Giving Your Home to Your Children Can Have Tax Consequences

Many people wonder if it is a good idea to give their home to their children. While it is possible to do this, giving away a house can have major tax consequences, among other results.

When you give anyone property valued at more than $13,000 in any one year, you have to file a gift tax form.

Also, under current law you can gift a total of $5 million over your lifetime without incurring a gift tax. If your residence is worth less than $5 million, you likely won't have to pay any gift taxes, but you will still have to file a gift tax form.  (And Congress may change the gift tax exemption, which is now scheduled to revert to $1 million at the end of 2012 unless Congress acts.)

While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. If you give your house to your children, the tax basis will be $150,000. If the children sell the house, they will have to pay capital gains taxes on the difference between $150,000 and the selling price. The only way for your children to avoid the taxes is for them to live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.

Inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property’s tax basis would be "stepped up," which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences.

Beyond the tax consequences, gifting a house to children can affect your eligibility for Medicaid coverage of long-term care. 

There are other options for giving your house to your children, including putting it in a trust or selling it to them. Before you give away your home, consult an elder law attorney who can advise you on the best method for passing on your home.

This article was reprinted with the permission of ElderLawAnswers.com.

TSA Sets Up Hotline for Air Travelers With Disabilities or Medical Conditions

Concerned about negotiating the airport security checkpoint with a frail elderly or disabled traveler? Now there is a dedicated hotline that travelers with disabilities or medical conditions and their families can call with questions or concerns about the security screening process.

According to the Transportation Security Administration (TSA), the new hotline will provide travelers with information about navigating often arduous airport security checkpoints. Although not spelled out in detail, the TSA's press release seems to offer hope that by calling 72 hours prior to arrival at the airport, travelers with disabilities or medical conditions will somehow be able to notify airport security officers of their trip, with the hope that those officers will be better prepared to handle their needs when they actually reach security.

The hotline, which has been named TSA Cares (presumably because the TSA is trying to counter numerous incidents where elderly or disabled passengers encountered problems at checkpoints), is available Monday through Friday from 9 am to 9 pm EST at 1-855-787-2227.

"TSA Cares provides passengers with disabilities and medical needs another resource to use before they fly, so they know what to expect when going through the screening process,” said TSA Administrator John Pistole. “This additional level of personal communication helps ensure that even those who do not travel often are aware of our screening policies before they arrive at the airport.”

Mobility International, a foreign exchange organization for people with special needs, offers a host of tips for navigating airport security on their Air Travel Tips for People with Disabilities page.

This article reprinted with permission from ElderLawAnswers.com

Attention Vietnam Veterans and Their Families!!!

Are you a Vietnam Veteran who suffers with (or the loved one of a veteran who died of) Parkinson's disease, ischemic heart condition, or a B-cell leukemia or another condition that can be linked to one of these?

Did you (the veteran) or the deceased veteran serve in the Republic of Vietnam, the waterways of Vietnam, or on the Korean DMZ any time from January 9, 1962 thru May 7, 1975?

Did you (the veteran), the deceased veteran, or the deceased surviving spouse (or deceased child or parent) previously file a claim for benefits based upon the veteran having or dying of one of these conditions and was this claim denied?
  

If the answer to all of the above three questions is "Yes", you may now be able to go back and have this previous claim re-opened as a Nehmer class member if you were the original person who filed the claim OR have the original claim opened for accrued benefits owed to this deceased person if you are a family member. 

Normally, if benefits are granted on the basis of a new regulation, the law states that the effective date of the award may not be earlier than the date on which the regulation went into effect.  Nehmer has changed all of this for these Agent Orange claims, making the effective date of the award the later of the date the claim was filed or the date the disability arose.  This can result in a HUGE amount of retro-active benefits; possibly tens to hundreds of thousands of dollars for the claimant.

Accrued benefits paid in the case where the original Nehmer class member has died may be paid to a spouse (regardless of marital status), a child (regardless of age or marital status), parents, or even the estate of the deceased class member.

Because these three conditions are all combat related, a retired military veteran who is receiving military retirement from the Department of Defense can also apply for Combat Related Special Compensation (monetary) benefits from the DOD.  This is a matching amount of money to what the VA has awarded in service connected compensation, provided that the veteran is rated at least 10%.  It is an offset to military retirement, but is non-taxable; whereas, military retirement is taxable income.

In the case of a surviving spouse, please remember that one may be able to go back on prior spouses for VA Dependency Indemnity Compensation (DIC) benefits and it may also be possible for a parent of a single soldier/veteran who died service connected to file for DIC, regardless of that parent's age or when the soldier/veteran died.  Also remember that assets never matter in a DIC claim and income matters only in a parent's claim.

The VA is currently going back and re-opening hundreds of thousands of claims and attempting to contact both veterans and survivors to see if benefits are owed.  Meanwhile, we have an obligation to mention Nehmer to those client's who may have family and friends who served in Vietnam.  Obviously, the VA cannot possibly keep track of everyone.

Reprinted with permission by:

www.info4vets.com

Karen McIntyre, R.N., VA Accredited Agent

President Veterans Information Services, Inc.

IRS Issues Long-Term Care Premium Deductibility Limits for 2012

The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2012 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 7.5 percent of the insured's adjusted gross income.

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 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 2012. 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	$350
More than 40 but not more than 50	$660
More than 50 but not more than 60	$1,310
More than 60 but not more than 70	$3,500
More than 70	$4,370

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. For more on the "qualified" definition, click here.

The Georgetown University Long-Term Care Financing Project has a two-page fact sheet, "Tax Code Treatment of Long-Term Care and Long-Term Care Insurance."

To download it in PDF format, go to: http://ltc.georgetown.edu/pdfs/taxcode.pdf

This article is reprinted with the permission of ElderLawAnswers.com.

Medicare's Open Enrollment Season Already Underway

This year's holiday shopping season has begun early for Medicare beneficiaries: the program's Open Enrollment Period, during which you can enroll in or switch plans, began October 15 and ends on December 7.

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 plan in 2011 need to review their options for 2012, particularly because things are still in flux due to changes brought on by the health care law. 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 package and as well as their provider network.

According to the federal Centers for Medicare and Medicaid Services (CMS), Medicare Advantage premiums are expected to decrease by an average of 4 percent next year from this year, while Part D plan premiums will likely increase about 2 percent to $30 a month, on average.

“There’s no doubt that a lot of seniors are in the wrong plan,” Ross Blair, the CEO of PlanPrescriber.com, a site that compares Medicare plans, told SmartMoney.  “A lot of them could save hundreds of dollars a year by switching.” 

Reaching for the Stars
One change beneficiaries using the Medicare Plan Finder will notice this year is CMS's enhanced five-star rating system.  Plans that have achieved a five-star rating from CMS are identified with a "gold star" icon.  Those that have received a low overall quality rating for the past three years are identified with a "warning signal" icon.  Another new innovation is that there is no time limit to switch into a five-star Advantage or prescription drug plan. Medicare beneficiaries have one opportunity to switch to one of these top-rated plans anytime during 2012. (For more on the significance of the star rating system, see "Medicare Plans See Dollars in the Stars.")

If you want out of your Advantage plan after December 7, you can "disenroll" between January 1 and February 14.  At that point you can return to traditional Medicare and add a Part D plan, or move into a five-star Advantage plan.  But if you return to traditional Medicare you may not be able to buy Medigap coverage at that point, although the rules vary by state.

If you take no action, you will remain in your current plan unless your Medicare Advantage or drug plan is terminating its Medicare contract. Also, if you receive the Low-Income Subsidy (LIS) to help pay for some or most of your Part D drug costs, you may be randomly reassigned to a different plan. (For more on the LIS program, also known as "Extra Help," click here.)

Some factors to consider when evaluating your drug plan include:

• What is the monthly premium?
• Does the plan continue to cover necessary drugs?
• Does the plan provide coverage for drugs in the "doughnut hole" or coverage gap?
• What pharmacies are covered under the plan?

Some factors to consider when comparing Medicare Advantage plans include:

• What is the monthly premium?
• What is the cost-sharing for doctor visits?
• Which doctors and hospitals are covered?
• Is prescription drug coverage included?
• Are any other extra benefits included and will they be useful to you?

(For a MarketWatch article on picking an Advantage plan, click here.)

 

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 or here.

Here are more resources for navigating the Open Enrollment Period:

• The 2012 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at: www.medicare.gov/publications/pubs/pdf/10050.pdf 

• The Medicare Rights Center: www.medicareinteractive.org

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

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

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

• U.S. News on "Understanding Your 2012 Medicare Enrollment Statements"

For more about Medicare, click here.

Adult Children Losing $3 Trillion in Caring for Aging Parents

Americans who take time off work to care for their aging parents are losing an estimated $3 trillion dollars in wages, pension and Social Security benefits, according to a new MetLife study. Meanwhile, the percentage of adult children providing basic care for their parents has skyrocketed in recent years. 

Nearly 10 million adults age 50 and over care for an aging parent, MetLife says. For the individual female caregiver, the cost impact of caregiving in terms of lost wages, pension and Social Security benefits averages $324,044. For male caregivers, the figure is $283,716. 

The study also identified a dramatic rise in the share of men and women providing basic parental care over the past decade and a half. In 1994, only 9 percent of women and 3 percent of men and were providing care. By 2008, the percentage of women caregivers had more than tripled to 28 percent, while the figure for men had quintupled to 17 percent. "Basic care" is defined as help with personal activities like dressing, feeding, and bathing. Daughters are more likely to provide basic care and sons are more likely to provide financial assistance, the study found. 

"Undoubtedly, the impact of the aging population has resulted in increased need within families for family caregiving support," the study notes. 

At the same time, MetLife found that adult children age 50 and over who work and provide care to a parent are more likely to have fair or poor health than those who do not provide care to their parents. 

The study was based on an analysis of data from the 2008 National Health and Retirement Study (HRS). 

The findings have implications for individuals, employers and policymakers, MetLife says. Individuals, it says, should consider their own health when caregiving and should prepare financially for their own retirement. Employers can provide retirement planning and stress management information and assist employees with accommodations like flex-time and family leave. 

On the policy side, although only a few states mandate paid family and medical leave, "clearly this policy would benefit working caregivers who need to take leave to care for an aging parent," the study concludes. MetLife also notes that the CLASS Act, a voluntary long-term care insurance program that is part of the new federal health reform law, will provide some coverage for long-term care needs as well as raise public awareness of the issue. 

For more on the study, "The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents," click here.

Reprinted with permission by ElderLawAnswers.com

Currently on The Swinton Law Firm Radio: A Case of Neglect

Barbara Salerno and her family thought their decision to send their 80-year-old father, Albert Salerno, to a nursing home would mean he would be safe and cared for--but they were wrong. Barbara tells the story of how her family was helpless in saving their father even though they visited him nearly every day. Nursing home staff minimized and explained away a sharp downturn in Mr. Salerno's condition. By the time he finally received medical attention; Mr. Salerno was in acute renal failure, had advanced pneumonia and was malnourished. He died a few days later.