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So often when we receive a call from a child of an aging parent in crisis, it’s about the signs of declining mental and physical capabilities leading to the discovery of a financial crisis.  This decline in health and cognition usually means a decline in the ability to manage assets such as keeping track of finances and investments, paying the bills and susceptibility to fraud. While some seniors have help such as trusted financial advisors and professional money managers, many do not and have done well with their “do it yourself” approach.  This becomes a problem, however, when the senior starts to slip cognitively and loses his or her way.  The discovery by family members that everything is not OK can be jarring and we have seen situations where it has come after much of the nest egg has been lost.  This can be especially challenging in the case where the parent’s investments are in real estate. Because real estate is not a passive investment, it must be actively managed.  Property managers can be hired to assist but we see more often than not that our clients manage their properties themselves.  In the case of rental properties, whether they be commercial or residential, keeping track of leases, real estate taxes, insurance, utilities, maintenance and repairs and keeping the properties as

In my February 22 post I wrote about QITs and specifically about a case involving an application being denied because the QIT was improperly funded.  In that case my client established the QIT just before the pandemic and funded the QIT correctly in the first month but not in the several months after that.  We appealed the denial and the court last week issued its decision. QITs are used when an applicant’s monthly income exceeds the income cap ($2382 in 2021).  Without it’s proper use the application will be denied.  Since the income, from Social Security and pension, cannot be reduced, using the QIT is the only way an applicant will be approved. The State has imposed specific restrictions with regard to using the QIT.  As I previously explained, enough income must be passed thru the QIT such that the remaining income (that is not deposited into the QIT) is below the income cap.  Additionally, one cannot split income from one source to drop below the income limit.  For example, if an applicant has total income of $3000 per month of which $1500 is Social Security, he or she can’t split the Social Security by putting $500 into the QIT which would drop the remaining income below the income

In last week’s post I wrote about the latest stimulus payment. Eligibility is based on your income as reflected on your income tax return. What happens if you have not filed your 2020 income tax return?  The IRS will use your 2019 income tax return in that case to determine qualification.   And what happens if you have lower income in 2020 than you did in 2019 which would allow you to qualify for the payment (or a higher payment)?  One option is to quickly file a 2020 return. Even if you don’t file before you receive your stimulus check, you can still file later and the IRS will make the adjustment after reviewing the 2020 return and send any additional amount you are entitled to. If it turns out that 2020 income is greater than 2019 such that you would not have been eligible or you would have been entitled to less of a payment there is no provision in the law to allow the IRS to take back the money.  So it might be better to wait to file a 2020 tax return if you believe you won’t get a payment (or not as much of a payment) based on 2020 income.  Keep in

This month Congress passed and President Biden signed into law a $1.9 trillion COVID 19 stimulus package.  This new law includes, among other things, another immediate payment to millions of Americans in need. Like the first 2 stimulus payments (which were $1200 last year and $600 in January, 2021 for eligible persons), this latest payment is based on an income threshold of $75,000 per year for single individuals and $150,000 for married couples.  The phaseout of these payments, however, has been shortened.  Once you reach income limits of $80,000 ($160,000 for married couples) you get nothing. There are some other important changes from the previous rounds of payments.  Children and adult dependents such as college students and older relatives are eligible for the full $1400.  A married couple with 2 children now will receive $5600. We have already heard from clients who have received their payments.  If the IRS has direct deposit information, payments will be made electronically which is the fastest way.  This will typically be the case for anyone who has paid taxes or received refunds electronically. Where the IRS does not have this information, paper checks or debit cards will be issued.  Those who received debit cards previously will get new cards.  The old cards issued last year won’t be

In the past 2 weeks’ posts I have been talking about the SECURE Act and how it has changed the tax laws with respect to retirement accounts such as IRAs and 401ks.  With limited exceptions (as noted in my post last week), beneficiaries who inherit these accounts upon the owner’s death can no longer stretch the payments out over their life expectancy. From a tax planning perspective, the advice to withdraw only the minimum required in order to preserve tax deferred status and pass that on to children and grandchildren, becomes less relevant with the restriction of stretch provisions.  When we look at long term care planning, however, the goal to keep as much as possible in these tax deferred accounts, is still a problem when we are faced with clients who have substantial long term care expenses that can be $150,000 a year or more. IRA - Individual Retirement Account acronym, concept on blackboard If these clients have no long term care insurance then they must pay privately until their assets are below the level needed in order to qualify for one of the government benefit programs that cover long term care, usually Medicaid or in the case of wartime veterans, the VA Aid

In last week’s post I reviewed the stretch provision of the tax laws that apply to retirement accounts such as IRAs and 401ks.  These laws allowed tax deferred accounts to remain tax deferred for a longer period of time by allowing certain beneficiaries to “stretch out” the time within which they must withdraw funds and pay tax on the growth in these accounts. As I stated last week, as long as a beneficiary was a designated beneficiary ( individual) the stretch provisions could be utilized.  The SECURE Act which became law on January 1, 2020 changed all that.  Stretch provisions were severely limited to a small group of individual beneficiaries.  For all other formerly designated beneficiaries, a 10 year rule now applies. The 10 year rule says that for most designated beneficiaries distributions from an inherited retirement account must be made no later than the end of the calendar year which is 10 years after the death of the account owner.  Failure to empty the account by that deadline carries a pretty stiff penalty - 50% of the amount that was supposed to be distributed but wasn’t.  There is no minimum withdrawal requirement each year.  You must simply “zero” out the account by the 10 year deadline. The SECURE Act