Medicaid Spend Down: Pay for More Than Just Medical Bills

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Senior man uses smartphone at home.Since the 1960s, Medicaid has provided health care coverage for low-income people across the United States. For millions of seniors, Medicaid offers financial assistance, helping them to cover the cost of long-term care services. Today, this joint federal-state program also benefits other qualifying populations with limited income, including children and people with disabilities.

Qualifying for Medicaid

You may not foresee yourself applying for Medicaid in the future. Yet in reality, research shows that roughly one in seven seniors are likely to require long-term care at some point later in life. Long-term care can be extremely costly; this is why many people have come to rely on the Medicaid benefits that cover these costs.

Given these sobering statistics, consider gaining a better understanding of Medicaid and shaping your plans sooner rather than later. To qualify for Medicaid, you may need to carry out certain actions at least five years prior to when you apply. That’s because most state Medicaid agencies will look back at the five years leading up to when you submit your application for the program.

If you happened to make certain purchases or gifts during this so-called “lookback” period, you could end up facing a penalty. Unfortunately, these penalties could mean you have to wait months, or even years, before you become eligible for Medicaid.

Medicaid is for people living on limited incomes. So, among the main criteria to qualify for Medicaid is that you have limited income and assets. Generally, you must have no more than $2,000 in your name to be eligible for this public benefits program. (Note that this limit can vary according to state, however.)

If you have more than that, you may find yourself having to “spend down” your extra assets to meet the $2,000 limit. Only after you have fulfilled this (and other) requirements would Medicaid begin paying for basic long-term care expenses.

The upside, however, is that not all your assets count against you in the eyes of Medicaid. For example, your primary home is typically exempt. You also can own one car without worrying about exceeding Medicaid’s asset limits. And, depending on your state, you may be able to spend your excess money on certain items that help make your life more comfortable.

Medicaid Spend Down

As mentioned above, each state dictates what the income and asset limits are for Medicaid applicants. These figures also tend to shift a bit every year. 

Take note that not every state allows for a Medicaid spend down. These so-called “income cap” states follow different rules.

Also, take care that items you do decide to buy as part of your spend down are specifically for the Medicaid applicant.

So, What Can You Pay For?

All that said, Medicaid applicants can generally spend down their excess income in several ways. Paying off credit card debt or medical bills is one possibility. Prepaying for your funeral services is often a legitimate spend down option, too. Admittedly, these sorts of payments might not bring you much enjoyment, but they still may be able to count toward your spend down amount.

In many cases, you can spend down your surplus assets on medical services, equipment, or health insurance premiums.

Perhaps you have come to rely on a wheelchair or cane or could benefit from hearing aids. You may want to have an eye doctor check your vision. If your prescription eyeglasses are out of date, you may be able to purchase a new pair. These are all medical expenses that could potentially be part of your spend down efforts.

At the same time, your excess income can go toward much more than unpaid medical debt or other bills. Purchases that help improve your quality of life tend to be permissible. Here are five tangible types of items you may be surprised to find you can legally purchase as part of your Medicaid spend down:

  • A new vehicle – You may need a reliable car or a wheelchair accessible vehicle to get to medical appointments. Keep in mind that some states place a limit on the value of your one vehicle. For example, you might not want to plan on purchasing an RV camper for road trips if you are seeking Medicaid assistance.
  • Electronics – In some states, upgrades to your smartphone, laptop, television set, or another communications device may be a possibility.
  • New clothes – It might be an ideal time for you to stock up on new socks, pajamas, or other clothing necessities.
  • Books or subscriptions – Sources of entertainment can boost your quality of life, too. You may prefer books or magazines, or subscriptions to streaming services like Netflix.
  • Towels and bedding – Check with a professional to see whether you can refresh your bedding or towel supply as part of your spend down. If moving to a long-term care facility, ask whether they provide these types of items for you.
  • Furniture – You may be moving to a facility that allows you to bring along certain preapproved furnishings. For example, you might benefit from a recliner chair with a power lift in your new space.
  • Home improvement – Even if you’ll receive long-term care at home, you might be able to spend your excess income on modifying your residence. Maybe you need to invest in fixing your plumbing, paving your driveway, or installing a wheelchair ramp.

Consult with your attorney to understand what is and is not permissible. (A bonus is that you may in fact be able to include legal fees as part of your spend down process.)

Why It’s Key to Work With Your Elder Law Attorney

The rules regarding Medicaid get complicated quickly. Be sure to talk to your elder law attorney about Medicaid planning. Discuss your needs with them and ask what your options might be for spending down your assets. They can identify strategies to help preserve your hard-earned savings while avoiding potential Medicaid penalties.

Whatever you do choose to purchase, keep all your receipts and detailed documentation in case any questions come up. You don’t want to break the rules by accident and end up facing a Medicaid penalty period.

What You Should Know About Prepaid Funeral Plans

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Mourner holds lillies in one hand and places the other on a casket during a funeral service.How Much Are Funeral Costs in the United States?

Funerals rank among the most expensive purchases many consumers will ever make. As of 2023, the median cost of a traditional funeral, with casket and burial, was $8,300.

The average cost varies depending on where you live as well. Data from 2024 shows that average funeral costs (for burial or cremation) are highest in the following seven states: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. Any “extras,” like flowers, death notices, acknowledgment cards, and limousines, can bring the total to well over $10,000.

The process of organizing a funeral or celebration of life for someone else is an overwhelming and emotional one. Many people consider a funeral or burial a reflection of their feelings for their deceased family member or friend. As a result, they may tend to “overspend” on these services.

Planning Your Own Services

Today, an increasing number of people are planning their own funerals or memorial services. They may also designate their funeral preferences in detail and sometimes even pay for funeral ceremony in advance.

In part, they may pursue a prepaid, or “pre-need,” funeral plan to help relieve their family members of the financial burden. They also do this to offer them some peace of mind. With plans already in place, their loved ones can forgo certain decisions amid their grief, when they’re likely also overwhelmed with other pressing tasks.

Prepayment for funeral services can serve as an effective Medicaid planning strategy, too. For example, you may be looking to apply for Medicaid and need to spend down your assets to qualify for the program. Opting into a prepaid funeral contract can help you do this.

In addition to burial or cremation costs like caskets, urns, or burial plots, you may be able to include other expenses in your prepaid funeral plan. This can vary, but may include:

  • transportation to a cemetery for your family members
  • floral arrangements
  • gravesite services
  • catering
  • services of a funeral director

What to Look Out for When Prepaying for Funeral Services

However, consumers lose millions of dollars every year when pre-need funeral funds are misspent. 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 prove to be virtually worthless.

In the 1980s, consumers received some protection from unscrupulous funeral providers with the creation of the Funeral Rule. Under this rule, 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 that fall under state law. Plus, 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.

The FTC recommends exploring several aspects of a pre-need funeral arrangement in detail before you sign up. Consult with your attorney on these ideas before signing anything. The following come from tips the FTC shares on its Shopping for Funeral Services consumer advice page:

  • Ask what will happen to the money you will spend on a prepaid contract. States have different requirements for handling funds paid for prearranged funeral services.
  • Get information on what happens to the interest income on the money you prepaid and put into a trust account.
  • Determine whether or not you’ll have any protection if the firm you dealt with ever goes out of business.
  • Can you cancel the contract and get a full refund if you change your mind?
  • You may move to a different area or pass away when you are away from home. Determine whether someone can transfer your prepaid funeral plan if necessary. (This is often possible at an added cost.)
  • In addition, get details on exactly what you are paying for and compare this with other funeral providers.
  • Confirm that the price you are prepaying is final. You want to avoid anyone having to owe additional money to cover funeral expenses once you’ve passed away.

Communicate With Your Loved Ones

Of course, you can avoid many of these pitfalls by making decisions about your arrangements in advance, but not paying for them in advance. Either way, tell your family about the plans you’ve made and also make them aware of where you’ve filed the pertinent documents. You may also wish to consult your attorney on the best way to ensure that your family members follow through on your wishes.

If you’re just beginning to do your research and compare prices, connect with trusted loved ones on funeral homes they may recommend. See if one of them would be willing to join you when you make visits to different homes.

Consider a Payable on Death Account

To guarantee money is available to pay for your funeral, work with your bank to set up a payable-on-death (POD) account. (Note: Not all states offer POD accounts as an option.) Name the person who will be handling your funeral arrangements the beneficiary (and make sure they know your plans).

With a POD account, you will be able to maintain control of your money while you are alive. Then, when you pass away, it is available immediately to the beneficiary, without having to go through probate.

You be interested in exploring other potential options for prepaying, such as final expense insurance (also called burial insurance). Your insurance provider or your estate planning attorney can help you identify a suitable policy.

What Else to Keep in Mind

In some cases, it can be more convenient and less stressful to “price shop” funeral homes by telephone or online, rather than in person. The Funeral Rule requires funeral directors to provide price information to anyone who asks for it.

If you have questions about your state’s laws, most states have a licensing board that regulates the funeral industry. Your estate planning attorney also has the expertise to help you with planning and to guide you on your rights.

Medicaid Planning Protects Your Home

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Multigenerational family has breakfast in yard on a sunny day behind modern home.Your most valuable property may be your home, which is true for many people. You likely want your children to inherit that value when you pass away.

However, you may also have concerns about planning for the future, especially if your health declines and you need expensive long-term care. You may be aware that Medicaid can pay for these services. However, Medicaid rules say you can own no more than around $2,000 in assets to be eligible – now what?

Medicaid Planning Using an Irrevocable Trust

One solution is to take your home out of your name while reserving your right to live in it. This is possible with a carefully drafted irrevocable trust.

Putting the house in the ownership of a trust could prevent Medicaid penalties and ensure reimbursement of health expenses. (Note that each state’s rules can vary.) It all depends on whether your health continues to keep you out of long-term care for the next five consecutive years.

An irrevocable trust has numerous other advantages, one of which is to avoid probate proceedings. Trusts are private agreements that usually require no court supervision. So, signing away valuable property can feel like a major step, but it keeps your living situation unchanged and can pay off in the long run.

Avoiding Capital Gains Taxes

But suppose you later decide to sell the house and move into a smaller place. That could pose a capital-gains tax problem. If the trust hasn’t been carefully drafted, and it (not you) sells the home, the personal residence exemption would be lost. Capital gains tax could be prohibitive if the house has appreciated in value since the date of purchase.

A similar problem arises when it comes time for your children to inherit. If the trust is not carefully drafted to cover this eventuality, your heirs will lose the basis-adjustment tax break, which could cost them dearly. The basis adjustment allows the inherited value of the home, for capital-gains purposes, to be calculated not from the date you originally purchased the home but from the date your heirs inherit the property.

For example, imagine you paid $100,000 for your house in 1980, and you kept it in good condition; when you pass away, the house is worth $300,000. Now suppose the home is titled in the trust name, but the trust wasn’t written carefully to preserve the basis adjustment that would otherwise be allowed for inherited property. If the children sell the home for $350,000 in those circumstances, they would have made a taxable profit of around $250,000.

With the basis adjustment, however, profit would be calculated from the $300,000 mark as of the date of inheritance. This would leave your children with a tax bill on the $50,000 profit, not $250,000. This tax advantage comes from “stepping up” the taxable basis to the market price at the time of inheritance. As a result, your family receives more value by having to pay less taxes.

Protecting Your Assets for Heirs with an Irrevocable Trust

First, the irrevocable trust takes the home out of your name and, instead, titles it to the trust. Medicaid rules view the owner of the property as the trust, not you, and that’s why you want to reduce your assets and qualify for Medicaid assistance.

Next, to preserve the personal residence capital-gains exemption, an irrevocable trust creates what’s known as grantor trust tax rules. Current tax rules allow property owned by this kind of trust to remain part of your estate for tax purposes and exempt from capital gains up to specified value limits, depending on your state and whether you file single or jointly as a married couple.

Even though the trust has ownership, you are still allowed to take the personal residence exemption. For capital gains, the IRS disregards the trust. However, as of 2023, assets transferred to an irrevocable trust before your death that are not subject to estate tax will not receive a step-up in basis.

To minimize your heirs’ exposure to capital gains tax in the future, the trust also provides a limited testamentary power of appointment. The appointment power permits you to designate someone with the authority to disburse your assets to chosen beneficiaries, provided those beneficiaries are limited to family or charities.

The limited power of appointment may allow your assets to pass down to beneficiaries while preserving eligibility for both the tax basis adjustment and Medicaid. (There is never any guarantee of this tax treatment, and you should always consult with your tax advisor for tax advice — your elder law attorney can point you to a CPA if you don’t already have one.)

The right estate planning strategies neatly solve Medicaid planning and tax issues by:

  • Transferring the house title to the irrevocable trust while retaining your right to live in it, avoiding Medicaid penalties or reimbursement problems after five years
  • Creating grantor trust status to preserve the residence exemption, avoiding capital gains tax on the sale during your lifetime
  • On your death, the adjusted-basis tax break is preserved by designating a person or entity to administer the assets in the trust

Trusts are carefully drafted to comply with current rules regarding ownership and taxes to prepare for Medicaid eligibility and protect your assets for your family.

Consult With Your Estate Planning Attorney

You may have a will, but it will not be able to protect your assets unless it becomes part of an estate plan that includes an irrevocable trust.

You may already have a will or estate plan in place but want to have a professional review it. Your estate planning attorney may find that your will or estate plan isn’t Medicaid-qualified, or that it lacks provisions for a grantor trust or the necessary powers of attorney. However, this is not a reason to worry, as an irrevocable trust can be changed.

Trusts that fail to account for various contingencies can happen if you don’t know where to find a trusted and reputable estate planning attorney. Many states have passed legislation permitting the alteration of trusts for tax reasons, even if the trusts are nominally irrevocable. All parties must consent, or court proceedings would be required, but an expert estate planning or Medicaid planning attorney knows how to correct these problems efficiently.

Contact estate planning attorney Addison Goff today. You may visit GoffandGoffAttorneys.com or call 318-255-1760 to set up an office visit. 

A Senior’s Guide to Estate Planning

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Happy senior couple meets with an estate planning attorney.Most older adults acknowledge that estate planning is essential. Yet, nearly half of Americans age 55 or older do not have a will, and even fewer have designated powers of attorney, a living will, or health care directives.

These legal documents help guide your representatives to provide the end-of-life wishes you seek. Estate planning also reduces the burden your loved ones face and lessens the potential for conflict among your family members after you are gone.

Whether you own a little or a great deal, every senior should have an estate plan. Your estate comprises your home, real estate, vehicles, businesses, bank accounts, life insurance, personal possessions, and any debt you may owe. The goals of your estate plan include:

  • Establishing who will receive your assets upon your death
  • Setting up a durable power of attorney
  • Selecting a trusted representative to make health care decisions on your behalf if you become unable to manage your own affairs due to illness or injury
  • Creating a will and trust
  • Minimizing estate taxes
  • Appointing your estate executor or representative
  • Providing peace of mind to you and your loved ones

Four basic elements of an estate plan can help you achieve these goals.

Creating Your Will

This legal document, called a testamentary will, transfers your estate, after you die, to the individuals or charities you name. Naming your executor  is another function of your will. This individual will ensure your wishes are carried out. Many older adults choose their most responsible adult child for this role.

Advise the person you choose to manage their expectations and advise your family of what to expect in your will. This way, you can address questions they may have and stave off family confrontations after you are gone.

Your will needs to include the following:

  • your named executor,
  • a list of individuals or charities you wish to receive your assets, and
  • a list of significant assets to leave to heirs

Be aware that if you have substantial assets in probate court in a succession, the process can be costly and time consuming.  (Succession (sometimes called a probate proceeding in states outside Louisiana) is the legal proceeding where the court oversees the distribution of your assets.) This can add stress to your executor’s role, as well as increase the time it takes for your family members to receive their inheritance.

You may wish to establish a trust; you can do so by working with an elder law attorney or estate planning attorney. Creating a trust can minimize taxes, restrict asset distribution, and also bypass probate / succession proceedings. These trusts are usually a revocable or irrevocable living trust, or special needs trusts. Your attorney can identify the trust type that best meets your needs.

Your Living Will and Durable Health Care Power of Attorney

A living will (or Advanced Medical Directive) outlines your choices regarding end-of-life treatments and will come into play while you are still alive but unable to communicate health care decisions. Similarly, a health care power of attorney gives authority to another person to make medical decisions for you. The person you name in your  medical power of attorney is typically a caregiver or family member who inspires the utmost trust.

Here are some general issues to consider when creating a living will:

  • Medications you are willing or unwilling to have administered to you
  • Permission for a feeding tube if you are unable to eat
  • Permission to be on life support and, if so, for how long
  • Willingness to accept palliative care at the end of life
  • Having a do-not-resuscitate order or DNR
  • Your decision about being an organ donor

If you have both documents, a living will usually trumps your health care power of attorney. Many older adults prefer to forgo a living will. They instead opt to rely on their health care proxy to make medical decisions on their behalf in the event that they become unable to communicate their wishes for treatment and life-saving measures. Whatever you choose, it is important to inform your loved ones of your health care preferences.

Durable Financial Power of Attorney

Much like a health care power of attorney, a financial power of attorney becomes active when you can no longer make financial decisions. The person you designate will manage your finances on your behalf. To alleviate excessive burden, consider appointing a different individual than your health care power of attorney. However, note that it is legally permissible to name the same person.

Your financial power of attorney should be highly trustworthy and financially stable. When selecting an individual in your life to fulfill this role, you may consider someone who not only lives near you, but is also willing and capable of serving. The individual must be financially responsible, trustworthy, and able to act in your best interests. Finally, this person should be proactive and assertive in protecting your finances.

While these documents represent the basics of an estate plan, your situation may require far more detail and nuanced expertise that an elder law attorney can provide if they do not also offer estate planning. Begin with a checklist including:

  • A list of your assets and debts
  • Assemble important supporting documents
  • Choose candidates for the executor (personal representative) and powers of attorney
  • Draft an outline of estate planning documents as listed above
  • Talk with your family about your goals and wishes

Connect With an Estate Planning Attorney

When you accomplish these tasks, an experienced estate planning attorney or elder law attorney can review your efforts and put your plan into legal action. You will save time and money by being organized and having a basic understanding the estate planning process before meeting with an attorney.

Once all of your estate planning documents are complete, you’ll have a sense of peace knowing you have a solid plan that best protects you and your loved ones. To get your estate plan going, contact Estate Planning and Elder Law Attorney Add Goff today at 318-255-1760 or info@GoffandGoffAttorneys.com. 

Retirees: Deduct Your Long-Term Care Insurance Premium

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Even if you have a long-term care insurance policy, you may likely be hoping that you won’t ever have reason to use it. Regardless of what the future holds, there’s one silver lining of which you may not be aware. That is, premiums on many long-term care insurance policies are in fact tax-deductible.

What Is Long-Term Care Insurance?

Long-term care insurance, or LTCI, can help you prepare for covering the cost of care in a nursing home facility or other setting when and if you need it. Unfortunately, the likelihood that you’ll need long-term care services at some point is high. In fact, about 70 percent of older adults find themselves having to rely on at least some long-term care in their later years.

When individuals require long-term care, it means that they need assistance when completing activities of daily living (ADLs). These basic daily tasks include dressing oneself, showering, or moving safely from one place to another in one’s household, such as from the bed to the bathroom, or in and out of one’s chair. In most cases, your LTCI policy will begin covering long-term care services if you cannot perform at least two ADLs on your own.

The cost of LTCI policy premiums can be out of reach for many people, and some insurers have been raising premiums over the course of time. According to one 2022 survey by HCG Secure, a mere one in 10 of Americans older than 65 have a long-term care insurance policy. However, if you have purchased a tax-qualified plan, you may be able to deduct the insurance premium as a medical expense.

Is My Long-Term Care Insurance Policy Tax-Deductible?

You can deduct numerous types of medical and dental expenses from your taxes. In addition to qualified long-term care insurance premiums, other deductible health expenses include the following:

  • prescription medications and insulin
  • substance use disorder inpatient treatment or smoking-cessation programs
  • prescription or reading eyeglasses
  • contact lenses
  • hearing aids
  • X-rays
  • artificial teeth
  • acupuncture treatments
  • the cost of caring for a guide dog for a person with a vision or hearing disability

When filing your 2023 federal income taxes, check with your insurance broker or state insurance commission to determine whether your LTCI policy qualifies.

Only certain long-term care insurance policies meet the criteria for a tax deduction. The National Association of Insurance Commissioners sets these rules. Typically, many hybrid long-term care policies do not qualify for a premium deduction. (For more information on what defines a qualified LTCI contract, consult the IRS’ Publication 502 for the current tax year.)

If your policy does qualify, you can deduct your LTCI policy premium up to a specified limit. Keep in mind that you will only be eligible for a tax deduction if all of your eligible medical expenses totaled more than 7.5 percent of your adjusted gross income for the year.

Select states also offer LTCI tax incentives, so be sure to check with your tax advisor. Note, too, that if you are self-employed, the rules regarding these deductions can differ.

How Much Can I Deduct in 2024?

If your annual LTCI policy premium is higher than the limit provided in the table below, it will count as a medical expense. The older you are, the higher your deductible limit. For example, if you are a 75-year-old individual at the end of 2023, you may be able to deduct up to $5,880 in LTCI premiums as qualified medical expenses.

Table 1. 2024 LTCI Tax Deductible Limits.

Attained Age Before the Close of 2023 Maximum Deduction in 2024
Age 40 or younger $470
Age 41 to 50 $880
Age 51 to 60 $1,760
Age 61 to 70 $4,710
Age 71 and older $5,880

These are lower deduction limits than in previous years. The Internal Revenue Service adjusts these limits each year.

The cost of long-term care services can in large part depend on where you live. Check out this online tool to get an estimate based on your ZIP code.

The ins and outs of LTCI products can prove to be complicated. Consult with Explder Law Attorney Add Goff to learn more about how LTCi can help your estate plan. An elder law attorney can provide guidance on purchasing an LTCI policy and also assist you in planning for the possibility that you will need long-term care in the future.  Goff and Goff cannot give tax advice. For tax questions, please consult with your tax professional.

ABLE Accounts in 2024: Save Up to $18,000 Annually

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Young man using wheelchair holds rail on ramp on sidewalk.For nearly a decade, people with disabilities have had the option to accumulate savings in a special tax-free account – without risking their means-tested public benefits. In 2024, the annual limit on how much money one can deposit into these savings vehicles, known as ABLE accounts, will rise, allowing individuals to add up to $18,000 per year.

What Is an ABLE Account?

Many people across the disability community rely on such government assistance as Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits, or Supplemental Security Income (SSI). Yet having too many assets to their name can disqualify them from receiving these often critical benefits. For example, in most states, the resource limit to qualify for Medicaid is just $2,000. In 2014, Congress signed the Achieving a Better Life Experience (ABLE) Act into law to help address this issue.

Individuals with an ABLE account can save up to a total of $100,000, tax-free, while remaining eligible for public assistance programs. Family members, friends, and others can make contributions to the account, too. The disabled person can then use these funds to help maintain their independence by spending them on disability-related expenses, including assistive technologies, education, transportation needs, vacations, legal fees, and health care.

Unlike a special needs trust (SNT), an ABLE account can be opened by the individual with the disability. This offers them considerably more control over the account funds compared with an SNT.

Starting in 2024, the annual limit on contributions to ABLE accounts will be $18,000, up from $17,000 in 2023. Through the end of 2025, ABLE account owners who work can contribute their employment income to these savings vehicles even beyond the per-year deposit limit.

The idea for these accounts derived from the concept of a 529 college savings plan. Similar to a 529 plan, funds in an ABLE account grow tax-deferred over time. In addition, each state administers its own ABLE account program.

To qualify, you must meet the Social Security Administration’s strict definition of “disabled.” You also must have incurred your disability before age 26. (Note that the age cutoff will shift to age 46 come 2026. According to estimates, this age adjustment will result in roughly 6 million more individuals becoming eligible to open these types of savings accounts.)

Why Open an ABLE Account?

People with disabilities are among those most at risk for financial disaster. According to research, just 10 percent of people of working age who are living with a disability are financially healthy.

ABLE Accounts, or 529A accounts, can serve as a form of future financial support for these individuals. Yet the vast majority of those who could benefit from these accounts remain unaware of them. As of 2022, 8 million people were eligible for this type of account, yet a mere 120,000 had one in place.

Get Support With ABLE Accounts

To learn more about setting up this type of savings account, consult your special needs planning attorney.

How Gift Cards Could Affect SSI Benefits

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Joyful young brunette woman girl in yellow sweater excitedly holds up a gift voucher.Special events like holidays and birthdays often include gift-giving. Gift cards are a convenient and common choice. According to Capital One Shopping, 54 percent of United States consumers buy gift cards as holiday gifts.

Supplemental Security Income Benefits

Before purchasing a gift card for someone who receives Supplemental Security Income (SSI), be sure to understand how receiving a gift card could affect the benefits on which they rely.

SSI is a needs-based program for people with limited income and resources who have a disability, are blind, or are 65 or older. To remain eligible for SSI benefits, your loved one must have income and resources below specific thresholds.

These limits, which can vary by state, can make giving gift cards to an SSI recipient challenging. The Social Security Administration (SSA), which runs the SSI program, may consider certain gift certificates income for the month received.

The SSA requires SSI recipients to report changes in income and resources. Giving a gift card that increases your loved one’s income could result in the SSA reducing or even eliminating their benefit altogether, depending on the amount you have given them. According to the SSA, an increase in their unearned income will affect the payment the beneficiary receives two months later.

Gift Cards as Unearned Income

The SSA considers gift cards as unearned income in the following circumstances:

  • It allows the beneficiary to buy food or shelter; or
  • the beneficiary could resell it

Since SSI benefits help a recipient cover their costs for food and shelter, the SSA considers income that could go toward these essentials as a reason to reduce or eliminate the need for SSI benefits. Many department stores and online sellers like Amazon offer food items such that their gift cards could affect a person’s SSI benefits. And, unless the terms of a gift card explicitly prohibit resale, the SSA assumes that the gift card has resale value.

The eligibility requirements for SSI limit the amount of earned and unearned income an individual may receive. The administration considers gift cards unearned income. In 2023, an individual can receive up to $934 per month in unearned income, per the SSA.

Imagine an SSI recipient with $800 in unearned income gets a $200 Visa gift card as a holiday present. The individual has the ability to use the gift card to purchase food and shelter items. With the gift card, their total monthly income will equal $1,000. Because this exceeds the income limit of $934, the individual no longer meets the SSA’s requirements.

SSI benefits are dependent on income. Even if the gift card does not put the SSI recipient over the unearned income limit, it could result in a reduction of their benefits. When an individual’s unearned income increases, SSI benefits reduce by about $1 for every $1 received, per the SSA. So, a $200 gift card would in turn reduce the recipient’s monthly benefit by $200.

If a single adult receives $914 in benefits each month, they could expect a reduced payment of $714.

Gift Cards as Resources

In addition to affecting income, gift cards also count as available resources. An SSI recipient can have up to $2,000 in resources ($3,000 for couples). When a beneficiary receives a gift card but does not spend it, it becomes a countable resource, which could disqualify them from benefits.

Suppose you give your loved one who receives SSI a gift card for $200, and they have $1,900 in resources. They would now have a total of $2,100 in resources. The $200 gift card could put them over the resource limit for a single person by $100.

Gift Cards Not Considered Income

While most gift cards allow the recipient to make food and shelter purchases or potentially resell the gift card, specific gift cards may not. These types of gift cards will not count as income or count toward available and countable resources for the recipient. For instance, a $200 gift card to an office supply store with a legally enforceable prohibition on resale would not count as income or resources of the recipient.

Consult With Your Special Needs Planning Attorney

While you have good intentions, purchasing a gift card for an individual who receives SSI can result in potential problems with their benefits. Undoubtedly, you want to support a loved one who has limited income without jeopardizing their benefits, Contact your special needs planning attorney for guidance today.

Building an Estate Plan for Adult Children with Disabilities

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Young woman who has Down syndrome stands smiling for the camera in her kitchen.Parents of adult children with disabilities know that their child’s disability needs may change over the course of their lifetime. Planning for the future well-being of an adult child with disabilities is, therefore, a responsive, ongoing process.

The life expectancy of many adults with disabilities has increased over time. For example, according to research, life expectancy for adults with Down Syndrome rose from 25 in 1983 to 60 in 2020. Those with cerebral palsy, the most common motor disability of US children, may often live into their 50s.

The ever-increasing life expectancies of people with disabilities mean that comprehensive special needs planning requires short- and long-term planning. The following five elements are key to laying the foundation to ensure a successful support system for your adult child:

1. Vision

2. Living Arrangements

3. Government Resources

4. Private Financial Resources

5. Legal Needs: Special Needs Planning Attorneys

Vision

How do you envision your adult child’s life after you’re gone? As you define and refine your vision to the extent possible, you should involve your child in the process. It’s important to focus on the strengths and abilities of the adult child, not just the challenges of their disabilities. This involvement helps promote self-esteem and independence to the highest degree possible.

Letter of Intent (LOI)

Although this letter is not a legal document, it provides important information about your child’s routines, preferences, and wishes. The LOI can and should be extremely detailed, including comprehensive medical information. It also may identify caregivers, providers, and others in your child’s life who serve as part of their support system. Reviewing and updating the letter at least every two years or when significant changes occur is good practice.

Supported Decision-Making

If your adult child is capable and in charge of decision-making, selecting a team of trusted advisors is still important. This team may include family members, professionals, friends, and community services who all participate in your adult child’s success. The National Resource Center for Supported Decision-Making has information about the right to make choices by state.

Living Arrangements

Where your adult child will live depends on several factors, including their disability type and available financial resources. If your child currently lives in your home, don’t wait until you die to have them move into and experience a new home. Moving can be a tough experience while you are alive but catastrophic when you are gone.

Housing for People With Disabilities

  • Your home – It’s great if you can leave your residence to your child in a special needs trust. Just be sure the trust also contains enough money to cover ongoing property maintenance, taxes, and other costs.
  • Another home – You might purchase a townhouse or condo for your child and hold the property in a special needs trust.
  • Section 8 vouchers – This federal program provides housing in the community to low-income people; however, wait lists can be long.
  • Group homes – Adults with disabilities can use private money or Medicaid payments to live in a group home. In some cases, this living situation also has counselors and other staff that can help residents live as independently as possible.
  • If assisted living is a requirement, a special needs attorney can help identify options.

Government Resources

Creating an outline of the individuals, services, and organizations that have become your adult child’s support system and how they are financed makes your vision for your child a reality.

Public Assistance Programs

When navigating government assistance resources, it’s wise to involve a special needs attorney. They can explain how to manage assets properly to preserve your child’s access to crucial government programs.

A person with developmental disabilities can often access the Supplemental Security Income (SSI) program. SSI guarantees a minimum income to qualifying low-income recipients. A representative payee can assist those individuals who are unable to manage their finances.

To be eligible for Medicaid benefits, the recipient must have limited income and assets. (The limitations apply to assets not protected by ABLE or Special Needs Trust accounts.) Medicaid covers a broad range of health care costs.

Maintaining eligibility standards and managing these benefits may be more than your adult child with disabilities can manage. You may consider identifying a reliable candidate to assist your child. It is also essential to create the structure that legally permits this designee to facilitate your child’s access to such programs.

Many US military personnel have experienced serious physical and mental health problems. A large percentage of these service members are unmarried and under 30. For parents of veterans with disabilities, look into the Veterans Disability Compensation program.

There is also a benefits program for veterans with permanent disabilities, which is needs-based. The Veterans Disability Pension has eligibility requirements based on your adult child’s assets and income. A veterans specialist or disability attorney can create a special needs trust to ensure your adult child can qualify.

Many other government programs are available to help your adult child with disabilities secure a successful future. A special needs attorney can explain more about discrimination protections outlined in the Americans with Disabilities Act (ADA), the Affordable Care Act (ACA), the Ticket to Work Program, and more.

Private Financial Resources

Create a realistic strategy to ensure your adult child’s safety and success when you are no longer alive Begin by creating a general framework with a special needs planning lawyer and then fill in the financial details.

Financial resources may include life insurance policies and other investment strategies. For example, consider funding an Achieving a Better Life Experience (ABLE) account. ABLE accounts can help your child continue living a life of safety, purpose, and impact after you are gone.

Additionally, your lawyer can create a special needs trust appropriate for your family’s financial situation and child’s needs. This trust type provides additional monies to your adult child without them losing their ability to qualify for government benefits. There are various special needs trust types, including:

  • Third-Party Special or Supplemental Needs Trust (SNT)
  • First-Party Special Needs Trust or Self-Settled SNT

Contact Your Special Needs Attorney

There are several legal tools that parents can use to create a lifelong plan for their adult child with disabilities, including:

  • Interdictions (called Guardianships and Conservatorship in states other than Louisiana)
  • Special or Supplemental Needs Trusts
  • Advance Health Care Directive / Living wills
  • Durable Power of Attorney

Your attorney can help you determine the best option for your adult child’s future specific needs and situation.

Legal guidance from special needs attorneys is critical; missteps can jeopardize your child’s ability to qualify for crucial government benefits programs. Provide for your child’s future success by speaking to your special needs attorney. With their expertise, you can begin your proactive planning. If you need help in planning for your special need child’s future, please contact Special Needs Planning attorney and Elder Law Attorney Add Goff at 318-255-1760 or visit our website at www.GoffandGoffAttorneys.com. We’re here to help. 

What Does Advance Directive Mean?

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At certain stages of life, whether due to aging, illness, debilitation, or accidents, the capacity to manage affairs may be lost. Understanding this reality and planning before a medical crisis strikes is essential.

You can begin estate planning and have critical documents in place, such as an advance health care directive. Proper planning ensures care and treatment follow your wishes.

What Happens Without an Advance Directive?

Kevin stands at the door of Winnie’s nursing home room, tears streaming down his face. The medical staff just finished inserted a feeding tube into Winnie – an act Kevin knew she didn’t want. Unfortunately, Winnie couldn’t express her wishes due to advanced dementia, and she had no legal documents that expressed her wishes not to be fed by artificial means. Kevin had no choice but to sit back and watch his wife go through a procedure that would unnecessarily prolong her suffering.

Kevin and Winnie could have avoided this situation with an advance directive, a collection of documents, including a:

  • Living will (decisions you make about end-of-life treatment and care)
  • Health care power of attorney (proxy or surrogate)
  • HIPAA release form (medical history)

The purpose of this set of documents is to give you control over what happens when you can’t speak for yourself. If certain criteria are met, your doctors must consult with your advance directive and health care power of attorney before making decisions about life-sustaining treatment.

Situations Triggering Your Advance Directive

Usually, two doctors agree on a diagnosis when a person is terminally ill, permanently unconscious, or at the end-stage of life. Once that happens, and the individual can’t express their preferences, doctors turn to the advance directive to figure out the best course of action.

Medical staff are required to prolong life at all costs, which often leads to artificial hydration, feeding, and breathing tubes regardless of your outlook for recovery. Discussions with family members may raise more questions than answers without a written plan. Your loved ones may agonize over difficult decisions, wondering what you truly wanted.

A Living Will

A living will determines what happens to you in a medical emergency, unlike a Last Will and Testament, which determines what happens to money and possessions after death. A living will describes what health care providers can and can’t do to prolong your life or ease your pain when you can’t express decisions yourself. For example:

  • Do you want to be placed on a ventilator if you can’t breathe on your own?
  • Do you want a feeding tube and IVs set up, and if so, for how long?
  • Do you want to be an organ or tissue donor?

A Health Care Power of Attorney

A health care power of attorney may also be called a health care proxy or surrogate. It lets you choose someone to make health care decisions for you. They must follow instructions in your living will, and can make decisions not explicitly stated by your living will, based on medical history (if they are listed on a HIPAA release) and facts of the situation. In most states, default surrogate consent laws may allow family members to make treatment decisions on your behalf, but who is chosen and what they decide may not follow your wishes.

Other documents you may include in your advance directive are Do Not Resuscitate (DNR) orders and Physician Orders for Life-Sustaining Treatment (POLST), among others. You might also consider decisions in a mental health crisis.

This is a difficult subject to discuss with loved ones. But nearly 70 percent of Americans don’t have plans in place for a worst-case scenario, leaving others to choose for them. It may not align with their thoughts or beliefs about end-of-life care.

If you or a loved one would like more information about advance directives, please don’t hesitate to reach out to our estate planning law firm today. We are dedicated to preparing individuals and families for life’s challenges.

Contact our Ruston, LA office by calling us at (318) 255-1760 today and schedule an appointment to discuss how we can help you with your planning.

Reevaluating Your Retirement Investments: 5 Compelling Reasons

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To ensure a comfortable retirement, it’s essential to reconsider your financial retirement portfolio. While you might have accumulated a substantial nest egg in a 401(k) plan, withdrawing money from it comes with significant tax planning considerations. In the early stages of a 401(k), employers match your contribution to the plan. Contributions come out of your paycheck before calculating taxes and compound every year. When you retire, however, the tax impact of a 401(k), 403(b), or traditional IRA can become significant.

Retiring at a Higher Tax Bracket

You have probably been told you’ll be in a lower tax bracket at retirement. However, many people experience the opposite. Your tax rate is expected to increase if you maintain the same standard of living, requiring the same amount of income and tax rate. With your children grown and the house paid off, substantial tax deductions are gone, which may push you into a higher tax bracket. You will pay taxes on withdrawals from your contribution plan(s) annually, whether the money comes from dividends, capital gains, or your contributions. That money will be taxed at your income tax rate at the time of withdrawal. Currently, the top marginal income tax rate is 37 percent, and considering the US deficit, that tax rate could increase in time.

Double Taxation

Unless you have a Roth IRA, distributions from your retirement plans count against you when calculating what percentage of your Social Security is subject to tax. The result is paying more taxes on your retirement plan distributions and Social Security income. You also pay more taxes from capital gains, dividends, and interest from your investments.

Required Minimum Distributions (RMDs)

It can be frustrating and expensive if you neglect to make your minimum required distributions. You must withdraw funds from your retirement fund accounts when the IRS deems it necessary. Even if you want to leave the money in the account, as of 2023, the IRS will schedule your withdrawals when you reach age 73. There are stiff penalties for not taking out the required minimum distribution. You may pay an additional 25 percent tax. If you correct the shortfall during a two-year window, it could reduce to 10 percent.

Leaving a 401(k) or IRA to a Spouse

If you’re married, a 401(k) or IRA is the worst account to leave to your surviving spouse. No one wants to die without leaving their spouse financially secure, but these two financial vehicles are fully taxable accounts. Upon your passing, your spouse changes their tax filing status from married filing jointly to single. That takes their tax obligation from the lowest to the highest bracket — probably not exactly what you had in mind.

Both your 401(k) and IRA plans are subject to tax law changes. Every time Congress convenes a session, there is the possibility that increases in taxes on your retirement plans can occur. It’s highly unlikely that your taxes won’t increase. The US debt continues to grow at an alarming rate, and tax increases are used to gain some level of financial control.

Get together with a tax planner to identify ways to move your retirement funds into better financial retirement vehicles. Sometimes conversion can cost a bit of money upfront, but in the long run, you’ll be far better off with regard to your retirement tax obligations.

Contact an Estate Planning or Elder Law Attorney

Connect your tax planner with your estate planning attorney. Retirement and tax planning are heavily tied to money and property being managed, preserved, and eventually distributed to your heirs. Our estate planning and elder law attorneys look at changing tax laws and retirement goals to maximize your family legacy. We also discuss preparing for potential long-term care expenses and how they could affect your retirement income. Costs for health care services continue to rise, and you don’t want to lose significant income to medical emergencies.

Contact our Ruston, LA office by calling us at (318) 255-1760 today and schedule an appointment to discuss how we can help you with your planning.