Annuities
One of the most abused financial vehicles available is the annuity. Nationwide we are hearing of vulnerable adults being ripped off by boiler room operation that target unsuspecting, usually older adults that are susceptible to smooth talking agents intent on separating them from their money. One of the reasons we are seeing this is that agents selling annuities generally get a larger commission from them than from life insurance or stocks.
Because of the danger this presents to our elderly, Paul recently was part of a joint presentation of the good and bad of annuities at the recent Governor's Conference on Aging 2002 in Tucson. If this is of interest to you, let us know and we will send copies of the slide presentations to you.
The gist of the presentation was that the annuity can be a very useful and appropriate place for your money but you need to take a good look before you leap. Here are some of the problems:
-
If you sell something to get the cash to buy the annuity you might be immediately liable for taxes.
-
You will incur a penalty period and a penalty rate that may be very costly if you need to get your money out for an emergency.
-
If you are using this to plan for long term care assistance, it may be the wrong kind of annuity and not only do you no good, but make you cash it in with all of the attendant penalty costs.
-
Because of the high commission and the insurance company profit, it may be a few years before you break even.
-
It may not be appropriate for your age or health condition.
Don't buy an annuity because the salesperson is attractive, pleasant and flattering. Don't buy it immediately. It will be there tomorrow. Talk to someone about what you are considering.
Educational Accounts For Grandchildren
One of the beneficial changes in the Internal Revenue code last year allows you to use your annual gift tax exclusion (now $11,000 per year, per person) to set up accounts for the education of your children or grandchildren. These plans, called 529 Plans, are established by the state or by a specific college or university. Most schools and states now have them.
In a sense, they are like IRAs. Once the contribution is made, the earnings on that investment are not taxed to you and you have gotten those assets out of your estate so your heirs may have less federal estate tax to pay. You may make a large contribution, for instance $55,000, and spread the tax consequences over five years if that is an advantage. That way there is much more earning capacity in the account. With some universities, these contributions can purchase tuition credits for later use by the child. Another option is to use this as a savings plan that could be managed by a professional investment advisor.
When the money comes out of the account and is paid for qualified higher education expenses, it is tax free. Additionally, you may change from one institution's plan to that of another, or change the intended beneficiary, without penalty.
|
Myths About Medicaid
(ALTCS)
Many people want to know when Medicaid will cover nursing home costs, which can run $50,000 a year or more. Not many people can pay those costs out of their regular income, so, it doesn't take long to lose all of one's savings. Long-term care insurance is too expensive for many older people and if the person is already sick, he or she may be uninsurable.
So, folks will ask friends and neighbors how to get Medicaid to pay the cost for nursing home care. Few lawyers know this area of the law.
This is a complicated area and should only be handled by an attorney who knows Medicaid law. Your best bet is to consult an Elder Law Attorney. How many people has he or she advised in the field of Medicaid law? The National Academy of Elder Law Attorneys, www.naela.com, in Tucson, Arizona, can assist consumers in locating elder law attorneys.
There are some common "myths" that can get you in trouble. Often, they are somewhat correct, but mainly just plain wrong! This article won't go into great detail; consult an attorney about your own situation.
1. Myth: "I have to give away everything I own to get Medicaid."
The Truth: Basically, a person is permitted to own some property, and still be eligible for Medicaid. The trick comes in knowing what is "countable" and what is "non-countable" under the Medicaid rules. For a married couple this includes, for example, the marital home that is occupied by the healthy spouse. Whether you are married or not, certain types of prepaid burial contracts are non-countable. There are many other types of "non-countable property." The bottom line is, you don't need to be completely without assets to be Medicaid eligible.
2. Myth: "1 can't give anything away and get Medicaid."
The Truth: The Medicaid rules provide that a person can be disqualified for giving away property, in some cases. But a lot depends on what is given away, to whom, and when. So, again, it's complicated. Some asset transfers are not penalized under the Medicaid rules. Consult with a lawyer who knows the law.
3. Myth: "1 have to wait 3 years after giving anything away, to get Medicaid."
The Truth: The disqualification isn't always 3 years long and sometimes there is no disqualification at all. True, there is a 3-year "lookback" for some asset transfers under the Medicaid rules. This means that the Medicaid agency will look back at all transfers of property, including sales for less than market value. For some transfers, the "lookback" actually goes back 5 years. However, the rules penalizing transfers do not apply to all transfers. See #2 above.
(Myths is information initially written by Wake Forest University's
Legal Clinic for the Elderly and slightly edited. Click
here to read all 15 of the myths.)
Gimme A Break
In case you needed further proof that the human race is doomed through stupidity, here are some actual label instructions on consumer goods:
On Sears hairdryer:
Do not use while sleeping.
On a bar of Dial soap:
Directions: Use like regular soap.
On some Swann frozen dinners:
Serving suggestion: Defrost.
On Tesco's 'Tramisu dessert: (printed on bottom of the box)
Do not turn upside down.
On a string of Chinese-made Christmas lights:
For indoor or outdoor use only.
|
Next Newsletter
-->
