NEW SENIOR TAX NOW HERE

As I have been predicting for the last year, Congress has now enacted the Deficit Reduction Act of 2005. Buried in this monster bill are new rules that will impact millions of seniors, the disabled and the poor. The bill passed 216-214 on Feb. 1 and was signed into law by the President on Feb. 1.

I will talk about some sections of the new rules. There is some bad stuff here. At the end of this discussion, I have some GOOD NEWS, so pay attention. Note, the new rules are in italics.

Lengthening Look-Back Period for All Disposals to 5 Years     

Under the new rules, Medi-Cal (MC) will now be able to look back 5 years when someone needs help with the staggering cost of a nursing home.  Under the old rules it was 30 months. This means if you made ANY transfers or gifts in the last 5 years you may be disqualified from receiving the medical care you need.   These transfers could include; gifts to a church or other charity, gifts to a child or grandchild, Christmas or Birthday presents, etc. You get the picture. And under the new regs it will be presumed that you made the gifts for the purpose of getting MC help.  You will have to prove you did not. In addition you will have to be able to provide detailed records. Considering that many folks who need MC help have dementia, this will be an interesting chore.  How many of you have taken care of someone with dementia and you can't even find last months bank statement. This rule is simply a way of intimidating old folks and their families into not applying for the help they need and deserve.

(b) Change in Beginning Date for Period of Ineligibility

Under the old rules if you made a gift, and if that gift caused you to be ineligible for a period of time, that period ran from the date of the gift. For example, if you made a gift, 2 years ago, the period of ineligibility would run from the date of the gift.  So if you applied for MC today, the 2 years would have passed and you would be eligible for MC.  Under the new rules, given the same scenario, the period of ineligibility would not begin until you applied for MC. So in this example, a gift you made 2 years ago makes you ineligible for the next 2 years, or 4 years of penalty. So that $20,000 you gave to your granddaughter 4 years ago to help her go to college, keeps you today from getting the medical help you need.

(2) the State becomes a remainder beneficiary under such an annuity or similar financial instrument by virtue of the provision of such medical assistance.

Under the new rules, certain types of annuities will now be used to help someone qualify for MC (be careful of the misleading schemes that will now surface).  This means the State of California, not your family, will now be named as the beneficiary of your annuity, NOT your family.  How do you like this for a senior tax?  The State gets what you worked a lifetime for, not the kids.  Hope you now begin to understand why I have been pounding this on the radio for the last year.

the individual shall not be eligible for such assistance if the individual's equity interest in the individual's home exceeds $500,000.

This is the worst of all.  Yes, you read this correctly.  If your home has more that $500,000 of equity, and you have no spouse living at home, or are single, the value of your home will make you ineligible for any MC help if you are in a nursing home.  One of the Senators who voted for this legislation said, “they can just get a reverse mortgage and use that to pay the bill.”  Wow, is this dumb.  I guess this Senator does not know that you have to live in the home in order to get a reverse mortgage.  Senator, if you live in a nursing home, you are not at home, and therefore CANNOT get a reverse mortgage.  Seniors will now be target for another new senior tax.  If you did what you were supposed to do, live in your home and pay it off,  you will now be punished.  Many of you live in homes worth more than  $500,000.  All you did was live in it for 40 years.  You are not rich, but Congress thinks you are.

(b) Authority for States To Accumulate Multiple Transfers Into One Penalty Period

This one is especially bad.  Under the old rules, any gift you made was treated as an individual gift.  Not now.  All gifts you made in the last 5 years will be lumped together and treated as 1 gift.   This alone will make most people unable to get the help they need. Insert here my discussion above about record keeping.

services in a nursing facility that is part of such community, may require residents to spend on their care resources declared for the purposes of admission before applying for medical assistance.

Now, before you read on, what do you think this means?  No peeking.  Okay, here is the answer.  It means that if you now go into a long term care facility, you will have to give them ALL of your personal financial information. This would include trusts, wills, bank statements, life insurance policies, etc.  It means everything.  Do you like this?

There is much more, but by now you are probably somewhat discouraged.  So here is some GOOD NEWS.

First, California has to write new regulations before all this is implemented.  That will take several months.  You still have time to call or write the Governor's office and MC and ask them why they are in favor of this punitive new tax on seniors and the disabled.  Don't let them put you off by telling you it is not a tax. YES it is!! 

Second, you still have time to do valuable planning.  You can still set up plans that will allow you and your family to protect all you have worked a lifetime to acquire.  There is still an open window, however, that window will close this year.  If you have friends or family that do not subscribe to this newsletter, give it to them and tell them that now is the time.  Folks no longer have the option of waiting.  Listen to the radio program faithfully.  I will keep you up to date.  Join my teleconferences.  But most of all, act now.  Call my office and set up a time to come in and talk. 

Third, we are now able to offer a complete range of planning tools and techniques.  From Long Term Care Insurance, to more sophisticated concepts.  In addition, and pay attention to this one, we are able to help Veterans with a benefit that almost no one knows exists.  In addition, this VA benefit not only pays some of the cost of a nursing home, but also ASSISTED LIVING.  And, it not only pays to the veteran, but to his or her widow.  This is great stuff.

Don't wait, give me a call today and together we can save a lifetimes work.