooled trust is a trust managed by a non-profit for the benefit of disabled individuals.  MassHealth regulations permit a single person to transfer assets to a pooled trust and still qualify for MassHealth.  Transferring excess assets to the pooled trust would allow you to qualify for MassHealth while having funds held in the trust that you can dip into to supplement your care.  For example, MassHealth won’t pay for those new dentures you need, or for a chair car to take you to your grandchild’s graduation.  After you pass away, the pooled trust keeps about 25% of the balance (to support its mission of assisting disabled adults), and MassHealth is paid back for whatever it has paid the nursing home on your behalf.

Because of the payouts at the end to the pooled trust and to MassHealth, you can see that this is not a vehicle for preserving all of your assets for your family – but it is still a good planning option.  First, MassHealth pays a lower rate to the nursing home than private payers, so in the end, you are paying the nursing home, but less than if you were to pay privately.  Second, by transferring the funds to the pooled trust, rather than spending all your assets down to $2,000, you establish a “savings account” into which you can reach for extra expenses that MassHealth does not cover, such as companion care, or a home health aide for visits home.  After the pooled trust and MassHealth are paid, your family will receive any balance.

For examples of pooled trusts in our area, check out:

PLAN of Massachusetts and Rhode Island

CJP Disabilities Trust II

My Dad Died Owning Stocks – What a Pain That Was!

April 1, 2014

Filed under: Financial,Probate — Alexis @ 10:18 AM

If you have ever had to deal with stocks that you inherited, then you know what a pain it can be to change ownership over to your name.

You probably had to:

  • Figure out which stock transfer agent was managing those shares (ex. Computershare),
  • Figure out which forms that transfer agent needed you to fill out,
  • Go to your local bank to obtain a “medallion stamp signature guarantee” (and there is usually one person per region authorized to make that stamp, so you had to wait until the day that person was in your local branch),
  • Mail those forms to the transfer agent,
  • Wait for proof of your new ownership to arrive,
  • Find the value of the stocks on the date of death,
  • Find the value of the stocks on the date they were transferred to you, and
  • Report those last two items to the probate court.

What a pain!

Consider sparing your family such a headache.  If you own individual stocks, take action now to help your family out later.  For most people, listing family members as “beneficiaries” or “payable on death to” will do the trick.  You do this by: (1) figuring out which stock transfer agent manages your stocks, and (2) downloading appropriate forms from their website, completing them, and mailing them in.

For example, if you have a spouse and three children, then in most cases, you would name your spouse as the first beneficiary, and in case she predeceases you, name your three children as equal beneficiaries in the second position.  When you die, your spouse, or your children, if your spouse doesn’t survive you, will download the appropriate forms from the stock transfer agent’s website, mail those in along with a death certificate, and the transfer agent will send out proof that the beneficiaries are the new owners of the stocks (or a check, if the beneficiaries prefer).

That’s it.  No chasing down the manager at your local bank for a signature, no reporting to the probate court.  Just a few forms in the mail.

A caveat: If you have a taxable estate, a special needs child, predeceased children, children who don’t speak to you, or anything else that makes your situation unique, then adding beneficiaries to stocks without professional guidance may not be a good idea.  If you have any unique situation, then speak with an elder law or estate planning attorney before changing your stocks.  In addition, if you have met with an attorney who has crafted an estate plan for you, then check with her on whether to name beneficiaries.  But for most people, adding family as beneficiaries is the right thing to do.

Whatever you do, don’t add other people as joint owners on your stocks!  See this post for why that approach can cause a lot of problems.  It’s rarely a good idea.

A little work by you now will save your family a lot of work later. And if you need help determining whether and what to do with your stocks, please let us know.