Sunday, December 31, 2017

New Tax Law Highlights for Older Adults and the Disabled

The new tax law (the Tax Cut and Jobs Act or TCJA) is getting a lot of coverage by the news media. A main thrust of the TCJA is to reduce corporate tax rates. For individuals tax brackets are reduced modestly. The standard deduction is increased but the personal exemption is gone and itemized deductions are limited.
The TCJA is a sweeping law which will take a while for tax experts to fully digest. And don’t be surprised if Congress makes changes through “technical corrections” legislation to deal with unforeseen consequences.
Most of the tax changes for individuals don’t take effect until the 2018 tax year and will apply to returns filed in April 2019 (but a notable exception is the medical expense deduction which is changed retroactively as discussed below). Most of the individual tax changes are scheduled to end on December 31, 2025.
The TCJA will impact all American taxpayers. Some of the provisions are particularly notable for older or disabled Americans. Here are a few you might have missed.
Medical Expense Deduction. Instead of doing away with the medical expense deduction Congress actually expanding it temporarily. For the years 2017 and 2018 the deductibility threshold is reduced from 10% of adjusted gross income (AGI) to 7.5%. Note that this change applies retroactively to medical expenses incurred in 2017 and claimed on returns due in April, 2018.
Home Equity Loans. The new tax law eliminates the deductibility of interest paid on home equity indebtedness. In tax years after 2017 interest on home equity debt will no longer be deductible. This change will apply even to already existing debt. The rules regarding exactly what constitutes home equity indebtedness are complication. If you have been deducting interest on a home equity loan you may want to check with a tax expert to see whether it is impacted.
529 Plans. 529 plans have been a tax advantaged way to save for college costs. The TCJA expands this tax provision to allow 529 plan tax free distributions to be used within limits to pay for elementary and secondary school expenses for private, public and religious schools and some homeschooling related expenses. Educational therapies for children with disabilities are included. There is a $10,000 per student annual limit.
ABLE Accounts. The TCJA makes some complicated adjustments to the rules governing ABLE accounts. ABLE accounts (established under section 529A of the Internal Revenue Code) allow some individuals with disabilities to retain higher amounts of savings without losing their Social Security and Medicaid benefits.
Under the TCJA money in a 529 education plan can be rolled over to a 529A ABLE account. But there are significant limitations. For example, it appears that rollovers will count toward the annual contribution limit for ABLE accounts ($15,000 in 2018). On the other hand, the TCJA also changes the rules regarding contributions to ABLE accounts by designated beneficiaries who have earned income from employment. Experts will be figuring out how to best take advantage of these changes.
As with most of the individual tax provisions in the TCJA, the ABLE account provisions are not effective for distributions after December 31, 2025.
Federal Estate and Gift Tax Exemption Amounts. The TCJA doubles the previous exemptions for federal estate and gift taxes. This change applies to decedents dying and gifts made after December 31, 2017 and before January 1, 2026.
In 2018 the exemption amounts will be:
$11.2 million dollars - Individuals
$22.4 million dollars - Married Couples
Note that these increased amounts apply only to deaths occurring after December 31, 2017 and before January 1, 2026. With the exception of the change to the exemption amounts, the rules governing estate and gift tax remain the same.

Wednesday, December 13, 2017

How to Choose your Health Care Agent

A health care (medical) power of attorney may be one of the most important legal documents you will ever sign.
You never know when you might suddenly need someone to make medical decisions for you. Every year in the United States about 735,000 people have a heart attack, and nearly 800,000 people will have a stroke. You have to prepare fin advance for this kind of emergency health crisis. By signing a health care power of attorney, you help ensure that the right person will be making decisions for you and that you will receive the best and most appropriate health care possible – care that is consistent with your personal values and wishes.  
This vital legal document allows you to name a person of your own choosing to assist you with health care and personal care decisions. It also gives you an opportunity to outline your philosophy as to the types of treatment you want to receive or decline including end of life care.
The trusted person named in your health care power of attorney is called your agent. In the event you cannot communicate, your agent will step into your shoes and make heath care decisions based on what he or she understands to be what you would want. For example, consenting to a surgery or choosing a hospital or other care facility.
Obviously, your choice of who will serve as your agent is of critical importance. Here are some tips on how to go about choosing your agent.
Choice of Agent
You should try to choose someone who understands your values and wishes and who will forcefully pursue them despite opposition. Consider the following criteria:
(1) Availability.
(2) Reliability.
(3) Willingness to serve.
(4) Advocacy skills.
(5) Ability to understand medical issues.
(6) Understanding of and respect for your values and willingness to pursue them.
Many people initially consider appointing two or more persons to serve as co-agents. But most commentators feel that this should be discouraged. In most cases only one "ultimate" authority should be named. But you can ask that your agent consult with others during decision-making processes when possible. You can even include that requirement in your document. And you can and should appoint other loved ones as alternates (successor agents) in case your primary choice of agent is unavailable.
The best choice of agent will know you well and be willing to talk with you about  sensitive issues including discussions about end of life care. The ideal agent will be comfortable with the responsibility, able to deal with any potential family conflicts, and be a strong advocate for you.

Be sure to name a successor agent, in the event your first choice is unavailable to serve. And don't put this off. Talk with an elder law attorney soon. Have a health care power of attorney in place before a sudden health crisis strikes.