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Understanding Medicare’s Hospice Benefit

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Medicare’s hospice benefit covers any care that is reasonable and necessary for easing the course of a terminal illness. It is one of Medicare’s most comprehensive benefits and can be extremely helpful to both the terminally ill individual and his or her family, but it is little understood and underutilized. Understanding what is offered ahead of time may help Medicare beneficiaries and their families make the difficult decision to choose hospice if the time comes.

The focus of hospice is palliative care, which means helping people who are terminally ill and their families maintain their quality of life. Palliative care addresses physical, intellectual, emotional, social, and spiritual needs while also supporting the terminally ill individual’s independence, access to information, and ability to make choices about health care.

To qualify for Medicare’s hospice benefit, a beneficiary must be entitled to Medicare Part A, and a doctor must certify that the beneficiary has a life expectancy of six months or less. If the beneficiary lives longer than six months, the doctor can continue to certify the patient for hospice care indefinitely. The beneficiary must also agree to give up any treatment to cure his or her illness and elect to receive only palliative care. This can seem overwhelming, but beneficiaries can also change their minds at any time. It’s possible to revoke the benefit and reelect it later, and to do this as often as needed.

Medicare will cover any care that is reasonable and necessary for easing the course of a terminal illness. Hospice nurses and doctors are on-call 24 hours a day, 7 days a week, to give beneficiaries support and care when needed. Services are usually provided in the home. The Medicare hospice benefit provides for:

  • Physician and nurse practitioner services
  • Nursing care
  • Medical appliances and supplies
  • Drugs for symptom management and pain relief
  • Short-term inpatient and respite care
  • Homemaker and home health aide services
  • Counseling
  • Social work service
  • Spiritual care
  • Volunteer participation
  • Bereavement services

Services are considered appropriate if they are aimed at improving the beneficiary’s life and making him or her more comfortable.

Because the beneficiary is electing palliative care over treatment, there are things the hospice benefit will not cover:

  • Treatment to cure the beneficiary’s illness.
  • Prescription drugs other than for symptom control or pain relief.
  • Care from a provider that wasn’t set up by the hospice team, although the beneficiary can choose to have his or her regular doctor be the attending medical professional.
  • Room and board. If the beneficiary is in a nursing home, hospice will not pay for room and board costs. However, if the hospice team determines that the beneficiary needs short-term inpatient care or respite care services, Medicare will cover a stay in a facility.
  • Care from a hospital, either inpatient or outpatient, or ambulance transportation unless it arranged by the hospice team. The beneficiary can use regular Medicare to pay for any treatment not related to the beneficiary’s terminal illness.

To download Medicare’s booklet on the hospice benefit, click here.

The Best and Worst States for Protection Against Elder Abuse

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The older the population gets, the greater the potential for elder abuse. States have laws in place designed to combat elder abuse, but some states are doing a better job than others. The consumer finance website WalletHub researched the protections in place in all 50 states and the District of Columbia to determine which states have the best protections against elder abuse.

The prevalence of elder abuse is hard to calculate because the crime is underreported, but according to the National Council on Aging, approximately 1 in 10 Americans age 60 or older have experienced some form of elder abuse. In 2011, a MetLife study estimated that older Americans are losing $2.9 billion annually to elder financial abuse.

To determine its rankings, WalletHub compared the 50 states and the District of Columbia across three key areas:
•    Prevalence of elder abuse in the state
•    Resources spent on preventing elder abuse and offering legal assistance
•    Protection against elder abuse through laws, the availability of eldercare organizations and services, the quality of nursing homes and assisted living facilities, and other factors

The survey found that Massachusetts, Wisconsin, and Nevada had the best protections overall while New Jersey, Wyoming, and South Carolina had the worst. Massachusetts, Wisconsin, and Nevada, along with Rhode Island and Arizona, all ranked high in total expenditures on elder abuse prevention. However, the states with the lowest rates of elder abuse, neglect, and exploitation complaints were Louisiana, New York, New Hampshire, Pennsylvania, and Michigan.

WalletHub consulted with a panel of experts in social work, psychology, law, and gerontology on how to best protect seniors from abuse. Recommendations included incentivizing banks to report suspicious activity, requiring credit checks and background checks on caregivers, and providing more support to seniors to help them remain independent and be on the lookout for people trying to harm them.

To see how your state compares in the WalletHub survey, click here.

Why Not Just Use an Off-the-Shelf Power of Attorney Form?

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A durable power of attorney is one of the most important estate planning documents you can have. It allows you to appoint someone to act for you (your “agent” or “attorney-in-fact”) if you become incapacitated. Without a power of attorney, your loved ones would not be able to make decisions for you or manage your finances without asking the court to appoint a guardian or conservator, which is an expensive and time-consuming process.

There are many do-it-yourself power of attorney forms available; however, it is a good idea to have an attorney draft the form for you. There are many issues to consider and one size does not fit all.

The agent’s powers

The power of attorney document sets out the agent’s powers. Powers given to an agent typically include buying or selling property, managing a business, paying debts, investing money, engaging in legal proceedings, borrowing money, cashing checks, and collecting debts. They may also include the power to consent to medical treatment. Some powers will not be included unless they are specifically mentioned. This includes the power to make gifts and the power to designate beneficiaries of your insurance policies.

The power to make gifts of your money and property is a particularly important power. If you want to ensure your agent has the authority to do Medicaid planning on your behalf in the event you need to enter a nursing home, then the power of attorney must give the agent the power to modify trusts and make gifts. The wording in a power of attorney can be significant, so it is necessary to consult an attorney.

Springing or immediate

The power of attorney can take effect immediately or it can become effective only once you are disabled, called a “springing” power of attorney. While a springing power seems like a good idea, it can cause delays and extra expense because incapacity will need to be determined. If the power of attorney is springing, it is very important that the method for determining incapacity is clearly spelled out in the document.

Joint agents

While it is possible to name more than one person as your agent, this can lead to confusion. If you do have more than one person named, you need to be clear whether both parties need to act together or whether they can each act independently. It might make more sense and be less confusing to name an alternative agent to act in case the first agent is unable to.

Appointing a guardian

Another use of a power of attorney can be to nominate a guardian in case guardianship proceedings become necessary. Including your preference for a guardian can allow you to have some say over who will be managing your affairs. Usually, the court decides who will be chosen as a guardian, but in most circumstances, the court will abide by your nomination in the durable power of attorney.

Executing the power of attorney

To be valid a power of attorney must be executed properly. Some states may require a signature, others may require the power of attorney to be notarized, and still others may require witnesses. It is important to consult with an estate planning attorney in your state to ensure your power of attorney is executed properly.

Accepting a power of attorney

Even if you do everything exactly right, some banks and other institutions are reluctant to accept a power of attorney. These institutions are afraid of a lawsuit if the power of attorney is no longer valid. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute the forms offered by the institutions with which you have accounts. But be careful that you don’t sign a bank’s document that inadvertently restricts a power of attorney’s ability to deal with other assets, and you should check that any documents you sign with a bank match the original power of attorney.

Have Private Insurance and Are Turning 65? You Need Sign Up for Medicare Part B

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If you are paying for your own insurance, you may think you do not need to sign up for Medicare when you turn 65. However, not signing up for Medicare Part B right away can cost you down the road.

You can first sign up for Medicare during your Initial Enrollment Period, which is the seven-month period that includes the three months before the month you become eligible (usually age 65), the month you are eligible and three months after the month you become eligible. If you do not sign up for Part B right away, you will be subject to a penalty. Your Medicare Part B premium may go up 10 percent for each 12-month period that you could have had Medicare Part B, but did not take it. In addition, you will have to wait for the general enrollment period to enroll. The general enrollment period usually runs between January 1 and March 31 of each year.

There are exceptions to the penalty if you have insurance through an employer or through your spouse’s employer, but there is no exception for private insurance. The health insurance must be from an employer where you or your spouse actively works, and even then, if the employer has fewer than 20 employees, you will likely have to sign up for Part B.

If you don’t have an employer or union group health insurance plan, or that plan is secondary to Medicare, it is extremely important to sign up for Medicare Part B during your initial enrollment period. Note that COBRA coverage does not count as a health insurance plan for Medicare purposes. Neither does retiree coverage or VA benefits.

For a New York Times column about a man with private insurance who didn’t realize he needed to sign up for Part B, click here.

Pre-Paid Funeral Plans: Buyer Beware

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Funerals rank among the most expensive purchases many consumers will ever make. A traditional funeral costs about $7,000, although “extras” like flowers, obituary notices, acknowledgment cards and limousines can bring the total to well over $10,000. Moreover, people often “overspend” on a funeral or burial because they think of it as a reflection of their feelings for the deceased.

To help relieve their families of some of these decisions, an increasing number of people are planning their own funerals, designating their funeral preferences, and sometimes even paying for them in advance. In fact, many elder law attorneys advise prepayment as a way to invest in assets that will not be countable by Medicaid or SSI.

However, consumers lose millions of dollars every year when pre-need funeral funds are misspent or misappropriated. A funeral provider could mishandle, mismanage or embezzle the funds. Some go out of business before the need for the pre-paid funeral arises. Others sell policies that are virtually worthless.

Consumers received some protection from unscrupulous funeral providers with the creation of the Funeral Rule in 1984. This rule, administered by the Federal Trade Commission (FTC), requires funeral providers to give consumers accurate, itemized price information and other specific disclosures about funeral goods and services. Unfortunately, the Funeral Rule does not apply to many of the features of pre-need contracts, which are governed solely by state law, and protections vary widely from state to state. Some state laws require the funeral home or cemetery to place a percentage of the prepayment in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery. Other states, however, offer buyers of pre-need plans little or no effective protection.

Following are some questions that the FTC recommends asking before signing up for a pre-need funeral arrangement. The questions are from the FTC’s Shopping for Funeral Services page.

  • What happens to the money you’ve prepaid? States have different requirements for handling funds paid for prearranged funeral services.
  • What happens to the interest income on money that is prepaid and put into a trust account?
  • Are you protected if the firm you dealt with goes out of business?
  • Can you cancel the contract and get a full refund if you change your mind?
  • What happens if you move to a different area or die while away from home? Some prepaid funeral plans can be transferred, but often at an added cost.

In addition, find out exactly what you are paying for and compare with other funeral providers. And make sure the price is locked in and additional money won’t be required at the time of death.

These pitfalls can be avoided, of course, by making decisions about your arrangements in advance, but not paying for them in advance. Be sure to tell your family about the plans you’ve made; let them know where the documents are filed. If your family isn’t aware that you’ve made plans, your wishes may not be carried out. You may wish to consult an attorney on the best way to ensure that your wishes are followed.

One way to ensure there is money available to pay for the funeral is to set up a payable-on-death account (POD) with your bank. Make the person who will be handling your funeral arrangements the beneficiary (and make sure they know your plans). You will maintain control of your money while you are alive, but when you die it is available immediately, without having to go through probate.

Sometimes it’s more convenient and less stressful to “price shop” funeral homes by telephone. The Funeral Rule requires funeral directors to provide price information over the phone to any caller who asks for it.

If you run into problems or have questions about your state’s laws, most states have a licensing board that regulates the funeral industry.

Does Your Estate Plan Include Your Pets?

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Have you considered your pet or pets when planning your estate? If not, you should, according to The Humane Society of the United States, the nation’s largest animal protection organization.

Pets usually have shorter life spans than humans, but people don’t always include their pets in their estate plans. If a pet owner doesn’t make plans for his or her pet, the animal can be left homeless and end up in an animal shelter.

To help pet owners ensure that that their wishes for their pets’ long-term care won’t be forgotten, misconstrued or ignored, The Humane Society has created a printable fact sheet, “Providing for Your Pet’s Future Without You.”  The five-page fact sheet, which is available in English and Spanish, provides sample legal language for including pets in wills and trusts, plus suggestions on protecting pets through a power of attorney.

The Humane Society says that all too often, people erroneously assume that a long-ago verbal promise from a friend, relative or neighbor to provide a home for a pet will be sufficient years later. Even conscientious individuals who include their pets in their wills may neglect to plan for contingencies in which a will might not take effect, such as in the event of severe disability or a protracted will challenge.

Charitable Giving Options Under the New Tax Law

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The new tax law makes it harder to claim a tax deduction for charitable contributions. While charitable giving should not be only about getting a tax break, if you want to reap a tax benefit from your contributions, there are a couple of options.

The Tax Cut and Jobs Act, enacted in December 2017, nearly doubled the standard deduction to $12,000 for individuals and $24,000 for couples. This means that if your charitable contributions along with any other itemized deductions are less than $12,000 a year, the standard deduction will lower your tax bill more than itemizing your deductions. For most people, the standard deduction will be the better option.

If you still want to maximize the tax benefits of charitable giving and you have the financial means, one option is to double your charitable donations in one year and then skip the donation the following year. For example, instead of giving $10,000 a year to charity, you could give $20,000 every other year and itemize your deductions in that year.

Another way to concentrate charitable giving is to establish a donor-advised fund (DAF) through a public charity. A DAF allows you to contribute several years’ worth of charitable donations to the fund and receive the tax benefit immediately. The money is placed in an account where it can be invested and grow tax-free. You can then make donations to charities from the account at any time, in addition to adding to the account. As with any investment, you need to do research before establishing a DAF. Make sure you understand the fees involved and whether there are any limits on the charitable contributions you can make. You should consult with your financial advisor before taking any steps.

If you are taking required minimum distributions from an IRA, another option is to donate those distributions directly to charity through a qualified charitable donation. The distributions won’t be included in your gross income, which means lower taxes overall. The donation must be made directly from the IRA to the charity and different IRAs have different rules about how to make the distributions.

5 Things to Know to Reduce Your Tax on Capital Gains

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Although it is often said that nothing is certain except death and taxes, the one tax you may be able to avoid or minimize most through planning is the tax on capital gains. Here’s what you need to know to do such planning:

  • What is capital gain? Capital gain is the difference between the “basis” in property — usually real estate or stocks, but also including artwork and collectibles — and its selling price. The basis is usually the purchase price of property. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 – $250,000 = $200,000). However, the basis can be adjusted if you spend money on capital improvements. For instance, if after buying your house you spent $50,000 updating the kitchen, the basis would now be $300,000 and the gain on its sale for $450,000 would be $150,000 ($450,000 – ($250,000 + $50,000) = $150,000). Just make sure you keep good records of any capital improvements in order to prove them in the event of an audit. (The residence exclusion and the step-up in basis are discussed below.)
  • How much is the tax? It depends, but assume 15 percent federally unless you have either very low or very high income, and whatever your state’s tax is (let’s assume 5 percent, for a total of about 20 percent). Using those assumptions, the tax on $200,000 of gain would be about $40,000. There are three exceptions. First, if you owned the property for less than a year, you would be subject to short-term capital gains tax rates, which are essentially the same rates as for income tax. Second, if your taxable income, including the capital gains, $38,600 or less for a single person and $77,200 for a married couple (in 2018), there’s no federal tax on capital gain. But beware that the capital gains will be included in the calculation and could put you over the threshold. Third, if your income is more than $425,800 for a single person and $479,000 for a married couple (in 2018), the federal capital gains tax rate is 20 percent, bringing the combined federal and assumed state rate up to just over 25 percent.
  • The personal residence exclusion. You may exclude up to $250,000 of gain on the sale of your personal residence and if you’re married you can exclude $500,000. To qualify, you (or your spouse) must have lived in and owned the house for at least two out of the five years prior to the sale. Those two years don’t have to be the same. For instance, if you lived in the house from 2012 to 2014 and owned it from 2014 to 2016, but rented it out, you could still qualify for the exclusion. If you are a nursing home resident, the two-year requirement is reduced to one year.
  • Carry-over basis. If you give property such as a family heirloom or real estate to someone else, they receive it with your basis. So, if your parents bought a vacation home many years ago for $25,000 and now its fair market value is $500,000, if they give it to you, your basis will also be $25,000. If you sell it, you’ll have a gain of $475,000 and no personal residence exclusion, unless you move in for two years first. The combined state and federal tax would be $118,750.
  • Step-up in basis. On the other hand, the basis in inherited property gets adjusted to the value on the date of death. In the example of the vacation home, if your parents passed it on to you at death rather than giving it to you during life, the basis would be adjusted to $500,000, potentially saving you $118,750 on its sale. On the other hand, depending on the size of your parents’ estate, it may be subject to estate tax, which would be payable within nine months of their death, while the tax on capital gain would not be due until you sold the property, perhaps decades in the future. Some have proposed getting rid of this so-called “step-up” in basis. The reasoning is that it is regressive, benefiting people with property, and the more property they have, the more tax they save. But an argument for retaining the step-up rules is that they can save a tremendous amount of administrative hassle. If you inherited stock from your father that he inherited from his mother, it may be impossible to establish what it was she paid for it. It’s much easier to determine what it was worth at your father’s death.
  • Offsetting losses. If during the tax year you realized capital gain through the sale of property, you can offset it with capital losses. Say, for example, you sell your home and realize a lot of gain. You could also sell some stock that has gone down in value, creating a loss that offsets some of the gain on the house sale. In some instances, you can carry over loss from one tax year to the next to offset future gains.

By understanding and considering these rules, you can save on capital gains taxes and avoid a number of possibly expensive mistakes. Talk to your attorney or financial planner today about ways to lower or eliminate your capital gains tax.

8 Questions and Answers About Being an Agent Under a Power of Attorney

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You have just been appointed as an agent, or “attorney-in-fact,” under a durable power of attorney, a document that, for most people, is even more useful than a will. Your appointment allows you to act in place of the “principal” – the person executing the power of attorney — for financial purposes when and if that person ever becomes incapacitated. Here are answers to eight frequently asked questions about the agent’s duties, responsibilities and powers under the document.

1. What are my duties as agent?

You have been appointed to represent the principal with respect to his or her financial affairs. In effect, you can step into his or her shoes and take whatever investment and spending measures the principal would take himself or herself. Unless limitations have been placed in the power of attorney itself, you can open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, cash checks. All steps you take must be consistent with your role as a “fiduciary.”

2. What does it mean to be a “fiduciary”?

This means that you will be held to the highest standards of good faith, fair dealing and undivided loyalty with respect to the principal. You must always act in his or her best interest and keep his or her goals and wishes in mind in making any discretionary decision. However, you do not have the same responsibility as a trustee or executor, who has total control over the estate or trust assets, since you share control with the principal himself or herself. Your duty only covers the level of care you take in your own actions as agent.

3. Can I be held liable for my actions as agent?

Yes, but only if you act with willful misconduct or gross negligence. If you do your best and keep the principal’s interests in mind as the basis of your actions, you will not incur any liability.

4. When does the power of attorney take effect?

Unless the power of attorney is “springing,” it takes effect as soon as it is signed by the principal. A “springing” power of attorney takes effect only when the event described in the instrument itself takes place. Typically, this is the incapacity of the principal as certified by one or more physicians. In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used until he or she becomes incapacitated. You should discuss this with the principal so that you know and can carry out his or her wishes.

5. What if there is more than one agent?

Depending on the wording of the power of attorney, you may or may not have to act together on all transactions. In most cases, when there are multiple agents they are appointed “severally,” meaning that they can each act independently of one another. Nevertheless, it is important for them to communicate with one another to make certain that their actions are consistent.

6. Can I be fired?

Certainly. The principal may revoke the power of attorney at any time. All he or she needs to do is send you a letter to this effect. The appointment of a conservator or guardian does not immediately revoke the power of attorney. But the conservator or guardian, like the principal, has the power to revoke the power of attorney.

7. What kind of records should I keep?

It is very important that you keep good records of your actions under the power of attorney. That is the best way to be able to answer any questions anyone may raise. The most important rule to keep in mind is not to commingle the funds you are managing with your own money. Keep the accounts separate. The easiest way to keep records is to run all funds through a checking account. The checks will act as receipts and the checkbook register as a running account.

8. Can I be compensated for my work as agent?

Yes, if the principal has agreed to pay you. In general, the agent is entitled to “reasonable” compensation for his or her services. However, in most cases, the agent is a family member and does not expect to be paid. If you would like to be paid, it is best that you discuss this with the principal, agree on a reasonable rate of payment, and put that agreement in writing. That is the only way to avoid misunderstandings in the future.

Does Your Will Name an Alternate Beneficiary?

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What will happen to your estate if your primary beneficiary does not survive you? If your will does not name an alternate beneficiary, your estate will be divided according to state law. The way the state divides your estate may not agree with your wishes. Your money may go to someone you don’t like or to someone who is unable to handle it.

For example, suppose your will divides your estate among your spouse and three children. If one child dies before you, do you want his or her portion of your estate to go to your grandchildren? To your other children? To your spouse? Or perhaps to a charitable organization or institution? Another issue to consider is whether the person who would inherit under the law is too young or has special needs. In that case, you may need a trust to protect the assets.

Double check your will to make sure it names an alternate beneficiary. And if you don’t already have a will, being able to name an alternate beneficiary is an important reason to create one.

Naming an alternate is a good idea for other provisions in your will as well. If you have young children, you should also consider naming an alternate guardian for your children in the event your first choice is unable to fulfill his or her obligation. In addition, you may want to appoint an alternate executor in case the first one cannot serve.

Contact your attorney to help you ensure you have considered all the possibilities.

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