Healthcare can be one of the biggest expenses in retirement. Fidelity Investments found that a 65-year-old newly retired couple will need $285,000 for medical expenses in retirement. That doesn’t include the annual cost of long-term care. In 2018, that expense ran from $18,720 for adult day care services to $100,375 for a private room in a nursing home, according to Investopedia’s recent article, “How to Plan for Medical Expenses in Retirement.”
A person with a disability can only have $4,000 to keep the Medicaid assistance that he or she has. That’s because those receiving Supplemental Security Income, Social Security Disability Income and/or participating in programs like Medicaid or Medicare have limits placed on their assets. If they go over the limits, their benefits will be suspended. In some cases, these limits can be as little as $2,000.
Mississippi Today’s recent article, “New tax-free accounts allow Mississippians with disabilities to save without the risk of losing benefits,” explains that it’s common for a grandparent of a child with a disability to die and provide an inheritance for the child in their will. It may not a large amount of money, but $5,000 will disqualify them from government programs. Until now, it meant that those who wanted to support family members with disabilities were often limited to buying groceries.
On July 1, Mississippi started a program that allows residents with disabilities to set aside money without risking the loss of government benefits. Income earned from the accounts is tax free “if spent on qualified disability-related expenses,” according to the Mississippi Department of Rehabilitation Services. The program was created under the federal Achieving a Better Life Experience (ABLE) Act signed by President Obama in 2014 and the Mississippi ABLE Act signed by Governor Phil Bryant in 2017.
In addition to the financial benefits, the mental health of participants and their families might also improve from the ABLE program. That’s because financial independence is very helpful psychologically, but the reverse is also true. Not having financial independence can be detrimental psychologically. The ability for parents to save for their disabled children might also decrease stress.
Eligibility is restricted to those who were disabled before age 26.
“There was originally not an age limit in the legislation but whenever they ran it through the budget office and they scored the cost in the legislation it was going to be … like $20 billion or something that it was going to cost the federal government if there wasn’t an age limit in there, which was going to kill the bill,” Mississippi Department of Rehabilitation Services chief of staff Billy Taylor told Mississippi Today. So (age limit) was put in there … to drive the cost of the program down.”
Mississippi is part of the National ABLE Alliance. It’s a partnership of states that utilize the same program. The program allows out of state residents to create ABLE accounts, allows contributors to ABLE accounts to deduct contributions from their taxable income, allows account holders to use debit cards and to choose from seven different investment options.
Call us (228) 460-5243 or email us at firstname.lastname@example.org to find our how your estate planning attorney can help you.
Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklawgroup.com) without seeking legal or professional advice.
Reference: Mississippi Today (July 8, 2019) “New tax-free accounts allow Mississippians with disabilities to save without the risk of losing benefits”
As life changes, you need to periodically review your estate-planning documents and discuss your situation with your estate planning attorney.
WMUR’s recent article, “Money Matters: Reviewing your estate plan,” says a common question is “When should I review my documents?”
Every few years is the quick answer, but a change in your life may also necessitate a review. Major life events can be related to a marriage, divorce, or death in the family; a substantial change in estate size; a move to another state and/or acquisition of property in another state; the death of an executor, trustee or guardian; the birth or adoption of children or grandchildren; retirement; and a significant change in health, to name just a handful.
When you conduct your review, consider these questions:
- Does anyone in your family have special needs?
- Do you have any children from a previous marriage?
- Is your choice of executor, guardian, or trustee still okay?
- Do you have a valid living will, durable power of attorney for health care, or a do-not-resuscitate to manage your health care, if you’re not able to do so?
- Do you need to plan for Medicaid?
- Are your beneficiary designations up to date on your retirement plans, annuities, payable-on-death bank accounts and life insurance?
- Do you have charitable intentions and if so, are they mentioned in your documents?
- Do you own sufficient life insurance?
In addition, review your digital presence and take the necessary efforts to protect your online information, after your death or if you’re no longer able to act.
It may take a little time, effort, and money to review your documents, but doing so helps ensure your intentions are properly executed. Your planning will help to protect your family during a difficult time.
Reference: WMUR (January 24, 2019) “Money Matters: Reviewing your estate plan”
Discussing the next steps isn’t an easy conversation, but if you plan ahead it can be less painful for everyone involved, says KARE 11 in Minneapolis in the article, “Making the best care decisions for aging parents.”
Many families find this out the hard way. When a parent requires immediate urgent care, the family must jump into “go” mode. It can be overwhelming. There are many options, which range from various levels of in-home care, to independent living, to assisted living and even to skilled nursing care. You should understand the level of care you need and what you can afford.
Unless you qualify for Medicaid, you’ll need to pay for assisted living out of your own pocket. For most of us, this could drain assets in short order. Many people also aren’t planning for long-term care in retirement.
It’s best to plan early. If you’re going to buy a long-term care policy, the best time to apply is in your 40s or 50s, when your health is good and the cost is cheaper.
Sit down with an elder law attorney, regardless of your assets, because the laws concerning Medicare and Medicaid are confusing. Every situation is also different.
Many people aren’t aware that Medicare doesn’t cover many long-term care services. In fact, that limited benefit is designed to get somebody back to independent living, not help them with basic activities of daily living. Therefore, if it becomes a situation where somebody is going to need help with such basics as dressing, bathing and other activities of daily life for the rest of their life, Medicare is not going to cover it.
If you believe gifting your estate away now will stop you from losing it in the future, remember that most states have a five-year look back period. Any gifts of money or property in the 60 months before applying for Medicaid, can be taken back to pay for the program or the applicant will be penalized.
It’s difficult enough to make the decision to place your parent in someone else’s care, let alone to fret about how you’re going to pay for it. Plan now, if you can.
Reference: KARE 11 (Minneapolis) (November 27, 2018) “Making the best care decisions for aging parents”