Fong Law Group

Things to Remember at Tax Time

Tax day, which is Tuesday, April 19 in 2022, is approaching and it is time to begin crossing T's and dotting I's in preparation for paying taxes. As tax time draws near, you want to make sure you file all the proper forms and take all deductions you're entitled to.

Following are some things to keep in mind as you prepare your tax form.

• Gifts. Did you give away any money this year? The gift tax can be very confusing. If you gave away more than $15,000 in 2021, you will have to file a Form 709, the gift tax return. This does not necessarily mean you will owe taxes on the money, however. 
• Medical Expenses. Many types of medical expenses are tax deductible, from hospital stays to hearing aids. To claim the deduction, your medical expenses have to be more than 7.5 percent of your adjusted gross income. This includes all out-of-pocket costs for prescriptions (including deductibles and co-pays) and Medicare Part B and Part C and Part D premiums. (Medicare Part B premiums are usually deducted out of your Social Security benefits, so be sure to check your 1099 for the amount.) You can only deduct medical expenses you paid during the year, regardless of when the services were provided, and medical expenses are not deductible if they are reimbursable by insurance.  
• Parental Deduction. If you are caring for your mother or father, you may be able to claim your parent as a dependent on your income taxes. This would allow you to claim the $500 tax credit for any non-child depedents. 
• Long-Term Care Insurance Premiums. Premiums for "qualified" long-term care policies are treated as an unreimbursed medical expense. Long-term care insurance premiums are deductible for the taxpayer, his or her spouse and other dependents. 
• Social Security Benefits. Although Social Security benefits are generally not taxable, people with substantial income in addition to their Social Security may pay taxes on their benefits. If you file a federal tax return as an individual and your "combined income," including one half of your Social Security benefits and nontaxable interest income is between $25,000 and $34,000, 50 percent of your Social Security benefits will be considered taxable. If your combined income is above $34,000, 85 percent of your Social Security benefits is subject to income tax. 
• Home Sale Exclusion. Married couples can exclude from income up to $500,000 in profit on the sale of a home ($250,000 for single individuals). If a surviving spouse sells the home, he or she can still claim the exclusion as long as the house was sold no more than two years after the spouse's death. 
• Elderly or Disabled Tax Credit. Some low-income elderly or disabled individuals are entitled to a special tax credit. To be eligible, you must meet income limits. For more information, click here.
• Earned Income Tax Credit. Previously primarily available to people with young children, for 2021 working seniors without dependents may qualify for this important credit.  For more, click here.  
• Tax Refunds. Getting a federal tax refund should not affect your Medicaid or Social Security benefits. For a year after recieving a tax refund from the federal government, the refund will not be considered income or resources for SSI or Medicaid purposes. You can also transfer the refund within a year without incurring a penalty. 

The IRS's Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older. For more information, click here. The IRS also publishes a Tax Guide For Seniors.

識法有方-信託Q&A (廣東)

Transferring Assets to Qualify for Medicaid

Transferring assets to qualify for Medicaid can make you ineligible for benefits for a period of time. Before making any transfers, you need to be aware of the consequences. 

Congress has established a period of ineligibility for Medicaid for those who transfer assets. The so-called "look-back" period for all transfers is 60 months, which means state Medicaid officials look at transfers made within the 60 months prior to the Medicaid application. 

While the look-back period determines what transfers will be penalized, the length of the penalty depends on the amount transferred. The penalty period is determined by dividing the amount transferred by the average monthly cost of nursing home care in the state. For instance, if the nursing home resident transferred $100,000 in a state where the average monthly cost of care was $5,000, the penalty period would be 20 months ($100,000/$5,000 = 20). The 20-month period will not begin until (1) the transferor has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer. Therefore, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018 and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

Transfers should be made carefully, with an understanding of all the consequences. People who make transfers must be careful not to apply for Medicaid before the five-year look-back period elapses without first consulting with an elder law attorney. This is because the penalty could ultimately extend even longer than five years, depending on the size of the transfer.

Be very, very careful before making transfers. Any transfer strategy must take into account the nursing home resident's income and all of his or her expenses, including the cost of the nursing home. Bear in mind that if you give money to your children, it belongs to them and you should not rely on them to hold the money for your benefit. However well-intentioned they may be, your children could lose the funds due to bankruptcy, divorce, or lawsuit. Any of these occurrences would jeopardize the savings you spent a lifetime accumulating. Do not give away your savings unless you are ready for these risks.

In addition, be aware that the fact that your children are holding your funds in their names could jeopardize your grandchildren's eligibility for financial aid in college. Transfers can also have bad tax consequences for your children. This is especially true of assets that have appreciated in value, such as real estate and stocks. If you give these to your children, they will not get the tax advantages they would get if they were to receive them through your estate. The result is that when they sell the property they will have to pay a much higher tax on capital gains than they would have if they had inherited it.

As a rule, never transfer assets for Medicaid planning unless you keep enough funds in your name to (1) pay for any care needs you may have during the resulting period of ineligibility for Medicaid and (2) feel comfortable and have sufficient resources to maintain your present lifestyle.

Remember: You do not have to save your estate for your children. The bumper sticker that reads "I'm spending my children's inheritance" is a perfectly appropriate approach to estate and Medicaid planning.

Even though a nursing home resident may receive Medicaid while owning a home, if the resident is married he or she should transfer the home to the community spouse (assuming the nursing home resident is both willing and competent). This gives the community spouse control over the asset and allows the spouse to sell it after the nursing home spouse becomes eligible for Medicaid. In addition, the community spouse should change his or her will to bypass the nursing home spouse. Otherwise, at the community spouse's death, the home and other assets of the community spouse will go to the nursing home spouse and have to be spent down.

Permitted transfers

While most transfers are penalized with a period of Medicaid ineligibility of up to five years, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:

• Your spouse (but this may not help you become eligible since the same limit on both spouse's assets will apply)
• A trust for the sole benefit of your child who is blind or permanently disabled.
• Into trust for the sole benefit of anyone under age 65 and permanently disabled.

In addition, you may transfer your home to the following individuals (as well as to those listed above):

• A child who is under age 21
• A child who is blind or disabled (the house does not have to be in a trust)
• A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home

A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Tips for Preventing, Detecting, and Reporting Financial Abuse of the Elderly

Reports of elder financial abuse continue to increase, and the elderly are particularly vulnerable to scams or to financial abuse by family members in need of money.

It is hard to ascertain the exact numbers of people affected by elder abuse because studies show that elder abuse is underreported. However, one study found that financial loss from financial elder abuse could be close to $3 billion a year. 

While it is impossible to guarantee that an elderly loved one is not the victim of financial abuse, there are some steps you can take to reduce the chances. One option is to have more than one family member involved in caring for the loved one. You can also encourage the elder to get involved in community activities to ensure that he or she has a wide range of support. Using direct deposit as much as possible is also helpful. And of course you should always screen caregivers carefully and verify references.

Financial abuse can be very difficult to detect. The following are some signs that a loved one may be the victim of this kind of abuse:

• The disappearance of valuable objects
• Withdrawals of large amounts of money, checks made out to cash, or low bank balances
• A new "best friend" and isolation from other friends and family  
• Large credit card transactions
• Signatures on checks that look different
• A name added to a bank account  or newly formed joint accounts
• Indications of fear of caregivers

If you suspect someone of being financially abused, there are several actions you can take:

• Report the possible crime by calling your local Adult Protective Services and state attorney general's office. File a police report.
• Explore options at your local probate court if your state has such courts. The court can intervene if someone in the family is misusing a power of attorney or their role as guardian or conservator.
• Contact advocacy organizations. The National Center on Elder Abuse offers guidance on how to investigate and seek justice for elder abuse. State laws vary, but some have elder abuse statutes and may be able to get restitution for breach of fiduciary duties.
• Try to get a temporary restraining order from a court while building your case.

Should You Sell Your Life Insurance Policy?

Older Americans with a life insurance policy that they no longer need have the option to sell the policy to investors. These transactions, called "life settlements," can bring in needed cash, but are they a good idea? 

If your children are grown and your mortgage paid off, you may decide that there is no longer a reason to be paying premiums every month for a life insurance policy, or you may reach a time when you can no longer afford to keep up with the premiums. If this happens, you may be tempted to let the policy lapse and get nothing from it or to surrender the policy for its cash value, which usually is a fraction of its death benefit. Another option is a life settlement. This allows you to sell your policy to an investor for an amount that is greater than the cash value, but less than the death benefit. The buyer pays all future premiums and receives the death benefit when you die. 

Life settlements offer seniors a way to get cash to supplement retirement income and help pay for living expenses, health care, or other needed items. They can be a good alternative to surrendering a policy or letting it lapse. But as with any financial transaction, you need to exercise caution. 

The amount you receive from a life settlement depends on your age, your health, and the terms and conditions of the policy. It is hard to determine if you are getting a fair price for the policy because there are no standard guidelines for life settlements. Before selling you should shop around to several life settlement companies. You should also note that the amount you receive will be reduced by transaction fees, which can eat up a good chunk of the proceeds of the sale. In addition, you may have to pay taxes on the lump sum you receive. Finally, the beneficiaries of your policy may not be pleased with the sale, which is why some life settlement companies require beneficiaries to sign off on the transaction.

Before choosing a life settlement, you should consider other options. If you need cash right away, you can borrow against your policy. If the premiums are too much, you may be able to stop premiums and receive a smaller death benefit. In some cases of terminal illness, you can receive an accelerated death benefit (this allows you to receive a portion of your death benefit while you are still alive). If you don't need the cash but no longer want the policy, another possibility is to donate the policy to charity and get a tax write-off. 

To find out the right solution for you, talk to your elder law attorney.

Protect A Life of Working and Saving from Long Term Care Costs 從長期護理成本中節省及保障工作生活 (中英對照)

“Though complex, existing laws provide people with a pathway to protect their assets, become legally poor and qualify for publicly funded Medicaid to cover nursing home bills.”

Every month, Lawrence Cappiello writes a check to a nursing home for $12,000 to pay for the cost of his wife’s nursing home care. Two years ago, his net worth was $500,000. In less than two years, the Cappiello’s savings will be gone. This unsettling story is explained in the article “How to Keep LTC Costs From Devouring Your Client’s Life Savings” from Insurance News Net. He is suffering from nursing home sticker shock and says he should have known better.

Cappiello was a professor at the University of Buffalo for 25 years. During that time, he taught an introductory course on health care and human services that touched on the costs to consumers. He said it was clear even then, that the cost of health care was going to escalate out of control.

To qualify for Medicaid payments of nursing home care in New York State, residents are permitted to own no more than $15,450 in nonexempt assets. However, elder lawyers, whose practices focus on these exact issues, say that the way to protect the family’s assets, is to take steps years before nursing home care is needed. Some general recommendations:

• Establishing an irrevocable trust, that upon death, transfers the house to the beneficiaries. There must be language that ensures that you have life use of the house.
• transferring savings and other financial assets to an irrevocable trust.
• Gift way assets pursuant to a gifting program

In New York, transfers of any assets must take place more than five years before applying for Medicaid nursing home coverage. In California, such transfers must be done 30 months before applying for Medi-Cal (California version of Medicaid).  In California, an elder law attorney can even devise a gifting program such that assets can be gifted away much less than 30 months before applying for Medi-Cal.  In some cases, people with substantial net worth can gift away their assets in just several months before applying for Medi-Cal. 

That is why planning with an experienced elder law attorney is so critical for families, especially when one of the spouses is facing a known illness that will get worse with time. There are steps that can be taken, but they must be done in a timely manner.

Many older people are not exactly jumping with joy at the idea of handing over their assets, even when relationships with adult children are good.  Setting up an irrevocable trust can be a solution.  By setting up an irrevocable trust, the elderly person can retain full control of the assets while qualifying for Medi-Cal.   

It should be noted that a sick spouse can move assets to a healthy spouse, to make the sick spouse lawfully poor and eligible for Medicaid. There is no look back period or penalty for interspousal transfers. This sounds like a very simple solution. However, these are complex matters that need the help of an experienced attorney. If it were so easy, countless spouses would not be facing their own impoverishment because of an ill spouse.

Reference: Insurance News Net (Feb. 4, 2019) “How to Keep LTC Costs From Devouring Your Client’s Life Savings”

“雖然複雜，但現行法律提供了保護資產的途徑，使人合法地成為窮人，並獲得資格取得醫療補助以支付養老院賬單。”

Lawrence Cappiello每個月都需要寫一張12,000美元支票給養老院，以支付他妻子在養老院的護理費。兩年前，他的淨資產為50萬美元。不到兩年，Cappiello的積蓄將會化為烏有。這個令人不安的故事在Insurance News Net的文章“How to Keep LTC Costs From Devouring Your Client’s Life Savings” 中說到。他給養老院的費用嚇一跳，但說他自己早應該知道。

Cappiello在布法羅大學當教授已有25年。期間，他教授了關於醫療保健和公共事務的入門課程，這些課程涉及消費者要負擔的費用。他說當時已明白到醫療保健的成本會如脫彊野馬般失控。

要獲得紐約醫療補助的養老院護理資格，居民可以擁有不超過15,450美元的非豁免資產。然而，專精這些問題的老人法律師說要保護家庭資產的話就要在需要入住療養院之前的數年便要採取行動。一些基本的建議：

• 成立不可撤銷的信託，在去世後將房屋轉移給受益人。必須有文字去確保您擁有房子的使用權
• 將儲蓄和其他金融資產轉移到不可撤銷的信託
• 依據贈予計劃贈予資產

在紐約，任何形式的資產轉移必須在申請療養院的醫療補助五年前進行。在加州，此類轉移必須在申請白卡的30個月前完成。在加州，老人法律師可以創立一個贈予計劃，以便在申請白卡之前，資產可以在不用在申請白卡之前30個月完成。在某些情況下，擁有大量淨資產的人可以在申請白卡之前的幾個月內贈送他們的資產。

這就是為什麼與經驗豐富的老人法律師一起規劃對家人來說如此重要，特別是當配偶面對每況愈下的已知疾病時。有一些步驟可以採取，但必須及時完成。

即使與成年子女的關係良好，許多老人對於交出資產的想法也並不喜悅。成立不可撤銷的信託是一種解決方案。通過成立不可撤銷的信託，老人可以在符合白卡資格的同時能全權控制自己的資產。

應這樣說，患病的配偶可以將資產轉移給健康的配偶，使患病的配偶合法地成為窮人並獲得醫療補助資格。對於配偶間轉移並沒有回顧期或罰款。這聽起來像一個非常簡單的解決方案, 但這些都是複雜的事情，需要經驗豐富的律師的幫助。如果這麼容易，便不會有無數配偶因患病的配偶而使自己面臨貧困。

參考: Insurance News Net (Feb. 4, 2019) “How to Keep LTC Costs From Devouring Your Client’s Life Savings”

When Is an Estate Plan Really Finished? 什麼時候資產計劃才是真的完成？ (中英對照)

“After you sign and file your elder law estate plan, there is still more to do. You should review the plan at least once every three years.”

It makes sense: your life changes. Your goals may have changed. You may have been divorced, married, or your children may have gotten married or divorced. Your financial status may have changed. All of these are reasons why the Times Herald-Record advises readers to review their estate plans, as detailed in the article “5 steps to securing your elder estate plan.”

Here are steps to make this an easier process:

Step One: gather up all your documents, which may take some time. This includes your will, powers of attorney, health care proxies, living wills, any trusts and any other documents.

For clarity, here are some definitions. A will is the document that states where you want your assets to go when you die. It is reviewed by the court in a proceeding called probate, but only after your death. Assets in a living trust (or other types of trusts, depending on your situation) do not go through this process. Creating a trust results in a legal entity that owns the assets it contains. The trust assets go to the beneficiaries upon death, as directed by you to the trustee. In many instances, trusts save time, money and avoid litigation over inheritances.

Powers of attorney name the person you appoint to make any legal, business or financial decisions for you, should you become incapacitated. A health-care proxy names the person to make your medical decisions, if you are unable to do so. Living wills are used to express your wishes for end-of-life care.

Step Two: review your documents. Make sure that everything is signed. You would be surprised how many important documents aren’t signed. Read the documents to see who was named as the executor of your will and who is the trustee of your trusts. Are those people still able to undertake these responsibilities? Do you still want them making decisions for you?

Step Three: make a list of all of your assets. Note how they are titled—what names are on the accounts—and what are the values of each? Include retirement accounts like IRAs, 401(k)s, insurance policies and annuities and check to see if you named a beneficiary. Do you still want that person to be the recipient of the asset? Make sure that you have also named a contingency beneficiary.

Step Four: what information would your loved ones need, should you become unable to communicate? They’ll need information about your medications, the name and contact information for your primary care physician, your estate planning attorney, your CPA and your financial advisor. You may want to arrange for a “family meeting” with your healthcare team and your legal and financial team (two separate meetings), so everyone in your family is familiar with your professional teams. A list of where your documents can be found and who you want to receive personal items, may also be helpful.

Step Five: don’t forget to tell your trusted family members, where your important information is located and what lists exist. You don’t have to review everything with them, but if they know where things are at the time of your passing, they will have an easier time of settling your estate.

Reference: Times Herald-Record (Dec. 1, 2018) “5 steps to securing your elder estate plan”

“在您簽好並把您的老年資產計劃歸檔之後，還有很多工作要做。你應該至少每三年審查這個計劃一次。“

這是有理的：你的生活正在改變。你的目標可能已經改變。你可能已經離婚，已婚，或者你的子女可能已經結婚或離婚。您的財務狀況可能已改變。這是為什麼Times Herald-Record建議讀者審查他們的資產計劃，詳見“5 steps to securing your elder estate plan.”

一文。

以下的步驟能簡化這個過程：

第一步：收集所有文件，這可能需要一些時間。這包括您的遺囑，授權書，醫療代理，生前遺囑，任何信託和任何其他文件。

為清楚起見，這裡有一些定義。遺囑是一份文件，說明在您去世時您希望您的資產如何處置。法院有一項名為遺囑認證的程序中對其進行審查，但只在您去世後才發生。而生前信託（或其他類型的信託，視您的情況而定）的資產不需經過這個過程。建立信託是成立一個可擁有資產的法律實體。根據您對受託人的指示，信託中的資產在您去世時會轉移給受益人。在各種情況下，信託可以節省時間，金錢並避免因繼承問題而引起的訴訟。

財務授權書在您喪失行為能力時, 由您指定的人為您做出法律，商業或財務決定。醫療授權書在您不能為自己做出醫療決定時由您指定的人來為您做出醫療決定。生前遺囑用於表達您臨終時的願望。

第二步：審核您的文件。確保所有文件都已簽好。您會感到驚訝當您發現一些重要文件沒有簽好。審閱文件，看看誰被任命為您的遺囑執行人，誰是您信託的受託人。那些人還能承擔這些責任嗎？你還想讓他們為你做決定嗎？

第三步：列出所有資產。注意它們的稱號是什麼 - 賬戶上的名稱 - 以及每個賬戶的價值是多少？包括退休賬戶，如IRA，401（k），保險單和年金，並檢查您是否指定了受益人。你還希望那個人成為繼承您的資產嗎？確保您還指定了替代受益人。

第四步：如果您無法溝通，您的家人需要什麼資料？他們需要有關您藥物的資料，您主診醫生的姓名和聯繫信息，您的資產規劃律師，您的註冊會計師和您的財務顧問。您可能希望與您的醫療團隊以及您的法律和財務團隊安排“家庭會議” （兩次單獨的會議），因而您家中的每個人都熟悉您的專業團隊。列出在哪裡可以找到您的文件以及您希望由誰獲得您的私人物品, 這也可能會有幫助。

第五步：不要忘記告訴您信任的家人，您的重要資料位於何處以及有哪些列表。您不必與他們一起審查所有內容，但如果他們在您去世時知道您的東西在哪裡，他們便可輕易地處理您的資產。

參考: Times Herald-Record (Dec. 1, 2018) “5 steps to securing your elder estate plan”

What to Gift

If you would like to take advantage of the new lifetime gift tax exemption limit before it reverts to a lesser amount in a few years, you have many options for doing so.

The recently passed tax reform law doubled the lifetime gift tax exemption from previous levels. However, the exemption is scheduled to revert to the previous level in a few years. That means if you want to take advantage of the increased limit, then you need to act quickly.

It is not always a good idea to gift large amounts of cash that can potentially be wasted and there are many other options. News Max listed some of them in "Gifting Wealth and the Estate Tax Law Under Trump," including:

• You can create an LLC that holds stock or other investments and gift your family members’ interests in the LLC. That allows you to control the investments, while still gifting to your family for their use later.
• If you own a company, you can create a trust and gift stock in the company to that trust for your family's benefit.
• It is a great time to fully fund any special needs trusts your relatives have.
• Now is a great time to create and fund trusts that your family can benefit from later. If you have enough money, you can even create a dynasty trust that will supplement your family for generations to come. An estate attorney can help you determine the best trust for your family.
• You can help younger family members purchase their first homes.
• Consider funding retirement options for younger family members, such as by purchasing annuities for them.

Reference: News Max (June 20, 2018) "Gifting Wealth and the Estate Tax Law Under Trump."

Stan Lee Involved in Elder Abuse Investigation

Police are investigating whether legendary comic book writer Stan Lee is a victim of elder abuse.

It seems that 95-year-old Stan Lee is at the height of his fame. The characters he created for Marvel Comics currently make the film industry millions of dollars annually in film after film. Lee himself appears in a cameo role in every film.

To most people Lee is known as a friendly, beloved creator of the superheroes that they love. However, there is another side to Lee's life right now, as police are investigating whether he is the victim of elder abuse, as Time reports in "L.A. Police Investigate Reports That Marvel Comics' Stan Lee Is a Victim of Elder Abuse."

After Lee's wife passed away, a man named Keya Morgan stepped in to assist Lee with his affairs. Morgan is on probation for an unrelated matter. It is claimed that Morgan moved Lee out of his home and will not let friends and family visit Lee.

Police and a social worker were sent to Morgan's home to conduct a welfare check on Lee.  However, Morgan called 911 on them and falsely reported that he was being burglarized. Morgan now faces criminal charges for filing a false police report. A restraining order against Morgan has also been issued by a court prohibiting him from contacting Lee.

While it is not yet known whether Lee is a victim of elder abuse, a common sign is when a caretaker isolates an elderly person from other friends and family.

If you suspect elder abuse, you should contact Adult Protective Service as soon as possible.  If you are prevented from seeing your loved ones as in the case of Stan Lee, you might consider taking legal action such as conservatorship, consult an elder law attorney for advice.  

Reference: Time (June 14, 2018) "L.A. Police Investigate Reports That Marvel Comics' Stan Lee Is a Victim of Elder Abuse."

Stay Issued in California Doctor-Assisted Suicide Case

A California Appeals Court has issued a stay order against a lower court's ruling that had declared the state's doctor-assisted suicide law unconstitutional.

Several states have passed laws allowing doctors to assist terminally ill patients who want to commit suicide. Whenever these laws are passed, there is always some controversy.  However, it has not been nearly as what has occurred since California passed its law allowing the practice.

California has seen groups consisting of both doctors and religious-affiliated people fight hard against the law. In May of 2018, the law’s opponents won a major victory, when a district court judge declared that the law violated the state's constitution.

However, it was not a complete victory. This is because the judge did not rule on the merits of doctor-assisted suicide. Instead, the judge declared the manner in which the law had been passed as unconstitutional. That partial victory is now in doubt, as an appeals court issued an immediate stay of the lower court's order, as KVOA reports in "Court reinstates doctor-assisted suicide in California."

The California law is being closely monitored by interest groups on both sides of the debate over doctor-assisted suicide.

Interest groups are also following the law, because it included several provisions mandating that the state collect data about how the law was working and to issue regular reports about it. Both sides hope what the data reveals will be helpful for them, as other states consider similar laws.

Reference: KVOA (June 16, 2018) "Court reinstates doctor-assisted suicide in California."