Posts By: Gene Osofsky

[Alert to Readers:  Make sure to read the “ALERT” at the bottom of this post for recent developments].

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Q.  I  hear a new Right-to-Die law goes into effect very soon. Do you know anything about this?

A.  Yes. Starting June 9, 2016, California becomes the fourth state in the union to allow a terminally ill patient to request lethal medication from his or her physician to voluntarily end the patient’s life. This legislation is the end result of years of contentious battle in California by ardent supporters on each side of the issue. California will now join Oregon, Washington and Vermont in offering this option to its terminally ill residents.

Many credit the new law to the much publicized story of 29 year old Brittany Maynard, the East Bay resident diagnosed with an aggressive brain cancer. To avoid an agonizing death, she was obliged to move with her husband to Oregon in order to secure physician assistance for aid in dying under that state’s Death with Dignity Act. Her video story went viral with 11.8 million views on YouTube, and a personal phone interview with Governor Jerry Brown as he struggled with his own decision whether to sign the bill into law, which he later did. The bill is AB 15, signed by Governor Brown on October 5, 2015.

Under the new California law, called the End-Of-Life Option Act, a California resident may seek medical aid in dying if the individual meets the following requirements: the patient must be an adult, terminally ill, given a prognosis of 6 months or less to live, and must be mentally capable of making their own health care decisions.  The requesting individual must also be a resident of California, acting voluntarily, making an informed decision, and be capable of self-administering the lethal medication by ingesting it.

In addition, two California physicians must agree that the individual is eligible under the Act.  One physician can only prescribe the medication and the other physician must give a consulting opinion regarding the individual’s terminal disease.  The patient must make a total of three voluntary requests: two oral requests made at least 15 days apart, and one written request using a prescribed form signed by two witnesses, only one of whom may be related to the patient. NOTE:  This 15 day requirement was recently reduced to 2 days by legislation effective January 1, 2021. The text of the law, known as SB 380, can be found here.

The request cannot be made by an agent under a Durable Power Of Attorney or Advance Health Care Directive, but must be made by the patient himself.  The new law also provides that, when citing the patient’s cause of death, doctors cannot list suicide as the cause of death, and so the decision to use the law should not adversely affect a patient’s life, health or annuity insurance policies.

At this point, many hospitals and healthcare providers are rushing to get up to speed by training doctors and pharmacists in how best to assist patients who wish to access this new end-of-life option.

ALERT:  On June 15, 2018, the California Court of Appeal, 4th District in Riverside, overruled the lower court which had suspended the law. As a result, “The End of Life Option Act” has now been reinstated while legal proceedings continue. Those desiring to use the law to end their suffering may now do so legally.

Background:  On May 25, 2018, Riverside County Superior Court judge Daniel A. Ottolia yesterday officially overturned the California End of Life Option Act. The formal ruling in Ahn v. Hestrin confirmed his earlier verbal ruling.  

05/29/2018:  California Attorney General Xavier Becerra has appealed the court ruling and has requested that the law remain in effect pending the outcome of that appeal. As of this post, the availability of this Act to permit a dying individual to end their own life is unclear. Watch for further legal developments here and/or visit the Death With Dignity website for ongoing further developments.

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A concise summary of the law prior to the recent court case [noted above] putting it on hold, and entitled “California End of Life Option Act, Information for State Residents” can be found at www.CompassionAndChoices.org, or by calling 1-800-893-4548.

Other resources:  Assembly Bill No. 15, End of Life Option Act; and Governor Brown’s signing message.

 

Posts By: Gene Osofsky

Q.  Is it possible to plan my estate so that my assets go to my beneficiaries without probate or even a trust administration? I have a home, bank and brokerage accounts, an IRA, annuity and life insurance policy. I would like to keep things as simple as possible.

A. Yes, and here is how you might do it:

Your Home: Under a new California law effective this year, you can now transfer your home to your named beneficiaries, effective upon death, using a simple document called a Transfer on Death Deed (“TOD Deed”). Upon your demise, your beneficiaries would receive your home without a probate or trust administration. However, while it may sound good, this TOD Deed has some significant downsides. Here are just a few examples:

  • Let’s say you use the TOD Deed to transfer your home to your only child, Sam. Sadly, Sam predeceases. What happens? The deed is then void and the home reverts to your estate, requiring a probate.
  • The TOD Deed designates your three children as beneficiaries, John, Judy and Elaine. Sadly, John predeceases you, leaving his own two young children surviving. What happens to John’s interest? Instead of going to his children, as you might desire, it all goes to Judy and Elaine. John’s children are left out.
  • In the event that you have spent time in a nursing facility subsidized by Medi-Cal, the use of the TOD Deed exposes your home to a Medi-Cal estate recovery claim.

Beneficiary Assets: You can set up bank and brokerage accounts with a built-in beneficiary designation using a “Pay on Death” (“ POD”) or “Transfer on Death” (“TOD”) account designation. You can also designate beneficiaries of your IRA, annuity and life insurance. Upon your demise, they would receive these assets upon the completion of very simple paperwork.

However, many financial custodians do not permit customization of their beneficiary forms in order to address various survivorship scenarios, such as in the examples described above. In short, you may be limited to the custodian’s basic forms, which might not satisfy your wishes.

Another caution: all of these simplified arrangements are designed to deal only with death, but not incapacity. By contrast, a Living Trust creates a vehicle for handling your assets both during incapacity as well as upon death, and to that extent is more versatile.

While creating a Durable Power Of Attorney (“DPOA”) may allow your agent to handle some of your financial affairs during incapacity, your account custodians may be reluctant to honor a change in beneficiary designation if requested by an agent. Further, the DPOA expires upon your death and then becomes unusable.

Bottom line: if you feel virtually certain that your designated beneficiaries will all survive you, if you are not concerned about management of your assets during incapacity, and if you are not concerned about protecting your home or other assets from a Medi-Cal estate recovery claim, then perhaps these simplified procedures may work for you. However, it is suggested that you consider the limitations and downsides seriously before forgoing more traditional estate planning, such as the creation of a Living Trust. In any event, it is suggested that you also create a Last Will, “just in case”.

 

Posts By: Gene Osofsky

Q. My husband was just diagnosed with Alzheimer’s, but still seems to be generally okay. Are there legal steps we should take by way of planning for the future?

A. Yes. Once you or loved one has been diagnosed with Alzheimer’s, it is important to take action to get your affairs in order. Here is my short list of suggestions:

  1. Check Your Long-Term Care Insurance Policy. If you are lucky enough to have a long-term care insurance policy in place, check its benefit provisions, especially its “benefit triggers”.  Many policies are triggered by an inability to perform 2 out of 7 activities of daily living, i.e. eating, dressing, bathing, toileting, ambulating, transferring and continence.  Check for waiting periods, cost-of-living adjustments, lifetime caps, and the extent to which the policy covers care in the home.  Some policies also provide an option to increase benefits periodically without new medical examinations and, if so, consider opting for such benefit increases now, or as soon as eligible to do so.
  2. Check Your Life Insurance Policy for Early Benefit Options. Some life insurance policies offer an option to accelerate benefits under certain conditions, such as the need for long-term care. Check with your insurance company to see whether yours offers an Accelerated Death Benefit.
  3. Consider Applying for a Reverse Mortgage Line of Credit. If you or your spouse are over age 62, consider applying for a Reverse Mortgage (RM) line of credit to draw upon in the event of future need.  To qualify for a reverse mortgage, it is usually necessary for both spouses to receive counseling and sign numerous loan documents.  It is best to do this when both of you are able to fully participate in the process.  Also, just because you have a RM credit line, does not necessarily mean you have to draw upon it; instead, consider it as a stand-by source of emergency money for care expenses should the need later arise.
  4. Check Availability for Veterans Pension. If you or your spouse is a veteran, check with the VA to determine whether you might qualify for a veteran’s pension to help with care expenses.
  5. Review Beneficiary Designations. Review the beneficiary designations on insurance policies, IRA accounts, annuities, bank and brokerage accounts, and the like, to make sure they still conform to your wishes.  Many people designate beneficiaries when they initially set up their accounts and, over the years, neglect to review and update them as family circumstances change.
  6. Have Your Estate Planning Documents Reviewed. Make sure you have in place good quality estate planning documents, such as Advance Health Care Directives, Living Trust & Will, and Durable Powers of Attorney. Most importantly, make sure that your documents have been designed to incorporate Medi-Cal planning powers: such powers may enable you to access a Medi-Cal subsidy to help pay for nursing home expenses without depleting a lifetime of savings.

Note: Sadly, I find that most estate planning documents that I am asked to review do not contain adequate Medi-Cal planning powers.  I suggest arranging for a review of your documents by an elder law attorney with special experience in public benefits planning. Revising your documents now to include these powers may help you finance the future cost of your husband’s nursing home care without placing your own financial security at risk.

Posts By: Gene Osofsky

Q.  I would like to prepare an estate plan, but I do not have a spouse, children or relative whom I could name as executor or trustee. Any thoughts about how I can proceed under these circumstances?

A.  Yes, and be assured that you are not alone. Many persons find themselves in your situation, whether because they do not have a spouse, relatives or children, or because there is such strong sibling rivalry among their children that nominating one child in preference to others would be unworkable. Under these circumstances, one solution is to nominate a private Professional Fiduciary.

A Professional Fiduciary is an individual licensed by the State of California to serve in a fiduciary capacity as an executor, trustee and/or agent under a power of attorney or advance healthcare directive.  In order to be licensed, an individual must meet certain education and/or experience requirements, pass a criminal background and credit check, participate in continuing education, pass an examination, make annual reports to the state regarding estates under management, and subscribe to a Professional Fiduciaries Code of Ethics. Fiduciaries are regulated by the Professional Fiduciaries Bureau, a licensing entity within the Department of Consumer Affairs.

Professional fiduciaries typically have significant experience in managing financial assets and can often provide the financial skills of a large financial institution without the restrictive policies which often accompany such organizations.  Further, an individual serving as a professional fiduciary may be more responsive to the needs of a person or family than a large institution.

Some private professional fiduciaries employ full and part-time staff members and handle several millions of dollars of client funds.  In addition to managing money, they also often deal with difficult people and interpersonal situations.  Some even specialize in working with difficult families. Most are members of the Professional Fiduciary Association of California (PFAC).

The concern in your case is how to select a professional fiduciary now, whom you know will be able and willing to serve in the future upon your passing or incapacity.  One solution might be to make an open nomination, designating a member of PFAC in good standing, albeit with the proviso that the specific individual to ultimately serve would be nominated by the president of the organization at the time of need.  Alternatively, you might nominate a person whom you trust, such as your pastor, priest or rabbi, to be a “fiduciary designator”, and authorize him to make a future selection when the need arises.  If you opt for this method, be sure to name a successor designator, just in case your first choice is unavailable.

If you have a more immediate need, you might make your own selection now and arrange to meet with your fiduciary from time to time to keep him or her abreast of your circumstances. If he will also serve as your health care agent, be sure to discuss your end of life wishes with him, consider bringing him to an occasional medical appointment and provide him access to your medical records.

PFAC provides more information on its website, as well as a search function to help you locate professional fiduciaries in your area willing to serve.  To explore this further visit www.pfac-pro.org or call 866-886-7322.

References:  Professional Fiduciaries Act (Business & Professions Code § 6500–6592).

Posts By: Gene Osofsky

Q.  My husband and I are concerned about how to keep our trust up to date in light of changing tax law and changing family circumstances.  What if we are too ill to make changes ourselves. Any thoughts on how we can handle these concerns?                                                

A. With the ever-changing tax landscape, and changes over time in family circumstances, keeping your trust up-to-date can be challenging. Here are some techniques to keep your trust flexible to help deal with change, even where you are unable to do so yourself. You may wish to include one or more in your estate plan:

1) Use a Power Of Attorney: delegate authority to a trusted agent to amend your trust as tax laws and family circumstances warrant. Your agent would typically act only if you were unable to do so yourself.   To be valid, this power must be expressly stated in a Durable Power Of Attorney (“DPOA”) and reciprocal provisions must also be in your trust. Unfortunately, this dual requirement is too often overlooked, resulting in an ineffective delegation of authority.

2) Use a Trust Protector: an emerging mechanism involves naming an Trust Protector (“TP”) in your trust in order to update your trust as need requires. The TP would be independent of your trustee, who would handle normal trust administration.  By contrast, the TP would act like a “super trustee”: he would have the power to replace the trustee, modify administrative provisions and even change the ultimate disposition of trust assets in order to meet your stated objectives. Unlike the trustee, who would have a fiduciary duty to act according to the existing provisions of the trust, the TP could modify or override those provisions to comply with changing law and your expressed intent. The TP must be someone who is not a beneficiary under your estate plan, but in whom you have a high degree of trust.  Unlike the agent acting under a DPOA, the TP could even make some changes to your trust after your death if necessary to meet your stated goals, e.g. tax avoidance.

3) Include Disclaimer Provisions: a disclaimer is the right to decline a bequest, so that it goes to the next person in line, typically one’s children. Disclaimers can be very effective in postmortem tax planning, especially as a technique to remove future appreciation from one’s taxable estate.   Example: assume that a married couple has a combined community property estate valued at just under the current Federal Estate Tax Exemption amount ($12.06 Million/each for persons dying in 2022–2025, but which is likely to revert to a much lower number after 2025, when the current exemption ‘sunsets’).  

Upon husband’s death, assume their estate plan directs that all goes to wife as the surviving spouse.  If she reasonably anticipates future appreciation, it is likely that–upon her later demise–the value of her estate will then be above the amount that can escape estate tax.  If, however, upon her husband’s death she makes a timely disclaimer of a portion of her “inheritance”, so that a portion “skips” her and goes immediately to their children, the appreciation attributable to the disclaimed assets will then be owned by their children and will escape estate tax at the wife’s later death. 

In larger estates, this technique can potentially save a significant amount of tax upon the surviving spouse’s later demise. For more modest estates, since the disclaimed assets “skip over” the surviving spouse and pass directly to the children or other designated successor beneficiaries, it can save the time and expense of a second estate or trust administration upon the surviving spouse’s death. Its use can also accelerate the children’s inheritance. The good news is that the decision as to whether, and to what extent, a disclaimer should be exercised can be made up until 9 months after the first spouse’s death, providing time for reflection. However, if not exercised by that deadline, it then lapses. In our view, appropriate disclaimer provisions should be included in every estate plan.

4) Permit Decanting: Decanting is a term borrowed from wine vintners, and in the trust world it refers to modifying an existing trust to get rid of unwanted provisions (i.e., “sediment”, for vintners), by “pouring” the good provisions into a new trust that is free of the unwanted provisions.  In 2019, California became one of a growing number of states to adopt the Uniform Trust Decanting Act, which now allows a trustee to make changes to a trust without initiating a judicial proceeding, upon notice to, and usually with the consent of, the trust beneficiaries. Decanting can be implemented so long as the trust does not expressly prohibit this technique. Changes via decanting can even be made, in many cases, after the death of the original creator(s) of the trust. Here are some examples of its application: to create a Special Needs Trust to hold the share of a beneficiary then on public benefits; to comply with changes in the tax code; to address changes in family circumstances, etc. For more, see this article written for a lay readership, and this one written for lawyers.

5) Include a Power of Appointment: A Power of Appointment (“POA”) is a power held by a designated individual, usually the surviving spouse, in a couple’s joint trust, to take another look at the plan design and modify it as the power holder feels is then appropriate, typically some time after the death of the first spouse. The survivor can then re-arrange the distribution of trust assets, and add or delete beneficiaries, as he/she feels circumstances then require. It can be very useful when family circumstances have changed since the trust was originally created, for example by deaths, births, divorces or other changes in relationships (whether they be positive or negative).

It has been said that the only certainties in life are death and taxes.  I would add a third:  change. Make sure that your estate plan includes at least some mechanisms to deal with this “third rail” of estate planning.

Posts By: Gene Osofsky

Q.  My wife and I plan on creating a Living Trust and transferring our home and two rental properties into the trust. Each property has a mortgage. Should I anticipate any problems from the lenders?

A.   Short answer: As to your home, no. As to your rental properties, maybe.

Virtually all lenders provide in their loan documentation that, upon sale or transfer of the real property, the lender has the right to call the loan due.  This is called an acceleration clause, as it accelerates the due date of the entire unpaid balance of the loan, which otherwise would be payable over the full life of the loan.  Lenders feel they need this protection so that they are not obliged to deal with a future owner who may not be as creditworthy as you, and also so that their loan portfolio, as a whole, is “refreshed” with periodic payoffs, allowing them to fund new loans and thereby stay current with market interest rates.  Even a transfer by you into your own Living Trust would be considered a “transfer” in this context and potentially cause your entire unpaid loan balance to become immediately due.

However, in 1982, Congress passed a law called the Garn – St. Germain Depository Institutions Act of 1982, which imposed limits on the right of lenders to call loans due upon sale, transfer or certain other circumstances. As to your question, here is the short version:

Home: With respect to a home, lenders cannot call a conventional loan due merely because the homeowner transfers the property into a “Living Trust”, provided that the homeowner continues to remain a beneficiary of the trust, retains the right of occupancy, and cooperates with the lender’s request to give reasonable assurances that the lender will be notified in the event of a later re-transfer of the home.

Rental Property: Rental property is a bit trickier.  If it is residential real property of four (4) dwelling units or less and you live in one of the units, then a lender, again, cannot accelerate the loan balance. However, if it is more than 4 units, then the lender could do so.  However, just because the lender retains that right, does not necessarily mean that it would.  Your best bet is to ask your lender for its written consent in advance of the proposed transfer.  If you have been a good customer, paid your mortgage on time, and the like, the lender may give its consent, provided that you meet its conditions and, typically, pay a fee which is sometimes significant.

Reverse Mortgage: Reverse mortgages, however, are quite different.  They are exempt from the protections of the Garn Act of 1982, and reverse mortgage lenders are therefore free to accelerate the loan balance upon transfer of the home to a trust. This can be a real problem for those senior home-owners who have reverse mortgages but wish to create a Living Trust.  In this situation, it is imperative that you first check with your lender to see if there might be any work-arounds before transferring your home to your trust. The good news is that federal HUD guidelines do permit HUD to insure HECM reverse mortgages on homes transferred into trust, provided that the borrower satisfies certain conditions. Thus, notwithstanding that reverse mortgage lender are exempt from the protections of the Garn Act of 1982, if home-owners satisfy those conditions, their lenders may nevertheless consent to a transfer of  the home into a Living Trust. So, be sure to work with your lender.

In all of the above situations, I recommend checking with your lender and securing written consents to transfer whenever possible.

References:  the Federal Statute, and the Federal Regulation. California Code § 2924.6; HUD Handbook 4235.1  REV-1, Chapter 4

Posts By: Gene Osofsky

Q. My mother has been in a nursing home on a Medi-Cal subsidy for the last 18 months, and I know Medi-Cal will have a substantial “payback” claim when she passes. She owns a home which she bought 40 years ago for $40,000, which is now worth about $700,000.  I worry about the growing Medi-Cal claim and also about capital gains taxes.  My CPA says if Mom retains the home until she passes, the capital gain will be eliminated.  But, wouldn’t that strategy expose the home to a Medi-Cal payback claim?

A. Yes, indeed. The problem is that the Medi-Cal rules and the tax rules work differently.  On the tax side, in order to eliminate the capital gain associated with the dramatic appreciation in value of the home, mom would need to retain the home as part of her estate until she dies.  Under current tax law, the home would then get a “step up” in cost basis equal to its value on the date of her death. This date of death adjustment would essentially wipe out all of the accumulated capital gain that would have to be recognized and tax paid if you later sold the home, and so your CPA is correct in this regard.

However, on the Medi-Cal side, if mom retains the home until she dies, it would then be exposed to a substantial Medi-Cal estate recovery claim equal to the value of all nursing home benefits paid out during life.

Hence, the dilemma: in order to avoid a Medi-Cal recovery claim, the home would have to be deeded out by mom during her lifetime so that it is not part of her estate at death.  However, for tax purposes the optimal plan would be to retain it so that it remains part of her estate at death, and thereby passes to her children unburdened with capital gain.

Good news!   There is a way out of this dilemma: The optimal plan is to structure a conveyance of the home during mom’s lifetime which, for Medi-Cal purposes, is complete, but which for IRS purposes is incomplete.  I call this plan “Eating Your Cake and Having It, Too”.

Since the Medi-Cal rules and the IRS rules are different, this plan takes advantage of the differences in the two bodies of law.  The transaction would be structured so that the home would be conveyed out during mom’s lifetime to her children, but with mom retaining the legal right to return to live in the home if able to do so.  For IRS purposes, the  conveyance would then be considered incomplete, as it was made with “strings attached” (i.e. the right to return home). It would become complete only upon her later death, thereby embracing all of the favorable capital gains benefit associated with a death transfer.  However, for Medi-Cal purposes, the transfer would be considered complete, so that the home would not be a part of mom’s estate upon her later demise and thereby would not be exposed to a Medi-Cal estate recovery claim.

If properly structured, this strategy would (a) protect the home from a Medi-Cal estate recovery claim, (b) result in a transfer of the home to mom’s children unburdened by the accumulated capital gain, and (c) avoid the later need for a probate or a formal trust administration.

And remember: just as it is perfectly lawful for the wealthy to plan their affairs to minimize tax liability, so, too, is it lawful for middle-income folks to plan their affairs to avoid a Medi-Cal estate recovery claim. While both strategies can be said to impact the public treasury, the impact of the former is greater by far.

Note: The above plan assumes that the home will not be sold during mom’s lifetime.  If a sale were contemplated, another strategy would be used involving the creation of a specially designed irrevocable trust to both preserve the $250K homeowner’s exemption upon sale and to avoid the influx of sale proceeds directly to mom so as to preserve her Medi-Cal subsidy.

 

Posts By: Gene Osofsky

Q. We were obliged to arrange for mom to move into a nursing home because she has become frail and needs full-time care. We now need to apply for a Medi-Cal subsidy to help pay for the cost of her care, which is quite expensive. We’ve heard that Medi-Cal may then take her home. Is this true?

A. Well, “Yes” and “No”, but the good news is that by taking proper legal steps during your mother’s lifetime the home can be fully protected and preserved for her intended beneficiaries.

During Mom’s Lifetime: So long as mom is alive, and so long as you indicate on the Medi-Cal application form that she intends to return home some day if she is able, the home remains an exempt asset. If you do so, then during her lifetime Medi-Cal will not attempt to put a lien on the home. Further, under current California law home ownership will not interfere with her eligibility for a Medi-Cal long-term care subsidy no matter how much equity she has in the home. However, this unlimited equity value will be changing in the near future: when a new law called the Deficit Reduction Act is fully phased in, the home equity value for a single person must be under $750,000 in order to qualify, but even then the unlimited equity value for a married person will remain in effect.

Upon Mom’s Death: During your mother’s lifetime, Medi-Cal will keep a running tab of the amounts it pays out for her care. When she dies, the home will then cease to be an exempt asset and Medi-Cal will then seek to “recover” its payments from her estate. If she still owns the home at the time of her death, Medi-Cal will file a claim. That claim will need to be paid before the home can be sold or transferred to your mother’s beneficiaries. This is called Medi-Cal “estate recovery”. Medi-Cal can never recover more than it has paid out in benefits, but usually the amount paid out is substantial and can, itself, force the family to sell or refinance the home. And, by the way, holding the home in a “Living Trust” does not avoid this exposure to recovery.

However, there are perfectly proper ways to avoid this recovery, provided that proper steps are taken during your mother’s lifetime. These planning steps must comply with Medi-Cal rules. They should also take into account tax consequences and probate avoidance concerns among others. Elder Law attorneys sometimes create a very special kind of irrevocable trust to use for this purpose. It is usually unwise for family members to attempt to handle this special transaction on their own. If not handled correctly, a transfer of the home for the purpose of avoiding Medi-Cal recovery claims could expose the home to even greater adverse tax consequences.

Posts By: Gene Osofsky

Q. My mother-in-law lives with my wife and me and we pay most of the cost for her caregiver, as well as providing free room and board. Can we declare her as a dependent on our tax returns?

A.  You may very well be able to do so. Actually there are several ways in which expenses associated with the care of a parent may result in a tax benefit to you:

1) Declare A Parent As A Dependent: You will be able to claim your parent as a dependent for income tax purposes if you meet the following five tests set out by the IRS: (1) your parent must be related to you (Note: in-laws and stepparents are  allowed); (2) she must be a citizen or resident of the United States, or of Canada or Mexico; (3) she must not file a joint return with any other person (although exceptions apply); (4) her gross annual income must be less than $4,000 (for 2015). NOTE: Social Security income is generally not counted if less than $25,000 for the year; and (5) you must provide more than half of her support for that calendar year. In determining the amount you pay in support, you are allowed to include the value of the free room and board you provide her.   If you qualify, claiming your mother-in-law as a dependent would result in a $4,000 exemption on your tax return. See IRS Publication 501.

If you and your siblings jointly contribute more than one-half of her support, then you would be able to claim your pro-rata share if all of you sign a Multiple Support Declaration (IRS Form 2021).  See IRS Publication 502.

2) Claim Deductible Medical Expenses: If you cannot claim your mother-in-law as a dependent because, for example, she had gross countable income above $4,000 for the year, you may still be able to deduct her care expenses as an itemized deduction on your Schedule A. To do this, you still must have provided more than one half of her support for the calendar year, but you need not worry about the income test.  However, in order to reap the benefit of this deduction, your total itemized expenses must normally be greater than 10% of your adjusted gross income (“AGI”). Exception:  if you are over age 65, or turn 65 during the tax year, you are allowed to deduct these expenses if they exceed the lower threshold of 7.5% of your AGI.  This exception is a temporary measure through tax year 2016.

3) Claim A Tax Credit: If you pay her caregiver in order to free you or your wife up to work or to seek work, you may be entitled to a Dependent Care Tax Credit. A tax credit is actually more valuable than a tax deduction.  See IRS Publication 503.  However, you cannot claim both the credit and a deduction for the same expense.

So, tally your expenses and discuss these issues with your tax advisor.  You may find that Uncle Sam will share some of your financial burden by extending one of the above tax benefits to lower the amount you pay in income tax.

Posts By: Gene Osofsky

Q.  My mother needs full-time round-the-clock care, but she wants to remain in her home rather than move to a nursing home. If she meets the financial eligibility requirements, will Medi-Cal pay for her care at home?

A.  Unfortunately, your mom would most likely need to be in a nursing facility in order to receive the benefits of a Medi-Cal subsidy for round-the-clock care. Essentially, the Medi-Cal Long-Term Care program generally assumes that a nursing facility is the most effective, and the cheapest, way, to deliver quality care for persons who need it on a 24/7 basis.

That said, there are various Medi-Cal and other programs ‘on the books’ which do offer care to a select few persons in their own home or in other home-like settings, such as Assisted Living Facilities.  These are called “waiver programs”, so named because for these few individuals the state waives the requirement of residence in a nursing home as a condition of receiving a Medi-Cal subsidy.  However, these programs typically have very few slots and very long waiting lists, sometimes of several years duration, so that very few people actually qualify to receive these waiver program benefits. For the most part, these programs are experimental.

Therefore, for more realistic options for help with the cost of care outside of a nursing home setting, you might look into one or more of the following benefit programs:

In-Home Supportive Services (“IHSS”): For persons who are Medi-Cal eligible, the IHSS program offers nonmedical services in the home, such as meal preparation, cleaning, laundry, bathing, feeding, dressing, grooming, toileting, and monitoring for persons with cognitive impairments who are at risk of injury at home.  The number of available hours varies with the disability, and typically would be a maximum of 195 hours per month, but up to 283 hours for those persons who are severely impaired.  Your mother would hire her own caregiver, and the county would pay the caregiver at the then current IHSS hourly rate, and your mother might have a co-payment depending upon her income. The problem that most folks encounter is the Co-Pay (which Medi-Cal calls the “Share of Cost” (“SOC”)”: for unmarried individuals seeking assistance in the year 2021, if gross income (after medical premiums) is above $1,481/month, then that person would be able to “retain” only $600/month for his own food and other non-medical needs, and all in excess of that amount must first be used to pay for hired care, before Medi-Cal would pay anything for the IHSS workers; for married individuals whose combined incomes are above $2,004/month, all income above a very modest $934/month would need to be paid for care before Medi-Cal would pay anything for their IHSS assistance.  These limitations make the IHSS program impractical for many. For more on this program click here.

Veterans Survivor’s Pension:  If your mother is the widow of a veteran who served during a qualifying war time, she might qualify for a pension of up to $1,149 per month (in 2016) to help with the cost of care. For more on this program click here and for pending changes in the program click here.

Assisted-Living Waiver: If your mother is willing and able to move to an assisted living facility, which is generally a more homelike setting than a nursing home, there are a few facilities in select California Counties authorized to accept Medi-Cal payments toward the monthly fee. Alameda is one of these counties. As of this writing, there were actually a few available beds in Alameda County. The problem with this program is that, to qualify, the individual’s income must be very low, so that he or she has no Share of Cost (“SOC”). For a list of Assisted Living Facilities that participate in this program click here.

PACE Program:  The Program for All Inclusive Care Of the Elderly (“PACE”) is another option.  Under this program, your mother would be bused several days per week to a local community health center where she would receive medical care, rehabilitation therapy, social services, recreation and hot meals. At the end of the day, she would be transported back home. PACE would also provide some in home care services.  Most of the fees would be paid by Medicare and Medi-Cal, but your mother might have a modest co-pay. For more on PACE click here.

For more information on these and other programs in Alameda County, contact Senior Information & Assistance at 1-510-577-1900 (www.acgov.org), or visit our website for links to additional information.