alzheimers

    Are your parents a tax deduction?

    You may have already started putting the information together for your taxes. But there’s something important you need to know. If you are providing substantial financial assistance to your parents, you should be aware that you may qualify for significant tax deductions!

    The key to Internal Revenue Service assistance in caring for an elderly relative is whether you can claim the person as a dependent. If you and your parent meet IRS requirements, you’ll be able to claim an added personal exemption on your income tax return. For 2016, each exemption allows you to reduce your taxable income by $4,050.

    Then there are possible deductions and credits. If you pay medical expenses for a dependent parent, you may be able to deduct some of those costs. Hire a caregiver to help you out and a credit could cut your tax bill a bit more.

    A dependent parent cannot make more than the exemption amount. This is $4,050 for 2016. The income barrier represents taxable income. Social Security normally is excludible, but if they have other income, which in many cases means interest and dividends, some is taxable. If your parent meets the income requirement, than you must determine the level of support you provide.

    To be deemed a dependent for tax purposes, your parent must get more than half of his or her support from you.

    If your parent lives in your home, to reach the 50-percent-plus threshold, you can take into account the fair-market room rental, food, medicine and other little support items.

    But your parent doesn’t have to live with you. When a parent is able to remain in his or her own house, in an assisted living facility or a nursing home, costs you pay for parental support at those locations count toward meeting the IRS requirement.

    Once your parent meets the IRS dependency tests, you can use any medical expenses you pay for mom or dad toward your itemized deductions. Since medical costs must exceed 7.5 percent of your adjusted gross income before you can claim them, a parent’s added expenses could help you meet the requirement.

    When adding up those parental medical costs, don’t forget premiums for supplementary Medicare coverage or long-term care insurance. Once your parent is your dependent, some of these payments that you make can be counted toward your deductible medical expenses.

    And if your dependent parent lives with you and requires continual care, you may be eligible for another tax break. What you spend for this attention generally won’t count toward the medical deduction. But if it’s necessary so that you can go to work, you can claim the dependent care credit, which could be as much as $3000. The amount is based on a formula considering your income level. But it’s a credit not a deduction. This means its a dollar for dollar reduction in taxes.

    If you share the cost of caring for your parents with your siblings you should file Form 2120, Multiple Support Declaration with your tax return. This form indicates that while several siblings contributed to your parent’s support, the others waive any tax-exemption claim.

    You also need to get signed statements from your siblings acknowledging that they waived their tax claims. You don’t have to send these documents with your 1040, but keep them in your records in case the IRS ever questions your exemption or medical deduction claims.

    If this arrangement sounds unfair to your siblings, you should inform them that the tax benefit can be rotated among you. One child can claim the deduction one year and another the next. But be careful that you pay the expenses in the year you claim the deduction.

    For more detailed information on how to claim your parent as a tax deduction, please refer to this article at TurboTax.

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    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    When do you discuss the future of the family home with your elderly parents?

    Recently  I read an article in the Real Estate section of the New York Times  written by Constance Rosenblum. She made a very good point that all adult children need to discuss with their elderly parents. What do our elderly parents believe is the future of their family home?

    For many of our parents, their home is probably the most valuable asset they own. It is  the last thing that they want to give up. But they need to realize that if they leave it to their children to decide, after they are gone, it can often lead to family rifts that last for decades.

    One of my wife’s friends took care of her parents the last few years of their lives. She lived with them full time and dedicated her life to taking care of them. When they died they left their home to her in their wills. Her brothers were shocked and extremely upset that they were not consulted in this decision. As a result they have not spoke to her for years.

    Ms. Rosenblum makes several very valid points in the article:

    1. Take a few basic steps early on. This will avoid problems in the future
    2. Start early to discuss the future of your parents’ home with them, while they are both healthy.
    3. Begin the conversation in a non-threatening setting. Consider sharing with them the article that appeared in the NY Times (or this blog)
    4. Balance Competing Issues. Don’t let taxes and financial concerns be the only motivating factors. Consider if the home still works for your parents and will as they age.
    5. The future of the family home becomes more complicated when several children are involved. Each has their own agenda. Involve everyone in the discussion.

    In my book, Can We Talk? A Financial Guide For Baby Boomers Assisting Their Elderly Parents, I have a chapter on transferring real estate from your parents which includes such ideas as the Life Estate and the Qualified Personal Residence Trust. Please read this chapter to learn more.

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    Join the War Against Alzheimer’s

    Nearly half of all seniors who need some form of long-term care, from help at home to institutional care, have dementia. That’s from the World Alzheimer Report which came out recently.

    The report further states that cognitive impairment is the strongest predictor of who will move into a care facility in the next two years. That is 7.5 times greater than people stricken with cancer, heart disease or other chronic ailments.

    More than 35 million people worldwide, including 5 million in the U.S., are estimated to have Alzheimer’s. Unless some miracle cure is found, these numbers are expected to double by the year 2050.

    Unfortunately, the U.S. is investing only $400 million a year in Alzheimer’s research. But the disease’s financial toll is estimated to be $200 billion per year. Compare that to the budget of the National Cancer Institute, part of the Department of Health and Human Services. For the last 6 years it has had a budget of $4.9 billion per year.

    It’s time for caregivers, advocates and families stricken by Alzhemier’s to come to together to demand a push to end this brain disease. The world’s governments and researchers came together to turn the AIDS virus from a death sentence to a chronic disease and the same force of will can turn Alzheimer’s around.

    If you want to get a clear picture of what Alzhemier’s is like from the patient’s perspective I suggest you read Lisa Genova’s book, Still Alice (or watch the movie of the same name starring Julianne Moore) or read Dr. David Hilfiker’s blog, Watching the Lights Go Out.  Hilfiker is a retired physician who was diagnosed with Alzheimer’s in September, 2012. (Note: Hilfiker writes in Feb. 2016 that he was misdiagnosed.) Lisa Genova’s book is fictional but was based on her experiences working with support groups for people who contracted the disease.

    During my 33 years as a financial advisor, I met with many couples and strongly recommended that they put together a long-term care plan while they were healthy. I was emphatic when I suggested that they consider buying long term care insurance to protect themselves. Most people don’t realize that medicare will not cover the custodial care that an Alzheimer’s patient will require. It is only available for up to 100 days if a person is expected to recover from an illness or injury.

    Long-term care insurance covers cognitive impairment from Alzheimer’s or other forms of dementia. Time and time again people told me that long-term care insurance was too expensive. But all they had to do was to talk to a few of my clients who discovered that the cost of care was much more expensive! Here in New England, care in a residence that focused on those with mental impairment averages more than $8000 per month and in some cases is over $10,000 a  month.

    Eliminate the possibility of bankrupting your parents by investing in long-term care insurance to cover any dementia care.

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    Is A Hospice Program Right For Your Mom Or Dad?

    When the medical director of my mother’s assisted living residence called me I was curious to know what she wanted to talk to me about. After informing me how much everyone at the facility loved my mom she then made a statement that took me by surprise. “I think you mom would benefit greatly by going into a hospice program.”

    My thoughts immediately jumped to “Oh my God, she’s about to die. The end is very near.” The next day a hospice nurse visited me and explained to me what hospice was and whom it could benefit. She did state that in order to qualify for hospice an individual is expected to die in 6 months or less. But she added that some patients have been in hospice for a year or more. And in some cases they have improved so much they are taken off of the program.

    I learned that Medicare would pay for an upgrade to her wheelchair that would make her much more comfortable and provide for any other medical equipment she needed. A nurse would be assigned to her who would monitor her condition weekly, review her medications and report back to us if any changes in her condition occurred. In addition a home health aid would visit her three to four times a week to bathe her or provide any other personal care that would benefit her.

    She would be assigned a social worker that could assist her and our family with any emotional support that was needed. An experienced physician would participate in the development of her care plan and oversee her medical regimen. And all of these services would be fully covered by Medicare.

    Within two days the nurse had visited her, made specific recommendations to changes in her meds and brought in a new mattress and a more comfortable wheelchair for her. I was amazed at how quickly she went into action and how knowledgeable she was about the aging process.

    I had noticed for a few months that my mother had deteriorated significantly but I wasn’t sure how to deal with this and who to talk to. The hospice nurse made it clear to me she was available 24 hours a day, seven days a week if I had any questions or concerns. I immediately felt much more comfortable knowing that someone was watching her situation closely and would be available whenever we needed her.

    If you have a family member who is beginning to show signs of slipping away I would recommend strongly that you find out more about the hospice program and have a hospice nurse visit you to answer your questions. In most cases she will do an evaluation of your loved one at no cost. The website for the National Hospice and Palliative Care Organization will help you find a hospice organization in your area.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.