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What happens if you are a high-income Medicare beneficiary who is paying a surcharge on your premiums and then your income changes? If your circumstances change, you can reverse those surcharges.

Higher-income Medicare beneficiaries (individuals who earn more than $85,000) pay higher Part B and prescription drug benefit premiums than lower-income Medicare beneficiaries. The extra amount the beneficiary owes increases as the beneficiary’s income increases. The Social Security Administration uses income reported two years ago to determine a beneficiary’s premiums. So the income reported on a beneficiary’s 2015 tax return is used to determine whether the beneficiary must pay a higher monthly premium in 2017.

A lot can happen in two years. If your income decreases significantly due to certain circumstances, you can request that the Social Security Administration recalculate your benefits. For example, if you earned $90,000 in 2015 but your income dropped to $50,000 in 2016, you can request an income review and your premium surcharges for 2017 could be eliminated. Income is calculated by taking a beneficiary’s adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources.

You can request a review of your income if any of the following circumstances occurred:

– You married, divorced, or became widowed;
– You or your spouse stopped working or reduced your work hours;
– You or your spouse lost income-producing property because of a disaster or other event beyond your control;
– You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan; or
– You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization

If your income changes due to any of the above reasons, you can submit documentation verifying the change in income — including tax documents, a letter from an employer, or a death certificate — to the Social Security administration. If the change is approved, it will be retroactive to January of the year you made the request.

For more information about Medicare and Medicaid benefits, contact the knowledgeable attorneys at Zacharia Brown. You may schedule an appointment by visiting our website at PittsburghElderLaw.com or by calling 724.942.6200.

 

Many grandparents may be tempted to leave an IRA to a grandchild because children have a low tax rate, however, the so-called “kiddie tax” could actually make doing this less beneficial.

An IRA can be a great gift for a grandchild. A young person who inherits an IRA has will need to take minimum distributions, but because the distributions are based on the beneficiary’s life expectancy, grandchildren’s distributions will usually be small and allow the IRA to continue to grow. In addition, children are taxed at a lower rate than adults—usually 10 percent.

Unfortunately, this lower tax rate does not apply to all unearned income. Enacted to prevent parents from lowering their tax burden by shifting investment (unearned) income to children, the so-called “kiddie tax” allows some of a child’s investment income to be taxed at the parent’s rate. For 2017, the first $1,050 of unearned income is tax-free, and the next $1,050 is taxed at the child’s rate. Any additional income is taxed at the parent’s rate, which could be as high as 35 percent. The “kiddie tax” applies to individuals under age 18, individuals who are age 18 and have earned income that is less than or equal to half their support for the year, and individuals age 19 to 23 who are full-time students.

If a grandparent leaves an IRA to a grandchild, the grandchild must begin taking required minimum distributions within a year after the grandparent dies. These distributions are unearned income that will be taxed at the parent’s rate if the child receives more than $2,100 of income (in 2017). In addition to IRAs, the “kiddie tax” applies to other investments that supply income, such as cash, stocks, bonds, mutual funds, and real estate.

If grandparents want to leave investments to their grandchildren, they are better off leaving investments that appreciate in value, but don’t supply income until the investment is sold. Grandparents can also leave grandchildren a Roth IRA because the distributions are tax-free.

For more information about leaving an IRA or other investments to grandchildren, contact the knowledgeable attorneys at Zacharia Brown. You may schedule an appointment by visiting our website at PittsburghElderLaw.com or by calling 724.942.6200.

 

With Valentine’s Day fast approaching, the month of February is a perfect time to think about care for our elderly loved ones. As average life expectancy in the U.S. continues to increase, many children are being called upon to take a primary role in either caring for their elderly parent(s) or assisting them in finding good long term care.

 U.S. Census Bureau statistics indicate that the number of Americans aged 65 or older will double by the year 2030 to over 70 million. That trend, combined with the growing number of couples starting their own families later in life, indicates that the issues facing this so-called Sandwich Generation show no signs of slowing down. When faced with the challenge of managing a busy work life and the hectic schedules of today’s kids and teens, how can anyone possibly have time to navigate the maze of care options for their aging parents?

 Although there is a wealth of information available regarding care for the elderly, the sheer variety and amount of choices can be overwhelming.  Consequently, it is important to be well informed about the different kinds of care available so that you can formulate a plan and choose the best situation for your loved one. Life Care Planning combines legal representation, asset protection, care coordination and advocacy into a single solution that answers all of the tough questions about your loved one’s long term care, now and in the future. It is the ultimate protection for elders and their families.

 At Zacharia Brown, we are a holistic law practice offering elder-centered solutions for families struggling with the demands of a loved one’s care. When we meet with you and your family to discuss Long Term Care Planning, our primary focus is on Quality of Life and Quality of Care. Please contact us at 724.942.6200 or visit PittsburghElderLaw.com  to make an appointment with one of our attorneys and find out more about creating a personalized Life Care Plan for your loved one.

 

Estate Administration or Probate in Pennsylvania is a legal process that occurs after a person has passed away. As part of the process, a personal representative is appointed by opening an estate at the County Register of Wills where the decedent resided at the time of his or her death. It is the job of the personal representative to settle the decedent’s affairs by paying debts, filing an inheritance tax return, and distributing the decedent’s assets to their heirs.

While estate administration may seem like a fairly straightforward process, there are a number of rules and regulations regarding notices, administrative procedures and reporting requirements that must be strictly followed. If you have a Last Will and Testament or a Revocable Trust in place at the time of your death, it will designate the person you chose to serve as your personal representative. This individual will be called an Executor/Executrix if you had a Will, or a Trustee if you had Revocable Trust. He or she will be in charge of managing the estate administration process, which will be different, depending on whether you had a Will or Revocable Trust.

If you pass away without a Will or Revocable Trust, you are said to have died intestate. If that is the case, the appointment of your personal representative (Administrator) and the distribution of your assets to beneficiaries will be governed by the intestacy laws of the Commonwealth of Pennsylvania. This process can often be a difficult one if the family dynamics do not allow for cooperation among the personal representative(s) and/or beneficiaries. In each of these aforementioned scenarios, it is extremely important to consult with a trusted attorney at Zacharia Brown who can help guide you through the Estate Administration process.

Over this past month, we have outlined the importance of establishing or revisiting your Estate Plan as one of your New Year’s Resolutions for 2017. We explained the significance of Durable Powers of Attorney, both Financial and Medical, along with your Living Will, and their roles in allowing an Agent to manage your affairs and carry out your wishes should you become ill or incapacitated. Additionally, we elaborated on the difference between assets passing to beneficiaries by your Last Will and Testament or by beneficiary designation.

Don’t put off this important New Year’s Resolution! You can contact Zacharia Brown at 724.942.6200 or schedule an appointment online at PittsburghElderLaw.com. A properly drafted estate plan will not only provide you peace of mind, but it will also serve to take a great burden off of your loved ones at a very difficult time.