The Senior Lawyers Division acknowledges the work of the Virginia State Bar in the preparation of a Senior Citizens Handbook, which was the genesis of our Handbook. In particular, the Division expresses its appreciation for the work of the University of Virginia law students and to Lora Hamp of Virginia Commonwealth University, who were the principal drafters of this Handbook.

Section A: Financial Assistance

Social Security 1

Supplemental Security Income 6

Pensions 8

Section B: Health Care

Medigap Supplemental Insurance 23

Managed Care 26

Long Term Care Insurance 29

Alzheimer’s Disease 31

Section C: Long Term Care

Nursing Homes 35

Sections D: Housing

Rental Assistance Program 51

Utility Assistance Program 52

Reverse Mortgages 52

Section E: Planning for the Future

Divorce and the Elderly 55

Probate and Estate Administration 55

Advance Directives 59

Power of Attorney and Durable Power of Attorney 60

Guardianship 61

Section F: Protection of Legal Rights

Discrimination Based on Disability 74

Grandparent’s Rights 75

Elder Abuse 76

Alternative Dispute Resolution 78

Section G: References and Referral Information

Financial Assistance 80

Health Care 80

Long Term Care 80

Legal Information 80

Other Helpful Contacts 81

Other Resources 82

Introduction

Different types of benefits are payable under various provisions of the Social Security Act, but when the average person uses the phrase "social security benefits" he or she usually means the Retirement, Survivors, Disability and Health Insurance Program (RSDHI). These are monthly cash benefits paid to you as a retired or disabled worker, to qualified spouses, children, and parents of retired or disabled workers, and to qualified widows, widowers, and divorced spouses of workers.

The RSDHI program is largely financed out of taxes paid by employers and employees. It is an insurance program. Benefits received by you and your dependents have been earned by you through your employment and the taxes collected regularly from your wages. These tax deductions are shown on your paycheck next to the initials "FICA." The letters "FICA" stand for "Federal Insurance Contributions Act," which is the official name for the federal laws which established the Social Security program in 1935. These deductions go up periodically. The money collected from this tax goes into trust funds, and current benefits are paid out of these funds.

General Eligibility

Eligibility for Social Security benefits depends on the length of time you have been working and paying Social Security taxes. Generally, an individual is eligible for benefits after a lifetime total of ten years in employment covered by Social Security. "Covered" employment refers to all employment and self-employment in which the employee and employer are obligated to pay a payroll tax to the Social Security Administration. The ten years may be calculated by adding up the total number of "quarters" worked by the individual. A "quarter" is defined as a three-month period; that is, there are four quarters per year. Thus, ten years of employment is the equivalent of forty quarters.

If you stop working before you have the forty quarters needed to qualify, your quarters will be kept on record. If you start working again, your quarters will continue to accumulate. In some cases, you may not need the forty quarters to qualify for benefits. To find out how many quarters you have or how many you need to qualify, contact your local Social Security Administration Office.

Retirement Benefits

The amount you receive in Social Security retirement benefits is dependent on how much income you averaged over your career. If you made a high amount of income, your benefits will be proportionately greater than if you had periods of no work or low salary. Your level of benefits is also affected by when you begin receiving Social Security.

If you are eligible for benefits, certain family members can also receive benefits:

When Should You Retire

Individuals are eligible to receive full retirement benefits at age 65, providing they have obtained the necessary work quarters and have worked for the requisite amount of time. It is possible to obtain benefits at 62 years of age, but the amount you receive will be reduced by 20 percent. If you do not take Social Security at 65 years of age and continue to work, you will receive additional money when you apply for and receive your Social Security Benefits. Your benefits will be raised by a certain percentage each year that you delay retirement.

You can also choose to receive Social Security benefits after age 65 and remain at work. Between the ages of 65 and 69, your Social Security benefits will be reduced slightly if you are making over $13,500 per year. (The amount of this earnings limit changes every year.) When you are 70 or older, you can work and receive full Social Security benefits with no limit on earnings. If your post-retirement earnings are greater than your earnings in pre-retirement years, you may be entitled to larger Social Security benefits. Ask your local Social Security office to recalculate your benefits if your post-retirement earnings have significantly increased.

The earnings limit applies only to earnings from self-employment and wage income. Interest, dividend and other passive income, are not included in the calculation. In other words, investment income will not cause you to lose your social security benefits.

A year before you retire you should consult with a Social Security representative to help you plan the best time to apply to get the maximum benefits. There are advantages for some people in retiring at age 62, and for others it makes sense to wait until later. Your Social Security representative can help you interpret the complex rules.

Note: If you choose to delay your retirement, generally you should still sign up for Medicare at age 65. See your Social Security office for more details.

Survivor’s Benefits

When a fully insured worker or retired worker dies, survivor’s checks can go to certain members of the worker’s family:

When a fully insured worker or retired worker dies, a small lump sum death benefit may be paid to an eligible surviving widow, widower, or entitled child.

Disability Benefits

There are benefits for certain disabled persons who are not old enough to qualify for regular Social Security payments. If you are disabled and have worked under Social Security for more than five years, you may be entitled to Social Security disability payments. For a worker to qualify for disability benefits, the worker must be unable to engage in any substantial gainful activity due to a physical or mental impairment that is expected to result in death or has lasted, or is expected to last, for at least 12 months.

An individual is eligible for Social Security Disability Insurance (SSDI) on the date he or she becomes permanently disabled. From this date, there is a waiting period of five months before benefits begin. In the event that an applicant is approved for SSDI after the sixth month of disability, the Social Security Administration will make a retroactive payment.

The level of monthly disability benefit is determined by the amount of one’s earnings, age at onset of disability, and date of disability. You may receive an estimate of your benefits through your local Social Security office.

If you are eligible for SSDI, certain family members may also be eligible for benefits:

There are also benefits for certain disabled adults and minors who have not worked under Social Security or do not have enough Social Security credits to obtain regular social security benefits. The program is called Supplemental Security Income. If you or your child is disabled, you may be entitled to such payments. In both of those situations you should contact the Social Security Administration local office and file an application. You may also contact a counselor or attorney to help in this claim. Any fees will come from whatever you receive and are set by the Social Security Administration.

Applying for Benefits

Apply for benefits by going to your local Social Security office, or calling the toll-free number: 1-800-772-1213. The Social Security Administration has many free pamphlets and articles to advise you of your rights and duties. They will inform you on how to apply for benefits and how to receive your benefits. Social Security will also furnish a form allowing you to check the status of your Social Security account.

Appeals Process for Social Security

If your application for Social Security benefits is denied OR if any of your benefits are reduced or terminated, you have the right to appeal the decision. The appeals process has four steps: 1) reconsideration, 2) administrative hearing, 3) review by Appeals Council, and 4) federal court.

Step 1: Make a written request for reconsideration within 60 days of the date you receive notice of the denial. If you have been receiving benefits and you receive notice that your benefits are being reduced or terminated, you must make the request within 10 days so your benefits will continue during the appeal. A Social Security representative will help you with your request.

Step 2: If you are not satisfied with the result of the reconsideration, you may appeal again and ask for a hearing before an Administrative Law Judge. Many decisions are reversed after the hearing. You must request the hearing within 60 days of the date you receive notice of the reconsideration decision.

Step 3: If you disagree with the judge’s decision, you may request a hearing by the Social Security Appeals Council in Arlington, Virginia, within 60 days of the hearing decision.

Step 4: If the Council refuses to hear your case or decides against you, you have another 60 days to appeal to a federal court. At this stage, if not before, you should seek assistance from an attorney.

Winning an appeal at any level may entitle you to receive lost benefits retroactively to the date of application, reduction, or termination.

Contact your local Area Agency on Aging or Legal Aid office for assistance with your appeal.

Overpayments

Every month, thousands of Social Security beneficiaries receive documents entitled "NOTICE OF OVERPAYMENT". Overpayment occurs when the Social Security benefits you receive are more than the amount for which you are eligible. If you receive notice of overpayment which tells you that you will have to pay back the money or it will be withheld from your future check, you have the right to appeal that decision. You should appeal within 30 days of receiving notice of overpayment. In order to protect your rights, you should request one or both of the following:

Reconsideration of Overpayment: You have the right to ask the Social Security Administration to look at the decision again. Request reconsideration if you feel you were not at fault in causing the overpayment and if repayment of the money would create a serious hardship for you.

Waiver of Repayment: You have the right to ask that the Social Security Administration not recover the overpayment. Request a waiver if you feel no overpayment ever occurred or if the amount which Social Security claims is overpaid or wrong.

Representative Payee

A "representative payee" is a person or organization designated to receive Social Security benefit checks on behalf of a beneficiary who may not be able to manage his or her own affairs. The representative payee has the primary responsibility of using the Social Security check for the beneficiary’s basic or personal needs. Usually, the representative payee is a spouse or other relative, friend, or legal guardian. Institutions, such as nursing homes and mental health centers, may also be designated to receive Social Security benefit checks on behalf of a beneficiary.

To have a representative payee appointed for a beneficiary, the Social Security Office must be notified that the individual is incapable of handling his or her own affairs. The Social Security Administration can then appoint a payee if it decides that this is in the individual’s best interest. The SSA makes such decisions based on doctor reports, court decisions, and statements from others who know the beneficiary.

If a representative payee is appointed for you, The SSA must tell you in writing before sending benefits to the payee. Any appointment may be challenged by appeal. If your representative payee does not use your benefit check for you, the SSA may have to reimburse you. You should immediately contact the SSA with reports of misuse of benefits.

Direct Deposit

You can sign up to have your Social Security check deposited directly into your bank account. Ask about this option when you sign up for benefits. Direct deposit will become mandatory for Social Security recipients on December 31, 1998.

Supplemental Security Income

Introduction

Supplemental Security Income (SSI) is a federal program administered by the Social Security Administration which provides income assistance to aged, blind, and disabled persons. The SSI program provides monthly cash payments to those individuals who meet income and eligibility criteria. Essentially, the program guarantees a certain income to an individual or couple. SSI will provide supplemental payments so that the total income for an individual or couple will equal the guaranteed amount. The SSI program is administered by the Social Security Administration, but it differs from Social Security retirement or disability benefits because you can get SSI even if you have never paid into the Social Security system.

Eligibility

You must be at least age 65, blind, or disabled and have only limited income and assets in order to qualify for SSI. Under the SSI program, "blindness" is defined as the following:

"Disabled" is defined as inability to engage in any substantial gainful employment due to a physical or mental impairment, which has lasted or is expected to last for at least 12 months or is expected to result in death.

An individual or couple must satisfy the following asset and income requirements for eligibility:

If your resources are over the eligibility limit, you may transfer your assets or spend them down to the resource level required for eligibility. In order to prove you no longer own the resources, you should keep receipts and other records of the ways you spend down your resources.

The following assets are NOT counted for SSI eligibility:

In some cases, SSI recipients are eligible for other low-income assistance programs, such as food stamps. In thirty-eight states, SSI recipients are automatically eligible for health benefits under the Medicaid program.

Penalties

Your SSI benefits may be reduced under the following conditions;

Additionally, an unmarried couple living together may be listed by the Social Security Administration as "holding out as husband and wife." When this happens, and both persons are receiving SSI, their checks will be reduced, if necessary, so that the two checks together will equal the amount that a couple would receive.

Applying for Benefits

You can call the Social Security Administration’s toll-free number, 1-800-772-1213 and complete an application over the phone, or go to your local Social Security office. If you file an application at a Social Security office, a Social Security representative will assist you with your application. Other agencies such as your Area Agency on Aging may be able to assist you in applying for SSI. Do not delay filing an application if you think you are eligible, because SSI can only be paid from the date of the application.

Appeals Process for SSI

You should receive a decision from Social Security within 60 days of your application.

If you are denied SSI, you may appeal and you may be represented by a person of your choice at any step in the appeals process. Your representative does not necessarily have to be an attorney. You and your representative will receive notices of all decisions on your claim.

The first step in the appeals process is called the reconsideration. You must ask for the reconsideration within 60 days of the date you receive notice of the initial decision. Do not delay appealing because the process takes a long time. If you have been receiving benefits and you receive notice that your benefits are being reduced or terminated, you must make the request within 10 days so your benefits will continue during the appeal.

A Social Security representative will help with your request. If you are not satisfied

with the result of the reconsideration, you may appeal again and ask for a hearing before an Administrative Law judge. Many decisions are reversed after the hearing. You must request the hearing within 60 days of the date you receive notice of the reconsideration decision. Again, you should appeal immediately. Further appeals of the Administrative Law judge’s decision are to the Appeals Council and to federal court. You may want to contact the local Area Agency on Aging or Legal Aid office for assistance with your appeal or questions about SSI.

Overpayments

It is not uncommon for SSI recipients to receive a notice from the Social Security Administration that they have been overpaid. Do not panic if you receive such a notice. You may not have to repay the money or you may be able to repay as little as $10 a month. You have the right to appeal if you do not believe you were overpaid. If you appeal within 30 days of the date on your overpayment notice, your benefits will continue during the appeal. Even if you did receive the overpayment, you may not have to pay it back if you were without fault in causing the overpayment and you are financially unable to pay it back. You must file a request for waiver of the overpayment with Social Security if you feel the overpayment was not your fault. Your local Legal Aid office may be able to help you get a waiver. Social Security may withhold as little as $10 per month from you checks even if you were at fault. You must talk to a Social Security representative about this.

Pensions

Introduction

For many individuals, pension plans provide an important supplement to savings and Social Security benefits and thus serve as a vital part of retirement income. Consequently, learning about pension plans and how they operate may prove to be a valuable safeguard before and at retirement.

A pension plan allows certain workers to defer compensation in order to earn benefits which are received upon retirement. While law does not require employers to provide pensions, approximately half of all private employers and most government agencies offer some type of pension plan that pays benefits to those retired persons who meet certain eligibility requirements.

Pension Eligibility

A worker must meet eligibility requirements before he or she can participate in a pension plan. Under the Employee Retirement Income Security Act of 1974 (ERISA), an employee must (with some exceptions) be allowed to begin participation in his employer’s pension plan if he or she is 21 years old or older and has worked for that employer for one year or more. ERISA defines a "year" as a 12 month period in which the worker has worked at least 1,000 hours.

Once an employee becomes eligible to participate in the pension plan, the worker begins earning pension credits which serve as the basis upon which pension benefits are awarded. The rules of the pension plan will specify how many years of work are required for an employee to become vested. To be "vested" means that you have a legal right to collect the pension when you retire. Usually, it takes between five and seven years of service with your employer to become fully vested. A vested employee does not lose the right to receive pension benefits even if he or she switches jobs, is fired for misconduct, or has a break in service.

Types of Pension Plans

Generally, there are two types of pension plans: defined benefit plans and defined contribution plans.

A defined benefit plan specifies how much in benefits the plan will "pay out" to a retiree. It is the most common type of plan and gives a retired worker a fixed monthly amount as described in the plan.

A defined contribution plan specifies how much money the employer, employee, or both will "pay in" to the plan each year for the employee. With this plan, your contributions are fixed but your benefits may vary according to your contributions and what those contributions have earned over the years. There are several types of defined contribution plans including the following:

place the money in an individual pension account. The employer may also

contribute to the employee’s individual account.

Pension Rights

In 1974, the Employees Retirement Income Security Act (ERISA) was enacted to increase protection for workers’ pension plans. ERISA sets minimum standards for pension plans, and guarantees that pension rights cannot be unfairly denied or taken from the worker. If you work for a private employer that offers a retirement plan, ERISA requires that pension plan rules be in writing in the Summary Plan Description (SPD). The summary should include the following:

You have the right to receive this information from the plan office within 30 days of your request for it.

In addition to your right to the SPD, you are entitled to receive a statement of your "personal benefit account" which explains how many benefits you have and what benefits you have vested. To be "vested" means that you have a legal right to collect the pension when your retire. Usually, it takes between five and seven years of service with your employer to become fully vested. So, if you leave your place of employment after you are fully vested, all of your benefits are still yours. If, however, you leave before becoming fully vested, you lose the unvested portion of your pension benefits.

Under ERISA, employers are prohibited from discharging an employee for the purpose of preventing the employee from receiving a pension. If this happens to you, you have the right to file suit in federal court. You will have to prove that the motivating factor for the discharge was the employer’s intention to prevent payment of your pension benefits. You could potentially recover lost wages and benefits, plus attorneys’ fees.

Breaks in Service

A break in service (time away from work) may have the effect of canceling pension credits earned prior to the "break." Therefore, it is important that you learn and understand the break in service rule of your pension plan. Under ERISA, an interruption in employment cannot count as a break in service unless the worker has worked less than 500 hours during the year. If a break in service occurs, the worker loses previously earned credits only if the number of consecutive years of break is as great or greater than the number of years of credited work prior to the break. Fully vested benefits are not lost by any break in service.

Benefits for Workers’ Spouses

For workers who retire after January 1, 1976, most pension plans must provide for a "joint and survivor annuity." This means that the employee can select to have higher benefits that stop at his or her death or a lesser benefit that continues for as long as either the worker or his/her spouse is alive. The amount paid to the surviving spouse can be as low as one-half of the amount the couple received while both were living.

The Retirement Equity Act of 1984 (REA) contains several provisions affecting the rights of homemakers, widows, divorced women and working wives to receive private pension benefits after their spouse’s death. (Note: REA is sex neutral and can help men as well.)

The REA requires that both spouses give written consent in a notarized form before survivor’s benefits can be waived.

Protection of Pension Funds

Under ERISA, a worker is protected from loss of benefits due to the employer’s going out of business, acquisition of the worker’s company by a new employer, or amendment or termination of the pension plan. Additionally, ERISA requires the trustees of the pension plan to do the following:

The Federal Pension Benefit Guaranty Corporation (PBGC) guarantees payment of

vested retirement benefits under most defined benefits plans in certain situations,

such as a company’s bankruptcy. Benefits above a set level are not insured.

(Note: Defined contribution plans do not get this protection.)

Appeals

If your pension application is denied, you have the right to be notified in writing of the specific reasons for the denial. You also have the right to a full review of the denial by the trustees. If you feel you have been wrongfully denied pension benefits, you should promptly seek legal assistance to determine whether an appeal is in order.

Veterans Benefits

Issued subject to a review of eligibility, numerous benefits are offered by the federal government to qualified veterans. These benefits include medical and dental care, compensation for service-connected disabilities, pensions, treatment for alcoholism and drug addiction, home and education loans, life insurance if retained upon discharge from active duty, and limited burial benefits. Medical care is also available on a priority basis to veterans with nonservice-connected disabilities. Additionally, medicines and hospital care may be available, subject to a means test which considers financial and insurance status, on a priority basis to veterans with nonservice-connected disabilities.

Eligibility

To be eligible for service-connected pension benefits, the veteran must have been

disabled by injury or disease incurred in or aggravated by active service in the line

of duty. The disability can be the result of injury, disease or the result of Veterans Administration (VA) health care. The amount of disability compensation is based

on the degree to which the veteran is disabled by the service-connected condition.

The minimum rating to receive compensation is 10 percent disabled.

Veterans may be eligible for nonservice-connected pension benefits if they meet the following eligibility criteria:

Dependents of a disabled veteran may also be eligible for benefits. A veteran’s spouse, widow or widower, child, and dependent parents may be able to get medical care, education benefits, home loans, pensions, and death benefits. Additionally, spouses and parents of veterans may get an allowance for nursing home expenses or for the expenses of a caregiver if the relative is helpless.

Relationship of VA Income to Social Security Benefits

Your Social Security Disability Insurance (SSDI) or Retirement Benefits will not be reduced if you receive service connected VA benefits. However, if you receive Supplemental Security Income (SSI), your VA benefits will be considered income. Therefore, in order to avoid overpayment, be sure to report all VA income to SSA if you receive SSI.

If you receive a non-service-connected pension, you must report all income and changes in income to the VA. A pension is reduced by receipt of SSDI or Social Security, but it is not reduced by SSI.

Applying for Benefits

To apply for benefits, contact your local office of the Department of Veteran Affairs by calling 1-800-827-1000.

Right to Appeal

Should a veteran disagree with a USDVA decision regarding the application for benefits, the decision can be appealed to the Court of Veterans Appeals. Appellate assistance may be obtained from a regional office Department of Veteran Affairs. An attorney may assist with an appeal, but federal law restricts attorneys’ fees for such representation to ten dollars. If legal assistance is needed and cannot be readily found, a local legal services office or a lawyer referral service might be helpful. Various independent veterans’ organizations such as the American Legion, Veterans of Foreign Wars, and the Vietnam Veterans of America may also be of assistance in the preparation of a claim application or with an appellate review.

The Food Stamp Program

Introduction

With food costs rising ever higher, millions of older Americans on fixed incomes have difficulty obtaining food "basics" necessary for a proper diet. If you meet the income guidelines, the Food Stamp Program may be able to help you stretch your food budget.

As the name suggests, the Food Stamp Program, administered by the Federal Government, provides coupons redeemable for food, as well as plants and seed to grow food. The Food Stamp Program explicitly excludes by regulation such non-food items as alcoholic beverages, pet food, vitamins, medicines, tobacco and cigarettes.

Food Stamp Myth

Many think that the Food Stamp Program is only designed to help the desperately poor. This is not true. Households may earn moderate amounts of income per month and still be eligible for food stamps. Recipients of food stamps also may own a car, a home of any value, as well as income-producing property, subject to the restriction of the law.

Individual recipients can possess up to $2,000 in resources, and households with at least one member who is 60 or older may have resources valued to $3,000 or less (personal belongings and household items are not considered "resources"). Limits are not set on resources in households whose members all receive either public assistance, such as Aid for Dependent Children (ADC) or Supplemental Security Income (SSI). Such households are eligible for food stamps without other limitations applying. However, there are limitations for those individuals who receive ADC or SSI but live with other members of the household who do not receive such assistance. ADC or SSI recipients in such "mixed households" are granted exemption of resources through a means test.

Applying for Food Stamps

To apply for food stamps, you must contact your local food stamp office. To find out where that office is, you can call your local Area Agency on Aging. If your household has little or no money and needs help right away, let the food stamp office know. You may be eligible under the "expedited service" rules to receive food stamps within five days of the application date if you are classified as homeless or as a member of a low-income family.

After you have turned in your application, a worker will hold a confidential interview with you or another member of your household at the DSS office. If no one in your household can go, an adult friend or relative who knows your circumstances may go for you. If you are 65 or older, disabled or suffer other hardships, and cannot go to the food stamp office, let the office know. A worker will arrange to interview you at home or by telephone.

Eligibility

You must reside in the area and be a U.S. citizen or lawfully admitted alien, and register for work unless you are over 60 or meet other exemptions. All households may have up to $2,000 worth of resources such as cash, checking and savings accounts, stocks and bonds, and land and buildings not used to produce income. Households with at least one member who is 60 or older may have up to $3,000. Bring proof of countable assets to the interview to expedite your case. In most cases, your house and surrounding lot, one car, household goods and personal belongings, and life insurance policies will not be counted as resources. You must provide proof of your Social Security number.

Only households with net monthly incomes below the allowable limits may qualify for food stamps. These limits go up with increases in the size of the family and are adjusted twice yearly to reflect changes in the cost of living. Persons who are caretakers of minor children may apply for and receive food stamps as separate households and share the same residence. Persons with earned income must file monthly report forms with the local Food Stamp office. All persons, except for those who are disabled or elderly, will have their allotted food stamps determined retrospectively. For example, a person’s income and expenses for March will determine the allotment for May. You may prove your income by recent pay stubs, information given by your employer, pension information, and benefit letters from the Social Security or Veterans Administration. Check with your local Food Stamp office to determine current allowable income for your household.

After adding income of all members of the household, the worker can subtract certain deductions such as standard deduction for every household ($134), a 20 percent deduction for earned income, dependent care (including care for disabled adults), and high housing costs. Proof of these expenses may include bills or records of payment of rent or mortgage, house insurance, property taxes, electricity, gas, oil, sewerage, telephone, and water.

If you are eligible for food stamps, you should receive your stamps no later than 30 days from the date you first applied. If you do not qualify, a written notice will explain why. If your local office requires you to pick up your stamps but you cannot, arrange to have someone that you have named pick them up for you.

Be sure to report any changes in your household’s circumstances by calling your case worker or sending in the form provided by the food stamp office. If you receive extra food stamps because you have not reported a change, you will owe the Food Stamp Program the value of these stamps.

What to Do If Refused

If you think that your application has been wrongly denied or that you have not received the right amount of food stamps, you should tell the food stamp office right away. If they disagree with you, you have the right to request a review by a hearing officer.

You may have a friend or relative attend the hearing with you, or you may wish to obtain the services of a legal aid or private attorney.

In some cases, you can continue to receive your regular allotment of food stamps while you await the hearing officer’s decision. If the hearing officer decides in your favor, you will receive the correct amount of food stamps. If the decision is in favor of the food stamp office, you will be asked to repay the value of any stamps you were not entitled to receive.

Federal Tax Relief

Federal Income Taxes

Certain types of income are taxed, while others are not. For example, gifts and interest earned on certain municipal bonds are not taxed. Salary and wages, payments from a pension plan, and investment income are forms of income which are taxed. If your income exceeds a certain level, your Social Security payments may be taxable for federal income tax purposes. Included in the instructions for the IRS Form 1040 is a worksheet that will help you figure whether any part of your Social Security payments is taxable.

When you file an income tax return, you are allowed a personal exemption, unless you are eligible to be claimed as a dependent by someone else. In some instances, you are allowed additional exemptions if you provide primary support for a dependent (such as a parent, child, or grandchild).

Federal Income Tax Credit

You may be eligible for a 15 percent tax credit if your income does not exceed the specified level, and:

This credit will reduce the tax you owe, but it will not result in a refund. Contact your tax advisor or local IRS office if you think you may be eligible for the federal tax credit.

Earned Income Credit

You may be eligible for the Earned Income Credit if you are working and you have a child or grandchild who lives with you. The tax credit is available to anyone who maintains a home for himself and a child who is either under the age of 19, a student, or disabled. The credit is available only if you have less than the specified level of income. Earned income for this tax credit includes salaries, tips, and earnings from self-employment. Pension and annuity payments are not included. This tax credit may reduce the tax you have to pay and may even result in a refund.

Taxpayers Who are Blind or Older Than 65 Years

For taxpayers who elect not to itemize their deductions, an additional standard deduction is available for individuals who are blind or over the age of 65. The additional standard deduction is available in addition to the basic standard deduction available to all non-itemizing taxpayers. Individuals who are both blind and over the age of 65 may claim two additional standard deductions. While the amount of the additional standard deduction generally changes each tax year, the additional standard deduction for tax year 1997 was $1000 for unmarried individuals and $800 for married taxpayers.

You may be eligible to claim the additional standard deduction for blindness if either:

You may be required to submit a statement from your physician certifying the degree of your visual impairment. Consult your tax preparer for further information about qualifying for the additional standard deduction for blindness.

Medical Expenses

If you itemize your deductions on your tax return, you should consider your medical and dental expenses. Medical expenses are deductible if they account for more than 7.5 percent of your adjusted gross income. Deductible medical expenses include the following:

For more information, contact your local IRS office or your tax advisor.

Sale of Principal Residence

The Taxpayer Relief Act of 1997 repealed the one-time $125,000 exclusion of income from the sale of a principal residence by taxpayers age 55 or over. The Taxpayer Relief Act replaces this provision with an exclusion of up to $250,000 (or $500,000, in the case of married taxpayers filing a joint return) of income realized on sale or exchange of a principal residence by taxpayer regardless of age.

To be eligible for the exclusion, a taxpayer must have owned the residence and occupied it as a principal residence for at least two years before the date of sale. The exclusion is not a one-time exclusion, but is generally available no more frequently than once every two years.

Medical Savings Account (MSA)

The Balanced Budget Act of 1997 creates a new type of Medical Savings Account (MSA) for individuals on Medicare. For tax years beginning after December 31, 1998, Congress has authorized a four-year pilot program that permits eligible seniors to establish MSAs called "MedicarePlus Choice MSAs." These MSAs must be used in conjunction with a MedicarePlus Choice MSA health plan, which requires a certain deductible to be satisfied before a senior citizen’s medical expenses are reimbursed. The Secretary of Health and Human Services will make tax-free contributions to the MSA from Medicare trust funds equal to the deductible amount under the account owner’s MedicarePlus Choice MSA health plan coverage. The account owner can use the MSA to pay for qualifying medical expenses, with no tax imposed on withdrawals for such purposes.

MedicarePlus Choice MSAs are a test program and will be available to the first 390,000 eligible seniors who enroll. The pilot program ends December 31, 2002.

Long Term Capital Gains

The top tax on long term capital gain is reduced by the Taxpayer Relief Act of 1997 from 28 percent to 20 percent (to 10 percent for taxpayers in the 15 percent bracket). There are holding period rules, so consult your tax advisor.

Estate and Gift Tax Exemption

Under the Taxpayer Relief Act of 1997 the estate and gift tax exemption excludes up to $625,000 of a decedent’s estate for decedents dying, or gifts made, in 1998, $650,000 in 1999 and $675,000 in 2000 and 2001. More increases will occur in later years, with the exemption topping out at $1 million dollars in 2006.

Other Important Tax Changes

Other important changes in the federal tax structure will affect individuals, families, businesses, and investors. Consult your tax advisor.

Medicaid

Introduction

Medicaid is a cooperative federal-state program which provides health care services to the poor of all ages. The program is administered by state agencies, and thus the regulations governing Medicaid vary from state to state. At the federal level, Medicaid is administered by the Health Care Financing Administration (HCFA).

Medicare and Medicaid are frequently mistaken for one another, but the programs serve two different populations. Note the following differences between Medicaid and Medicare:

Medicare is a federal medical benefits program that is financed through the Social Security system and is primarily for the elderly.

Medicaid was designed to meet the medical needs of the poor, and therefore, the elderly must often deplete a major part of their assets before they are eligible for Medicaid benefits.

Coverage

For older persons, there are three primary coverage groups under Medicaid: 1) Special Low-Income Medicare Beneficiaries (SLMB), for whom Medicaid pays the monthly Medicare premium; 2) Qualified Medicare Beneficiaries (QMB), for whom Medicaid pays Medicare coinsurance, deductibles, and premium costs; and 3) those individuals who have been found eligible for the full range of Medicaid services. The range of services may vary from state to state, but generally includes the following:

Eligibility

Only identified groups of individuals are eligible for Medicaid assistance. You must be age 65 or greater, disabled by Social Security’s standards of disability, or a member of a family with children that is medically indigent. If you are a recipient of Supplemental Security Income or an Auxiliary Grant, you may be eligible for Medicaid. Your eligibility also depends on the amount of your available income and assets.

Resource Limitations

In determining Medicaid eligibility, resources are categorized as either countable or non-countable. Countable assets are used to determine Medicaid eligibility and include those assets for which there is a meaningful possibility that they could be sold or otherwise converted into cash. Among the assets that count are bank accounts, stocks, Individual Retirement Accounts, deeds of trust, or real property other than the home. Non-countable assets are those assets which are not counted in determining the resources available to a person for purposes of qualifying for Medicaid treatment. Non-countable assets include the following:

Transfer of Assets

When an individual applies for Medicaid, he or she will be asked to disclose any property transfers made within the last 60 months prior to application. Intentional reduction of assets in order to qualify for Medicaid, by putting assets into a trust, giving it away, or otherwise disposing of it without receiving compensation of a like value can cause ineligibility for Medicaid coverage of long-term care services. The penalty period is dependent on the value of the asset transferred, how long ago the transfer occurred, whether compensation was received, and other factors. Therefore, before any transfer

of assets is made, consultation with an attorney knowledgeable about Medicaid matters

is suggested.

Medicaid and Long Term Care

Medicaid is the largest single payer of long-term care services. Many individuals of substantial means eventually spend their money and then seek coverage through the Medicaid program, particularly since there are so few long-term care insurance policies in force. Medicaid covers care in nursing facilities and in community alternatives allowed by waivers to federal rules. It is important to advise a nursing home or home for adults at time of admission planning if you expect to apply for Medicaid within six months of entering, because screening must be done in order to verify that the intended care is medically appropriate.

If you are single and require long-term care, you will most likely be expected to pay a portion of your income toward your cost of care, retaining an amount for personal needs, with Medicaid making up the difference each month. For married people, if a spouse is institutionalized, income assets are treated differently in order to prevent the spouse at home from becoming impoverished.

Appeals

If you feel you have been unfairly denied Medicaid eligibility, you have the right to appeal the denial. The required timeframe within which you must make your appeal varies from state to state. In making the choice to appeal, you may wish to obtain the advice of legal counsel.

Conclusion

Medicaid rules are very complex, and detailed rules exist for such items as what constitutes countable income and assets, when property transfer is a potential bar to receipt of services, and whose income and resources will be used against what financial standards. For specific guidance, particularly regarding estate planning and long-term care, you may wish to contact an attorney who practices in the area of elder law.

Medicare

Introduction

Signed into law in 1965, Medicare is a federal health insurance program for people 65 years of age and older. While it is the primary source of publicly funded health care for the elderly, people with permanent kidney failure and certain younger disabled people are also eligible to receive Medicare benefits. The program is administered by the Health Care Financing Administration (HCFA) which works with the Social Security Administration in enrolling people in Medicare and in collecting Medicare premiums.

Two Parts of Medicare

Medicare has two parts: (1) Part A, which is hospital insurance and (2) Part B, which is medical insurance. Most people qualify at age 65 and can receive the benefits of Part A. There is no monthly premium for Part A, but there is a monthly premium for Part B benefits. You can enroll in Part A without enrolling in Part B.

Applying for Medicare

To receive any Medicare benefits, you must apply at a local Social Security office. You will not receive benefits unless you apply for them. If you do not enroll within one year of reaching age 65, the premium will be increased by 10 percent and you may only sign up during the first quarter of each subsequent year.

Medicare Part A: Hospital Insurance

Medicare Part A helps pay for covered services received in a hospital or skilled nursing facility following a hospital stay, or from a home health agency or hospice program.

You are eligible for Part A if:

Inpatient Hospital Care

From the first day through the 60th day in a hospital during each benefit period, Medicare Part A pays for all covered services except the first $760 (in 1997), which is the deductible. From the 61st day through the 90th day, Part A pays for all covered services except a $190 per day copayment. If you are in the hospital for more than 90 days in a benefit period, you can use your "reserve days" to help pay the bill. For a reserve day, Medicare pays all covered costs except for daily coinsurance of $380 (in 1997). You have a lifetime supply of 60 reserve days. So, for days 91 through 150 of a hospital stay, Medicare Part A will cover all but $380 per day. There is no coverage for days 150 to 365 for an inpatient hospital stay.

Skilled Nursing Facility Care

A skilled nursing facility is different from a nursing home. It is a facility that primarily furnishes skilled nursing and rehabilitation services. (Note: Many nursing homes have specialized skilled care units.) Skilled care is to be distinguished from basic personal or custodial care such as assistance in walking, getting in and out of bed, eating, dressing, bathing and taking medicine. Medicare Part A will not pay for custodial care if that is
the only kind of care you require.

Medicare Part A helps pay for a skilled nursing facility stay to a maximum of 100 days

in each benefit period, but only if you need daily skilled nursing care or rehabilitation services for that long. In each benefit period, Part A pays for all covered services for the first 20 days in a skilled nursing facility. For days 21 through 100, Part A pays for all covered services except for $95 a day (in 1997). You are responsible for all charges beginning with the 101st day.

Home Health Care

Medicare will pay for all medically necessary covered home health services. Medicare pays for visits by a Medicare-approved home health agency. In order to qualify for coverage, you must:

need intermittent skilled nursing care, physical therapy, or speech therapy,

A hospital stay is not needed to qualify for the home health benefit, and you do not have to pay a deductible or coinsurance for home health services.

Hospice Care

Medicare covers the following hospice services:

Drugs (for pain and symptom relief)

Medicare Part B: Medical Insurance

Medicare Part B pays for many medical services and supplies, but most importantly, it provides coverage for your doctor’s bills. The full range of benefits includes: