Eliminating the Medical Expense Deduction Will Harm People Who Are Chronically Ill

House and Senate Republicans have approved their plans to reform the tax code and are currently in a conference committee. The House legislation calls for ending the medical expense deduction (MED). This proposed change will cause major disruption to individuals and families trying to privately pay for the catastrophic costs of long-term services and supports (LTSS).

The MED has been in the tax code in one form or another since 1942, at  26 U.S. Code § 213  .  

Elder law attorneys are intimately familiar with it because they have a front-row seat to their elderly clients’ chronic illnesses and long-term care expenditures as well as the special medical and remedial care expenses of individuals with disabilities. In my work as an elder law attorney, I deal with this tax deduction every single day, usually to reassure my clients that they will probably be able to offset the taxable income from, say, their IRAs or 401Ks,  with their substantial deductible nursing home expenses and minimize the tax consequences of paying for long-term care (LTC) themselves.

Right now, the MED is used for a variety of expenditures and situations. Taxpayers can deduct medical expenses in excess of 10 percent of their Adjusted Gross Income for the 2017 tax year. The Senate tax bill actually lowers this threshold back to 7.5%.  The MED can be used when people are:

  • Trying to afford their health insurance premiums, co-pays, and deductibles
  • Paying for the cost of childbirth and post-natal care
  • Paying for their own LTC or the LTC of a dependent child, parent, or other relative
  • Paying for assisted living
  • Paying a Medicaid cost share to a facility
  • Using pre-tax accounts for catastrophic medical expenses when they have no insurance or insufficient insurance coverage
  • Paying for home accessibility for disabling conditions
  • Paying for dental work, which is critical to long-term health
  • Paying for toxic lead or mold remediation
  • Paying for drug abuse rehabilitation for their dependent relative
  • Paying for additional ABA for a child on the autism spectrum

Our current long-term care system is driven by Medicaid, a means-tested program, and it sometimes acts as a disincentive for the middle and working class to save. Perversely, many middle- and working-class individuals who develop a chronic illness would have been better off had they not saved at all, thereby allowing them to qualify immediately for Medicaid. Clients express this frustration to us all the time. The MED acts as a key counterweight to that disincentive by substantially expanding the length of time someone could pay privately before needing government assistance.

The House Republican Tax Reform plan takes this important tax incentive away without any appropriate justification. Elder and special needs law attorneys are leading the way in educating and persuading stakeholders and the larger public  to fight back against removing the MED.

Read more about the Medical Expense Deduction for the Chronically Ill.

This post first appeared on the mailing list of the National Association of Elder Law Attorneys (NAELA): View the original online here.

Call us for advice about long-term care planning, nursing home care and elder law . 732-382-6070

The Landscape has changed for Guardianship in New Jersey

Procedures for filing for Guardianship are changing in New Jersey as a result of amendments to the Court rules that were effective 9-1-2016. The Rules are at N.J.R. 4:86-1 to 4:86-10. Guardianship petitions now must be initiated using a specific set of forms that have been prepared by the Administrative Office of the Courts.  A Guardianship Monitoring Program is being established in each county. After the pleadings are filed, the petitioner must complete a mandatory guardianship training program before the court hearing date, which includes watching a certain video about the Guardian’s many duties and responsibilities.  The alleged incapacitated person must attend the hearing unless his/her court appointed attorney and the petitioner’s attorney both certify  that s/he would be unable to attend due to physical or mental incapacity. Once the Judgment is entered, the Guardian must qualify as Guardian within thirty days. The physicians’ reports must specifically delineate the areas of functional decision-making in which the individual retains capacity.

There continue to be thorny legal issues that will come up in these cases.  Whether planning the care for a senior or a young person with disabilities, The law is bending towards limited guardianship, and sometimes it isn’t patently obvious that the individual lacks capacity in all respects. If the person who seeks to become guardian cannot be bonded due to their own prior financial difficulties or lack of personal resources, there may be a need to find somebody else to serve as guardian. The petitioner may need to obtain court permission for sale of real estate, or for placement of a mortgage on the property to pay off debt or support the individual in his/her home. The petitioner may wish to get court authorization for Medicaid eligibility planning including transfer of assets to spouse or other family members. The Verified Complaint, Order for Hearing, Physicians’ Certifications and Judgment are in a format that requires careful reading and additional legal drafting, in order to be sure that everything the petitioner knows and everything the petitioner seeks can be reflected in the forms that are submitted to the County Surrogate.

Call us for advice and representation in guardianship matters …732-382-6070

Why would an 18-year old need a Power of Attorney or a Will?

Powers of attorney are for old people.” “I don’t need a Will, I don’t own anything!” Truth be told, signing a basic set of ‘estate plan documents” at age 18 can prevent expensive legal problems later. It’s like fire insurance — you get it, but hope you don’t need to use it. I have been in court on so many occasions when an expensive guardianship proceeding was in progress because a young person had had a traumatic medical catastrophe or accident or brain injury but was over 18, had never signed a financial or medical power of attorney,  and no one could lawfully make decisions for them. Lawsuits couldn’t be filed or defended; settlements couldn’t be handled; bank accounts couldn’t be accessed; checks couldn’t be written; medical decisions were held up; bills couldn’t be paid.

What if there is no Last Will and testament? There, too, a person needs a Will so that someone can be appointed as Executor. It could happen that after a death, a lawsuit needs to be filed or other legal problems need to be straightened out. The Will designates the Executor, along with specifying who will receive the assets later. If there is no Will and no Executor, someone must apply at the County Surrogate  for appointment as  administrator, and others may be equally entitled to that appointment. This can cause substantial delays and costs to the estate.

As my children turned eighteen, they signed their basic estate plan. We called it insurance. As your children are becoming adults, consider helping them to make these arrangements also. The result can be peace of mind for everyone involved.

Call us for life cycle planning for young adults ……… 732-382-6070

Block Grants Could Throw Elder Care into Chaos

Since the election, there have been serious plans put out there to radically alter the Medicaid program .  Right now, while it can be hard to get Medicaid without guidance and assistance,  if you meet the eligibility criteria you are entitled to receive certain statutory benefits under federal law.  The benefits provided to every person on Medicaid are paid for through a combination of  state dollars and federal dollars, and each state has a formula for this.

Block grants change this.  Instead of the federal government contributing a certain amount per person, each State would receive a yearly amount (block of funds), and the State would decide how to allocate the funds.  Right now, this is how the Temporary Assistance for Needy Families (TANF) program works. While block grants may provide enough money to help people in good economic times (when enrollment is lower), when times aren’t so great the money won’t go as far, and eligible people might not get the services they would have gotten before.  This could mean waiting lists for nursing home Medicaid residents (creating financial hardship for the nursing home providers), and waiting lists for receipt of home health care services by aged or physically disabled people residing in the community, as well as waiting lists for residential services for people with intellectual disabilities, and less health care for low-income adults and children. Here is the  KAISER FAMILY FUND Block grant analysis

What can we do about this?  I can think of a couple of things.  First, speak out–let your Congressperson know that you don’t like the idea of block grants and you don’t want services for seniors cut.  Second, really think about whether a loved one has put off seeking present or future public benefits that he or she could benefit from. Seniors need to plan for their care and it’s important to seek enrollment before the rules substantively change for the foreseeable future.  If you’re not sure, we’re here to help.

We can prepare and file your Medicaid application. Call us for legal advice about your eligibility … 732-382-6070

Statewide Transition Plan for Disabled Finally Threading the Needle?

Stakeholders in New Jersey made their feelings known in a big way to State DDD officials on a new transition plan that New Jersey had to give to the federal government showing the State’s increased efforts to develop residential placements that integrate people with developmental disabilities and other enrollees in the community. It looks like the revised plan has satisfied the stakeholders.

The new transition plan gives more opportunities to new residential service providers to explain how their  congregate settings will integrate residents into the community while also balancing issues of safety and service provision.  Previous rules limited the number of  disabled individuals who could reside together in one place This seems like a common-sense approach to complex issues of balancing the needs of the disabled person with the values of community integration.

One area that we will continue to monitor is the rights of residents in assisted living facilities.  The transition plan addendum states, “The DOH will take whatever steps are necessary, including potentially revising NJAC 8:36, to ensure that an agreement between an AL facility and each resident is in place and that the document provides protections that address eviction processes and appeals comparable to those provided under New Jersey’s landlord tenant law.”  Having systemic landlord/tenant protections for residents of assisted living facilities (ALFs) is vital because ALFs fall in between the legal areas of landlord-tenant law and nursing home law, leaving  ALF residents unsure of how the law protects them against wanton eviction.

Call us for advice regarding legal planning to protect the rights of persons with disabilities …… 732-382-6070