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Category Archives: Elder Law

Leave your Trust to your Grandchildren NOT the Government!

A Dynasty Trust in Roselle and Schaumburg Can Help Leave Your Assets to Your Grandchildren – Not the Government!

A lot of people complain about high taxes. Looking at what the government takes from your weekly paycheck can be frustrating. But, it could be worse. Even people who don’t complain about taxes (there are a few) and understand it takes money to run the government would complain if they understood that it is possible for the government to tax the same money over and over and over. And, it happens more than you think.

Here’s a scenario:

You and your spouse leave a very large amount of money to your daughter without a trust – or, in a poorly drafted trust (yikes!). The money is taxed when it is transferred to your daughter. Your daughter leaves money she inherited to your grandchildren without a trust. Guess what? You’ve got it – that money is taxed again!

It is upon learning this that a well-meaning grandparent suggests leaving the money to their grandchildren rather than the child to avoid one of those tax events. Not so fast! In that scenario the federal generation-skipping transfer tax could apply.

Here’s another scenario:

You and your spouse leave $10 million to your child. If her inheritance grew over time, it would be subject to the estate tax at her death. That could result in millions going to pay estate tax.

There is a solution that could be used to stop the government from double-dipping. It’s called a Dynasty Trust. Assets that you put in a dynasty trust, plus any interest earned over the years, are still subject to federal estate tax, but just once – when you transfer them into the trust. The assets will not be taxed again even though several generations can benefit from them.

It’s important to note here that income taxes are still due on any income that is generated by the assets in the trust. Therefore, most people choose to put assets that do not earn money in the trust, such as growth stocks that don’t pay dividends and life insurance policies.

Dynasty trusts are complex legal documents, so they should be prepared by experienced estate planning lawyers in Roselle and Schaumburg who have experience with trust and tax planning strategies. If you are interested in talking with an attorney with this experience, call our office at 630-908-2752 to set up a consultation.

Long-Term Care Insurance

Everything You Need to Know About Long-Term Care Insurance from a Roselle and Schaumburg Elder Law Attorney

Long-term care is one of the most common dangers to the life savings of senior citizens. The fear of losing assets, possessions, and homes drive people to search out ways to protect themselves from the enormous costs associated with long-term care.

Many seniors turn to long-term care insurance, which is supposed to cover them through expensive medical episodes and pay for life in an assisted living or nursing home. However, there is a lot that seniors need to know before buying long-term care insurance and deciding on the best plan for their individual situation. Elder law attorneys in Roselle and Schaumburg have laid out some of the issues seniors should be aware of when thinking about long-term care insurance.

One thing seniors should know when making decisions about long-term care is the average amount of time for stays in nursing homes. Typically, most seniors will not stay in a nursing home any longer than 6 months – if at all. Unfortunately, many long-term care insurance policies lapse before the beneficiary ever makes it into a nursing home, and if benefits are paid to the nursing home through the insurance policy, they’re usually much less than the actual cost of care. As an investment in your well-being, long-term care insurance may not hold up.

In some cases though, long-term care insurance may be a good decision – usually if you look at it in terms of a safety net rather than a be-all, end-all to paying for long-term care. Most experts, including Roselle and Schaumburg elder law attorneys, agree that long-term care insurance is a worthwhile investment only if the premiums amount to less than 5% of your monthly income – keeping in mind that your income will drop as you age while the premiums will rise. In addition, it is advised that you do not even consider long-term care insurance that does not cover assisted living facilities, as it is far more likely that you will stay in an assisted living facility for a greater amount of time than you would stay in a skilled nursing facility.

Once again, with all of this in mind, your individual situation is what will truly determine whether or not long-term care insurance is a sound investment for you. A Roselle and Schaumburg elder law attorney can meet with you to determine your situation and plan out your future needs in order to advise you better when you’re making a decision regarding long-term care insurance.

If you have any questions about long-term care insurance, or if you’d like to have your long-term care insurance policy reviewed to make sure it’s the correct one for your situation, please call our Roselle and Schaumburg elder law firm at 630-908-2752 to schedule a consultation.

Western Suburbs Elder Law Attorney: Getting Tax Deductions from Assisted Living Expenses

The costs of assisted living facilities continue to rise for seniors and their families, leaving them struggling to make sure their loved ones are receiving the care they need and deserve. While it seems like sometimes there is just no relief from these rising costs, Western Suburbs elder law attorneys often advise their clients about tax deductions which may be available to them. Medical expenses (which include many long-term care expenses) that account for more than 10% of gross adjusted income for taxpayers under 65 and more than 7.5% of gross adjusted income for taxpayers 65 and older are deductible. However, there are many qualifications that must be met in order to receive these tax benefits.

When advising their clients, Western Suburbs elder law attorneys list the following criteria that must be met in order for them to receive the tax deductions:

  • A care plan for personal care services must be put in place by a licensed health care provider such as a doctor, nurse, or social worker. While many assisted living facilities make care plans for their residents, do not assume this will always be the case.
  • The senior must be deemed “chronically ill” by a health care provider, meaning they either need to have a cognitive impairment such as dementia or need assistance with at least two of the activities of daily living: eating, bathing, toileting, continence, walking (transferring), and dressing.

However, even if these conditions are met, there are still some matters that need to be clarified in order to receive the full benefit of the assisted living tax deductions. For example, room and board are typically not allowed as tax deductions – unless the senior meets the above requirements and is in the assisted living facility primarily to receive medical care, as the room and board is then considered a medical expense. In addition, any medical costs reimbursed by an insurance policy cannot be used when calculating the deduction.

Western Suburbs elder law attorneys advise that even if the seniors are in the assisted living facility for non-medical reasons, there are still some options for receiving tax deductions. Assisted living entrance fees are often counted as medical expenses for tax purposes, and assisted living facilities are required to outline the portion of their fees that are medical-related.

Adult children and family members that claim seniors as a dependent are sometimes eligible for assisted living tax deductions as well, once again as long as they meet certain criteria. The adult family members, either singularly or together, must contribute at least half of the senior dependent’s support for the year. If there are multiple family members supporting the senior, each contributing family member must pay more than 10% of the senior’s total support for the year and needs to sign a Multiple Support Declaration.

If you have questions about qualifying for the assisted living tax deduction, please contact our office at 630-908-2752 to see how we may help you.