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Tax Question
Old 04-14-2006, 07:04 AM   #1
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Tax Question

I have a MIL that recently moved into a nursing home with Parkinsons and dementia. My FIL has just been diagnosed with early/moderate Alzheimer's and will be moving into a assisted living facility.

My parents had the foresight to die "quickly" so I've not had the joys of being associated with these types of facilities.

My DW is taking over their finances which means I'm taking over their investments and tax returns. Here is my question -- Is the assisted living and nursing home tax deductible as medical expenses? In a few months, 100% of their expenses will be to these facilities.
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Re: Tax Question
Old 04-14-2006, 07:39 AM   #2
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Re: Tax Question

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Originally Posted by 2B


My DW is taking over their finances which means I'm taking over their investments and tax returns.* Here is my question -- Is the assisted living and nursing home tax deductible as medical expenses?* In a few months, 100% of their expenses will be to these facilities.
2B: Unfortunantly, (at least the information I've been able to gather, it's not.)

My mother was in a nursing home, but she was on Medi-Caid, with no net worth, so the tax situation didn't come into play.

My wife and I do not have LTC coverage, so it was a question that was of interest to me in case either one of us ends up there.

If it were deductible, it would soften the financial hit a whole bunch, but don't think it is, (at least in this point in time).

I'd sure like to be proven wrong though.
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Re: Tax Question
Old 04-14-2006, 08:58 AM   #3
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Re: Tax Question

I've actually answered my own question.* In case anyone else is in a similar situation I found this in IRS Publication 502.

Long-Term Care
You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts.

Qualified Long-Term Care Services
Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are:

Required by a chronically ill individual, and

Provided pursuant to a plan of care prescribed by a licensed health care practitioner.


Chronically ill individual.* *An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.
He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.

He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.


Maintenance and personal care services.* * Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment).
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Re: Tax Question
Old 04-14-2006, 09:00 AM   #4
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Re: Tax Question

Well you beat me to it about Pub 502.

You need to look into potential of transfering assets to spend down to qualify for Medicaid. Possibly talk to lawyer. There is a three year or five year look back period (depending on whether they have Trust Funds (5 year period) or not (3 year period))and penalties for excessive transfer. Depending on state they are in, look up state department of health services (dhs) and medicaid websites is the place to start.

Good luck and sorry about IL's, I went through that a few years ago with DW parents.
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Re: Tax Question
Old 04-14-2006, 09:12 AM   #5
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Re: Tax Question

Unfortunately, FIL was very secretive about his finances and became more so as he aged.* Also unfortunately, there were good reasons to be secretive.* They were spending more than they were receiving in pensions.* When we started getting involved we found almost $30,000 in credit card debt at 23%.* They had late payment charges every month we could find records.

DW wouldn't let them go into a medicaid facility and FIL wouldn't qualify yet.* I wouldn't want FIL to move in with us so I'd pay to get him somewhere.* Plus, for all the people planning to use medicaid for LTC, please visit one of these facilities.* Very few nice facilities have medicaid slots and they are usually reserved for long time residents who run out of money.* Any nursing home is bad enough but the medicaid facilities are nasty.

Fortunately, they have a paid for $500K house that when we get him out of it will cover their expenses for 12 to 15 years with their other income.* When one dies, they will have enough money for a indefinite stay for the surviving spouse.

It's probably too late to do anything fancy with trusts but we are going to create a trust for the house proceeds and other assets.* When we look into that, we'll probably go through an elder care lawyer.
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Re: Tax Question
Old 04-14-2006, 10:14 AM   #6
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Re: Tax Question

Quote:
Originally Posted by 2B
Fortunately, they have a paid for $500K house that when we get him out of it will cover their expenses for 12 to 15 years with their other income.* When one dies, they will have enough money for a indefinite stay for the surviving spouse.
2B,

Failing parents/inlaws create challenging times.* Best wishes to them and you folks.

I admire and share your outlook on caring for the inlaws in their old age.* We have only my MIL left and, at 81, she's still doing well.* Still, from time to time DW is contacted by her siblings with some scheme to transfer mom's assests to them, including DW, now so nursing home costs can be avoided later.* What heartless crap that is!* MIL and FIL worked, LBYM and saved all their lives so assests could be transfered to the kids and MIL could spend her last years on Medicaid?* * * DW always votes against it and I really respect her for it.* BTW, all siblings are well off.* We're not talking about transfering assests so the kids can go to college, etc.* We're just talking greed.
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Re: Tax Question
Old 04-14-2006, 11:01 AM   #7
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Re: Tax Question

I'd like to think I'm as greedy as the next guy around this forum. If I thought I could move the money to DW and SIL while putting them into quality government paid care, I'd go for it.

Have them go look at a typical medicaid "for profit" nursing facility and ask them if they are ready to end up there. Yes. There are a few medicaid beds at nicer facilities but they are not guaranteed to take a new patient. The ones where my MIL is at are pretty much reserved for patients that exhaust their assets. I suspect they wouldn't consider draining assets into a trust as an acceptible way of exhausting assets.

As it now stands, I can look forward to managing their residual nest egg with the assumption that they are both in a degenerative state that one of them probably won't survive for 5 more years. Since DW and SIL are the only heirs, I'll manage it as "future inheritance" after covering for the next 5 years in dual facilities. Again, they have enough pensions so that one can live on the pensions and annuities.
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Re: Tax Question
Old 04-14-2006, 11:14 AM   #8
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Re: Tax Question

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Originally Posted by youbet
BTW, all siblings are well off.* We're not talking about transfering assests so the kids can go to college, etc.* We're just talking greed.
I'm seeing links to other threads here - all well off, but have they saved enough for a* comfortable retirement?* It's my theory that many baby boomers see their parents' nest eggs as theirs and will do what they can to make that happen.* I'm just dreading the news headlines in 2010 when the estate tax nil rate band disappears and there's no estate tax to pay.* How many plugs in long term care facilities around the country will get pulled in that year...!

Seriously though... when will the new estate tax bands for 2011 be decided and what do other posters think the level will be?* Back to $1M, estate tax gone, to some middle ground - $4M maybe
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Re: Tax Question
Old 04-14-2006, 11:26 AM   #9
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Re: Tax Question

I had to talk my dad out of transferring assets for the purpose of qualifying for medicaid paid long term care when he was in his early 80's. I had seen those types of facilities and there was no way I would allow either of them to be in one. Mom had early alzheimers. I told him that my sister and I were both financially secure and that the reason he and mom had worked hard and saved their money was so that they could afford the best of care when they needed it. He was very reluctant to spend the $170K upfront fee and $4500 per month for a first class continuing care facility. I urged him to reconsider. When they were 84 he could no longer deal with Mom by himself so they sold their house and finally entered an outstanding continuing care community. They had their own apartment with daily assistance for Mom's care. After a year Mom was moved to the on site nursing facility specializing in Alzheimer's care. Dad visited her every day and he flourished without the burden of caring for Mom. The facility was excellent in all respects. Dad died there at age 89 and Mom died there a year later. It was one of the best decisions they ever made.

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Re: Tax Question
Old 04-14-2006, 11:31 AM   #10
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Re: Tax Question

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Originally Posted by jj
I'm seeing links to other threads here - all well off, but have they saved enough for a* comfortable retirement?* It's my theory that many baby boomers see their parents' nest eggs as theirs and will do what they can to make that happen.* I'm just dreading the news headlines in 2010 when the estate tax nil rate band disappears and there's no estate tax to pay.* How many plugs in long term care facilities around the country will get pulled in that year...!
If they really want the money fast, the alternative is homicide. It would probably be the easiest murder to commit. Dutiful son or daughter visits Mom reguarly. A nice little OD administered via a sweet treat for Mom causes the heart to stop. Old people in nursing homes don't get autopsies unless it's really obvious.

I hate to say it but I'm sure it's been done.
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Re: Tax Question
Old 04-14-2006, 02:00 PM   #11
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Re: Tax Question

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If they really want the money fast, the alternative is homicide.*
Sick-o 2B!* *You're probably right, but it makes my skin crawl to think of it!*

Grumpy - There's no doubt that the human qualities of love and compassion can be ecomonic anchors causing people to do the right thing instead of the greed thing.* But I think there is a special good feeling about life and oneself that comes when you walk the high road instead of the greed road.* Working with your folks to help them understand that the best use of their money was to use it for their own comfort and welfare at life's end places you a big step above average.* I wonder how many sons, on their death bed, think to themselves "Gee, I'm glad I screwed Mom and Dad by placing them in a low quality care facility while I partied with the fruits of their lifelong labors."* I suppose a few, but sheeese.............* *
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Re: Tax Question
Old 04-14-2006, 02:06 PM   #12
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Re: Tax Question

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Originally Posted by youbet
Sick-o 2B!* *
Thanks. You made my day.

Quote:
Originally Posted by youbet
I wonder how many sons, on their death bed, think to themselves "Gee, I'm glad I screwed Mom and Dad by placing them in a low quality care facility while I partied with the fruits of their lifelong labors."
It's been my experience that scummy people justify almost any scummy act. They don't see it as screwing Mom and Dad. They see it as passing on weath within the family. After all, Mom and Dad were demented anyway. They didn't know where they were and the poor care ended their miserable existence sooner. They would have wanted him (or her) to have it even if they did get crappy care.

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Re: Tax Question
Old 04-14-2006, 02:24 PM   #13
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Re: Tax Question

Quote:
Originally Posted by jj
I'm seeing links to other threads here - all well off, but have they saved enough for a* comfortable retirement?* It's my theory that many baby boomers see their parents' nest eggs as theirs and will do what they can to make that happen.* I'm just dreading the news headlines in 2010 when the estate tax nil rate band disappears and there's no estate tax to pay.* How many plugs in long term care facilities around the country will get pulled in that year...!

Seriously though... when will the new estate tax bands for 2011 be decided and what do other posters think the level will be?* Back to $1M, estate tax gone, to some middle ground - $4M maybe
I wouldn't confine this to baby boomers!* For us on the leading edge of the baby boom generation (folks in their late 50's), it's our kids starting to daydream about our portfolios rather than us daydreaming about our parent's portfolios that's the common thing.

My own opinion is that the new estate tax bands for 2011 will be whatever they revert to if Congress does nothing.
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Re: Tax Question
Old 04-14-2006, 02:33 PM   #14
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Re: Tax Question

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It's been my experience that scummy people justify almost any scummy act.*
That's my experience too.

A tip of the hat to you for your progressive, compassionate outlook regarding your inlaw's situation.* (While keeping up your gruff and greedy outward appearance no less........) Best wishes.
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Re: Tax Question
Old 04-14-2006, 11:23 PM   #15
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Re: Tax Question

Grumpy,

You are a class act. I am sure that your parents were extremely well pleased with the fine son that they reared. I wish that there were more people who thought as you do.

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Re: Tax Question
Old 04-16-2006, 02:33 PM   #16
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Re: Tax Question

Dreamer,

Thank you for the kind words. My parents taught me many valuable financial lessions and I hope I have successfully passed them on to my children.

Grumpy
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