Assisted Living Money Decision

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Regina00
Posts: 10
Joined: Mon Jan 29, 2018 10:01 pm

Assisted Living Money Decision

Post by Regina00 » Wed Jul 10, 2019 9:16 am

Hi Bogleheads,
Thanks in advance for your input. I'm helping my in laws on their decision. Mother will be making a life changing decision. Here is the rundown.
Dad 84 yrs old and a military Vet; Mom 83 years old (longevity on her side of family) and live in SC
Assets include:
102k IRA all in ST and IT bond funds. (This year RMD is 7K est)
41k Annuity
100k Savings(cash in bank)
4.2 k month Pension and SS combined and then add the .583k of RMD for income total.
Home 500k no mortgage and in fairly new great shape 55+ community.
Life Ins 500K on Dad only
Current expenses 4.5k month
My father is going into an assisted living with Dementia and Mom will stay in their home. His assisted living care will cost est 6k month. Expenses will exceed their income now with the new expense. The BIG question is should she tap savings account or take IRA additional withdrawals? Does a reverse mortgage make sense later on if needed? I know the annuity was a bad decision before I met them but that's another story. We just don't want to see her run out of money-inheritance is not a goal needed to address.
Any thoughts would be greatly appreciated.

megabad
Posts: 1864
Joined: Fri Jun 01, 2018 4:00 pm

Re: Assisted Living Money Decision

Post by megabad » Wed Jul 10, 2019 9:46 am

Regina00 wrote:
Wed Jul 10, 2019 9:16 am
Any thoughts would be greatly appreciated.
I would probably fill up 12% tax bracket with annuity withdrawals first (assuming taxable), then IRA withdrawals. Once you fill up 12%, I would tap savings. Does pension have COLA and survivor benefits? What is Father's long term physical prognosis? Is this likely to be a short term increase in expenses (pardon my asking)? If not, I would be concerned about Father's expenses leaving Mother with too few assets without selling the home.

It is unfortunate that they made the mistake of the life insurance policy but I doubt it would be worth changing that now (would still investigate). On the whole, I think they have enough networth to make it ok. The amount tied up in the home and the health expenses are a little disconcerting though.

HomeStretch
Posts: 800
Joined: Thu Dec 27, 2018 3:06 pm

Re: Assisted Living Money Decision

Post by HomeStretch » Wed Jul 10, 2019 9:57 am

As a military veteran, can your dad benefit from the VA Aid & Attendance program? It provides some financial assistance with assisted living for veterans and surviving spouses. I believe it is income and means tested.

I am not an expert on it. Similar situation soon with my parents and I am going to look into it.

Beehave
Posts: 519
Joined: Mon Jun 19, 2017 12:46 pm

Re: Assisted Living Money Decision

Post by Beehave » Wed Jul 10, 2019 9:59 am

Properly documented, I'd think that the assisted living costs in whole or very large part would be tax deductible as medical expenses. Because of this I'd think that tapping the IRA rather than savings would be the better choice because the savings have already been taxed but the IRA has not, and under these conditions funds from the IRA can be withdrawn "tax-free."

This is my understanding but I am not at all an expert - - so others should chime in if this reasoning is mistaken and OP should seek the opinion of a CPA or attorney.

Best wishes.

BarbBrooklyn
Posts: 291
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: Assisted Living Money Decision

Post by BarbBrooklyn » Wed Jul 10, 2019 10:05 am

Mom should REALLY consult with a certified Eldercare attorney in her State.

AL may be fine for now but dad may need Skilled Nursing in the future. There are ways for spouses to legally shift assets so that the institutionalized spouse qualifies for Medicaid if needed. I know that he doesn't need Medicaid now, but it's good to plan ahead so that your MIL, with longevity, doesn't miss the opportunity to arrange assets in such as way so that they are there for her use when SHE needs more care.

This is not about "hiding" assets; this is about getting the best advice possible so as to avoid her becoming unnecessarily impoverished.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

rxtra8
Posts: 92
Joined: Wed Jun 10, 2015 1:12 pm

Re: Assisted Living Money Decision

Post by rxtra8 » Wed Jul 10, 2019 10:11 am

For Aid and Attendant assistance I believe that the military veteran needs to have served during wartime but I am no expert. My Father was in the USN and served during WWII and Korean War. As such, working with an elder care lawyer, we were able to get the Aid and Attendance benefits for my Mother when she needed the money to go to a board and care facility (this took 9 months of back and forth with the VA). This is certainly worth investigating.

Good Luck.
“The eye sees only what the mind is prepared to comprehend.” | — Robertson Davies

David Althaus
Posts: 68
Joined: Wed Feb 14, 2018 8:05 pm

Re: Assisted Living Money Decision

Post by David Althaus » Wed Jul 10, 2019 10:31 am

Would it be asking too much of your mother to sell the house and move to one bedroom apartment? Emotional baggage aside this seems like a reasonable course. This $500k from the house can last a long time and turns an illiquid asset into cash on which to live. Good luck.

All the best

Dottie57
Posts: 6387
Joined: Thu May 19, 2016 5:43 pm

Re: Assisted Living Money Decision

Post by Dottie57 » Wed Jul 10, 2019 10:32 am

BarbBrooklyn wrote:
Wed Jul 10, 2019 10:05 am
Mom should REALLY consult with a certified Eldercare attorney in her State.

AL may be fine for now but dad may need Skilled Nursing in the future. There are ways for spouses to legally shift assets so that the institutionalized spouse qualifies for Medicaid if needed. I know that he doesn't need Medicaid now, but it's good to plan ahead so that your MIL, with longevity, doesn't miss the opportunity to arrange assets in such as way so that they are there for her use when SHE needs more care.

This is not about "hiding" assets; this is about getting the best advice possible so as to avoid her becoming unnecessarily impoverished.
This.

grandmacassie
Posts: 182
Joined: Mon Jul 14, 2014 8:50 am

Re: Assisted Living Money Decision

Post by grandmacassie » Wed Jul 10, 2019 10:41 am

Re: VA Aid and Attendance Benefit. I just did the research on this on behalf of my mom. My dad was a WWII combat vet.

Vet with no dependent: income limit $22,577
Vet with spouse or children: income limit $26,765
Surviving spouse income limit: $14,529

In addition, there is a net worth limit of $123,600

minesweep
Posts: 1233
Joined: Fri Mar 02, 2007 9:17 pm
Location: PA

Re: Assisted Living Money Decision

Post by minesweep » Wed Jul 10, 2019 11:03 am

Beehave wrote:
Wed Jul 10, 2019 9:59 am
Properly documented, I'd think that the assisted living costs in whole or very large part would be tax deductible as medical expenses.
Only the amount of rent that is considered for personal care is tax deductible (which in my sister’s case wasn’t very much).

I have POA for my older widowed sister. She has been in an assisted living facility for over 8 years. She moved into the memory care unit last October (the cost is $5,900/mo.). But only $19.96 per day ($600/ (mo.) is considered for personal care services. Any additional amount of rent is considered room and board. I would have thought that the memory care unit would be a higher amount, but was told it wasn’t. I didn’t push the issue because she was only there for 3 months. I may question it again for this year. Bottom line is she took the standard deduction for 2018.

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Assisted Living Money Decision

Post by delamer » Wed Jul 10, 2019 11:31 am

Is the life insurance a term policy? How much longer is the term and how much are the premiums?

That’s a large policy and could be a key factor in your MIL’s final future.

HomeStretch
Posts: 800
Joined: Thu Dec 27, 2018 3:06 pm

Re: Assisted Living Money Decision

Post by HomeStretch » Wed Jul 10, 2019 11:37 am

grandmacassie wrote:
Wed Jul 10, 2019 10:41 am
Re: VA Aid and Attendance Benefit. I just did the research on this on behalf of my mom. My dad was a WWII combat vet.

Vet with no dependent: income limit $22,577
Vet with spouse or children: income limit $26,765
Surviving spouse income limit: $14,529

In addition, there is a net worth limit of $123,600
Thank you for the info. I will be looking into this.

Generally, is any income source (like SS) exempted from the income test?

Is it true that the net worth test has exclusions like primary home value and car value?

stan1
Posts: 7114
Joined: Mon Oct 08, 2007 4:35 pm

Re: Assisted Living Money Decision

Post by stan1 » Wed Jul 10, 2019 11:53 am

For any potential VA benefits: Best recommendation is to contact organizations like Disabled American Veterans (DAV) who can help determine how veterans benefits might apply to their specific situation. I'd do that very quickly.

An elder care attorney SC is also important.

I wouldn't do ANYTHING without talking to both.

grandmacassie
Posts: 182
Joined: Mon Jul 14, 2014 8:50 am

Re: Assisted Living Money Decision

Post by grandmacassie » Wed Jul 10, 2019 12:01 pm

More re Aid and Attendance

The Vet must be a combat vet and qualifying dates are specific. The rules and lengthy and complex.

Resources: www.VA.gov
www.VeteranAid.org
www.VeteranCareAdvisors.com

dbr
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Re: Assisted Living Money Decision

Post by dbr » Wed Jul 10, 2019 12:20 pm

As mentioned tax deductible in assisted living depends on certain qualifications and only for part of the benefit involving medically necessary or disability care. Admission to a nursing home is a different thing.

As to VA, some state veterans departments operate veterans homes with various conditions to qualify. This is not the same as VA Administration of the Federal Government and may be worth checking in your state.

stan1
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Joined: Mon Oct 08, 2007 4:35 pm

Re: Assisted Living Money Decision

Post by stan1 » Wed Jul 10, 2019 12:29 pm

grandmacassie wrote:
Wed Jul 10, 2019 12:01 pm
More re Aid and Attendance

The Vet must be a combat vet and qualifying dates are specific. The rules and lengthy and complex.

Resources: www.VA.gov
www.VeteranAid.org
www.VeteranCareAdvisors.com
Good suggestions. You'll want to try to find his DD 214 (discharge paperwork first issued in 1950). That will help an expert explain any possible benefits. Every veteran knows this is the most important piece of paper they've ever had in their possession. I'm sure your FIL has it somewhere in the house.

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elcadarj
Posts: 128
Joined: Tue Aug 30, 2016 8:21 am

Re: Assisted Living Money Decision

Post by elcadarj » Wed Jul 10, 2019 12:36 pm

dbr wrote:
Wed Jul 10, 2019 12:20 pm
As mentioned tax deductible in assisted living depends on certain qualifications and only for part of the benefit involving medically necessary or disability care. Admission to a nursing home is a different thing.

As to VA, some state veterans departments operate veterans homes with various conditions to qualify. This is not the same as VA Administration of the Federal Government and may be worth checking in your state.
We just went through this with a close member of the family. The threshold for deducting assistance is not high, see IRS Pub 502 https://www.irs.gov/publications/p502:

Long-Term Care

You can include in medical expenses amounts paid for qualified long-term care services and certain amounts of 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).

EDIT: The long term care services are deductible whether provided in the home or in a facility. That's our direct experience over several years as Alzheimer's progressed. Family was advised by both a CPA and elder care attorney.

BarbBrooklyn
Posts: 291
Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: Assisted Living Money Decision

Post by BarbBrooklyn » Wed Jul 10, 2019 1:24 pm

In all states that I know of, the home and one vehicle are " non countable" assets. Not sure if the same holds true for VA.

A Medicaid lien can be placed on the home to recoup repayment after the death of the person receiving care. The spouse can remain in the home until their death at which time the lien is recouped.
Last edited by BarbBrooklyn on Thu Jul 11, 2019 4:56 am, edited 2 times in total.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

Beehave
Posts: 519
Joined: Mon Jun 19, 2017 12:46 pm

Re: Assisted Living Money Decision

Post by Beehave » Wed Jul 10, 2019 8:17 pm

minesweep wrote:
Wed Jul 10, 2019 11:03 am
Beehave wrote:
Wed Jul 10, 2019 9:59 am
Properly documented, I'd think that the assisted living costs in whole or very large part would be tax deductible as medical expenses.
Only the amount of rent that is considered for personal care is tax deductible (which in my sister’s case wasn’t very much).

I have POA for my older widowed sister. She has been in an assisted living facility for over 8 years. She moved into the memory care unit last October (the cost is $5,900/mo.). But only $19.96 per day ($600/ (mo.) is considered for personal care services. Any additional amount of rent is considered room and board. I would have thought that the memory care unit would be a higher amount, but was told it wasn’t. I didn’t push the issue because she was only there for 3 months. I may question it again for this year. Bottom line is she took the standard deduction for 2018.
Wow! Thanks for responding with this information. What I thought I understood was that if someone in assisted living was receiving assistance for any two of the crucial living tasks (toileting, dressing, eating...) and that this was under doctor's orders that the expenses would be tax deductible.

Many thanks for your reply and if you have additional info, I'd definitely be interested.

oldlongbeard
Posts: 37
Joined: Tue Oct 23, 2018 11:07 am

Re: Assisted Living Money Decision

Post by oldlongbeard » Wed Jul 10, 2019 8:32 pm

Dottie57 wrote:
Wed Jul 10, 2019 10:32 am
BarbBrooklyn wrote:
Wed Jul 10, 2019 10:05 am
Mom should REALLY consult with a certified Eldercare attorney in her State.

AL may be fine for now but dad may need Skilled Nursing in the future. There are ways for spouses to legally shift assets so that the institutionalized spouse qualifies for Medicaid if needed. I know that he doesn't need Medicaid now, but it's good to plan ahead so that your MIL, with longevity, doesn't miss the opportunity to arrange assets in such as way so that they are there for her use when SHE needs more care.

This is not about "hiding" assets; this is about getting the best advice possible so as to avoid her becoming unnecessarily impoverished.
This.
+2
Call the Probate Registrar in the County, and ask them off the record for the name of the elder care attorney they personally use.

RetiredAL
Posts: 312
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: Assisted Living Money Decision

Post by RetiredAL » Wed Jul 10, 2019 10:01 pm

elcadarj wrote:
Wed Jul 10, 2019 12:36 pm
dbr wrote:
Wed Jul 10, 2019 12:20 pm
As mentioned tax deductible in assisted living depends on certain qualifications and only for part of the benefit involving medically necessary or disability care. Admission to a nursing home is a different thing.

As to VA, some state veterans departments operate veterans homes with various conditions to qualify. This is not the same as VA Administration of the Federal Government and may be worth checking in your state.
We just went through this with a close member of the family. The threshold for deducting assistance is not high, see IRS Pub 502 https://www.irs.gov/publications/p502:

Long-Term Care

You can include in medical expenses amounts paid for qualified long-term care services and certain amounts of 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).

EDIT: The long term care services are deductible whether provided in the home or in a facility. That's our direct experience over several years as Alzheimer's progressed. Family was advised by both a CPA and elder care attorney.
After his second Hospitalization + Nursing Home event, my Dad was moved into an Assisted Living Facility this past April. Between the two events, he received 2 months of In-home Care.

I posed this question to his Tax Accountant when I did his 2018 tax interview and was told that since he met the 2 or more ADL limitation requirements, the cost for both Home Care and Assisted Living ( base+ the additional care level up-charges ) , minus the reimbursements from his LTC Insurance, would be for tax purposes a qualifying medical expense for the amounts in excess of 10% of his AGL.

To be on the safe side for 2019 taxes until they are done next year, I have not changed any of his
with-holdings for 2019.

elcadarj -- My dad is a retired LCdr.

Katietsu
Posts: 2099
Joined: Sun Sep 22, 2013 1:48 am

Re: Assisted Living Money Decision

Post by Katietsu » Wed Jul 10, 2019 10:49 pm

Last time I dealt with ALF expenses, room and board could be deducted provided both the chronically ill requirements and the plan of care requirements were met. I believe the plan of care must be in place before expenses like room and board are deductible. So you can not wait until the end of the year and then have it created. With a nursing home the plan of care and chronically ill assessments are a given. With an ALF, I think there is more variability. So you may need to make a request or your own arrangements to get all the documentation needed in place when an ALF is involved.

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