Lynn Brenner's Family Finance

Does a Veteran Need Medicare?

Q: I'm a disabled Vietnam veteran, and have been using the VA hospital and outpatient system since 1968. I'm now eligible for Medicare. Is it wise to sign up for Medicare? Or is it just double coverage and an unnecessary out-of-pocket cost? -- MD via email

A: That depends on the breadth of your VA coverage.

The VA provides treatment for service-connected conditions free of charge to all enrolled veterans. In addition, veterans who are in the highest enrollment priority groups -- including, for example, veterans whose service-related disabilities are 50% or more disabling, or who are former prisoners of war -- generally don't have to pay anything for care that's unrelated to their service.

By contrast, if  you're in a lower enrollment priority group, the VA may determine you're ineligible for some care that isn't service-related, or you may be required to make a co-payment. These same services may be fully covered by Medicare. If so, obviously it would be sensible to enroll in Medicare.

You may also want to bear in mind that VA health services rely on an annual Congressional appropriation. That's one reason that the VA encourages veterans of all ages -- especially those in the lower enrollment priority groups -- to retain any health care coverage they may already have. Other insurance won't disqualify you for VA health services; and it may prove a helpful supplement to your VA coverage.

Medicare comes in three parts. Part A covers hospital care. Part B covers doctors' visits and out-patient care. Part D covers prescription drugs. (Part C combines these three coverages in a single package administered by a private insurer. Part C is commonly known as Medicare Advantage.)

You should sign up for Medicare Part A because it's free if you're 65 years old and you (or your spouse) have paid Medicare taxes for at least 10 years. If you're already receiving Social Security, you're automatically enrolled in Part A when you turn 65. If you're not yet collecting Social Security, you must call the Social Security Administration to enroll in Part A; it won't happen automatically.

Speak to the VA about whether there's any reason for you to enroll in Parts B or D. If you have VA co-payments for any of your care, you may want to crunch numbers to determine whether Medicare Parts B and D would cost you less.

Don't postpone this conversation! It's important to make a decision during the three months before or during the three months after your 65th birthday. If you miss that six month window you'll pay a late enrollment penalty that permanently increases your Medicare premiums.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved.

 

'Alternative' Investments: Less Alluring Than They Seem

It's a tough time to be an investor. Stocks are wildly volatile, bonds are overpriced, and cash pays nothing. Everyone wants an alternative -- an investment that will zig while everything else is zagging.

So naturally, Wall Street is selling one: 'alternative' mutual funds, which promise an 'absolute' return -- i.e.,  a positive return in every environment.

It's a great marketing pitch. But as I explain in this article for Reuters, on closer examination the product is much less alluring than the pitch.   

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved.

 

 

Are Mom's Assisted Living Expenses Tax Deductible?

Q: My mother lives in a assisted living facility, where she gets 24/7 care. My brother, my sister and I each pay about $1,800 a month towards her upkeep. Are we entitled to any tax deduction? JJ via email

 

A: Maybe.

If your mother's 2011 income (not including her Social Security benefit) is under $3,700, another taxpayer who pays more than half of her total living expenses can claim her as a dependent and take an itemized deduction for her medical expenses.

You’re splitting those expenses among the three of you; so no one is paying more than 50% of her support. But each of you is paying more than 10%. If you file a Multiple Support Declaration with the Internal Revenue Service,  you can take turns claiming her as a dependent.

A couple of caveats:

You’ll have to ask the assisted living facility how much of your mother’s monthly bill qualifies as a medical expense. (The entire cost is only deductible if her doctor certifies that she must live there because she can't perform “activities of daily living” – like washing or getting dressed – without help.)

And bear in mind that medical expenses are deductible only to the extent that they are a) unreimbursed;  and b) exceed 7.5% of your income.

For example, let’s say it’s Joe’s turn to claim Mom as a dependent this year, and he writes a $5,400 monthly check to the nursing home. If his two sisters reimburse him for their respective $1,800 shares, Joe can only claim a medical deduction for his own $1,800 share. And he can’t actually take the deduction unless his total unreimbursed medical expenses exceed 7.5% of his income.

For more information about potential tax breaks for adult children who are giving financial help to their parents, see my Reuters article, 'Caring for Mom and Dad Can Activate Tax Breaks'.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved.