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What to Look For in a Pre-Paid Funeral Plan

Prepaying for your funeral is one way to ease the burden on your family following your death and make sure your wishes are carried out. But pre-paid funeral plans come with risks, so you need to exercise care when purchasing a plan.

Funerals are expensive and can take a lot of effort to plan. To help relieve your family of some of this expense and effort, you can pay for your funeral in advance with a pre-paid funeral plan purchased through a funeral home. In addition to making things easier for your family during a difficult time, pre-paid funeral plans can also be a good way to spend down money in order to qualify for Medicaid.

However, consumers lose money every year when funeral homes go out of business before the need for the funeral arises. If the funeral home mismanages your funds, there may be no way to recover them. In addition, customers are not always entitled to refunds if they change their minds, and some funeral homes sell policies that require additional payments or that can’t be transferred if the customer moves.

If you decide to go ahead with a pre-paid funeral plan, the following are things to consider:

Shop around.

Prices among funeral homes can vary greatly, so it is a good idea to check with a few different ones before settling on the one you want. The Federal Trade Commission’s Funeral Rule requires all funeral homes to supply customers with a general price list that details prices for all possible goods or services. The rule also stipulates what kinds of misrepresentations are prohibited and explains what items consumers cannot be required to purchase, among other things.

Make sure you have a reputable funeral home.

There have been cases of unscrupulous funeral providers taking advantage of customers, so make sure you choose a funeral home with a solid reputation.

Read the contract carefully.

Before signing, it is important to know what you are agreeing to. Can you cancel the plan and get a refund? Is the plan transferable if you move to another area? Are you paying just for merchandise or for funeral services as well? If prices for funeral merchandise and services rise, will your estate be responsible for paying additional costs?

Find out where your money goes.

The pre-paid plan should provide information on what the funeral home will do with the money you pay them. Some states have protections in place to make sure the money is safeguarded, but other states offer no protections. Is the money put into a trust account? What happens to the interest income? Is there a plan if the funeral home goes out of business? What happens to any money left over?

Make sure the plan won’t affect Medicaid benefits.

If you are buying the policy as part of Medicaid planning, you must purchase an irrevocable plan, which means you can’t cancel or change it once it is bought.

Once you’ve purchased a plan, be sure to tell your family about the plan you’ve made and let them know where the documents are filed. If your family isn’t aware that you’ve obtained a plan, then the plan is useless.

 

This article is a service of Myrna Serrano Setty, Esq. Myrna doesn’t just draft documents. We help you ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a  Planning Session and mention this article to find out how to get this $500 session at no charge.

 

Part 2: Use Estate Planning to Avoid Adult Guardianship and Elder Abuse

Part 2: Use Estate Planning to Avoid Adult Guardianship and Elder Abuse

In  Part 1 of this series, we discussed how some professional adult guardians have used their powers to abuse the seniors placed under their care. Here, we’ll discuss how seniors can use estate planning to avoid the potential abuse and other negative consequences of court-ordered guardianship.

As our senior population continues to expand, an increasing number of elder abuse cases involving professional guardians have made headlines. The New Yorker exposed one of the most shocking accounts of elder abuse by professional guardians, which took place in Nevada and saw more than 150 seniors swindled out of their life savings by a corrupt Las Vegas guardianship agency.

The Las Vegas case and others like it have shed light on a disturbing new phenomenon—individuals who seek guardianship to take control of the lives of vulnerable seniors and use their money and other assets for personal gain. Perhaps the scariest aspect of such abuse is that many seniors who fall prey to these unscrupulous guardians have loving and caring family members who are unable to protect them.

In Part 1 this series, we detailed how criminally minded individuals can take advantage of an overloaded court system and seize total control of seniors’ lives and financial assets by gaining court-ordered guardianship. Here we’ll discuss how seniors and their adult children can use proactive estate planning to prevent this from happening.

It’s important to note that any adult could face court-ordered guardianship if they become incapacitated by illness or injury, so it’s critical that every person over age 18—not just seniors—put these planning vehicles in place to prepare for a potential incapacity.

Keep your family out of court and out of conflict

Outside of the potential for abuse by professional guardians, if you become incapacitated and your family is forced into court seeking guardianship, your family is likely to endure a costly, drawn out, and emotionally taxing ordeal. Not only will the legal fees and court costs drain your estate and possibly delay your medical treatment, but if your loved ones disagree over who’s best suited to serve as your guardian, it could cause bitter conflict that could unnecessarily tear your family apart.

Furthermore, if your loved ones disagree over who should be your guardian, the court could decide that naming one of your relatives would be too disruptive to your family’s relationships and appoint a professional guardian instead—and as we’ve seen, this could open the door to potential abuse.

Planning for incapacity

The potential turmoil and expense, or even risk of abuse, from a court-ordered guardianship can be easily avoided through proactive estate planning. Upon your incapacity, an effective plan would give the individual, or individuals, of your choice immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake about how these crucial decisions should be made during your incapacity.

There are a variety of planning tools available to grant this decision-making authority, but a will is not one of them. A will only goes into effect upon your death, and even then, it simply governs how your assets should be divided. To this end, a will does nothing to keep your family out of court and out of conflict in the event of your incapacity—nor does it help you avoid the potential for abuse by professional guardians.
Your incapacity plan shouldn’t be just a single document. It should include a variety of planning tools, including some, or all, of the following:

  • Healthcare power of attorney: An advanced directive that grants an individual of your choice the immediate legal authority to make decisions about your medical treatment in the event of your incapacity.
  • Living will: An advanced directive that provides specific guidance about how your medical decisions should be made during your incapacity.
  • Durable financial power of attorney: A planning document that grants an individual of your choice the immediate authority to make decisions related to the management of your financial and legal interests.
  • Revocable living trust: A planning document that immediately transfers control of all assets held by the trust to a person of your choosing to be used for your benefit in the event of your incapacity. The trust can include legally binding instructions for how your care should be managed and even spell out specific conditions that must be met for you to be deemed incapacitated.
  • Family/friends meeting: Even more important than all of the documents we’ve listed here, the very best protection for you and the people you love is to ensure everyone is on the same page. As part of our planning process, we’ll walk the people impacted by your plan through a meeting that explains to them the plans you’ve made, why you’ve made them, and what to do when something happens to you. With a team of people who love you, watching out for you and what matters most, the risk of abuse from a professional guardian is low.

It could be a good idea (though it’s not mandatory) to name different people for each of the roles in your planning documents. In this way, not only will you spread out the responsibility among multiple individuals, but you’ll ensure you have more than just one person invested in your care and supervision. In that case, it’s even more critical that everyone you’ve named understands the choices you’ve made, and why you have made them.

Don’t wait to put your plan in place

It’s vital to understand that these planning documents must be created well before you become incapacitated. You must be able to clearly express your wishes and consent in order for these planning strategies to be valid, as even slight levels of dementia or confusion could get them thrown out of court.

Not to mention, an unforeseen illness or injury could strike at any time, at any age, so don’t wait—contact us right away to get your incapacity plan taken care of.

It’s crucial that you regularly review and update these planning tools to keep pace with life changes, including changes in your assets or the nature of your relationships. If any of the individuals you’ve named becomes unable or unwilling to serve for whatever reason, you’ll need to revise your plan. We can help with that, too.

Retain control even if you lose control

To avoid the total loss of autonomy, family conflict, and potential for abuse that comes with a court-ordered adult guardianship, meet with us. While you can’t prevent your potential incapacity, you can use estate planning to ensure that you at least have some control over your how your life and assets will be managed if it ever does occur.

If you haven’t planned for your incapacity, schedule a Planning Session right away, so we can advise you about the proper planning vehicles to put in place. And if you already have an incapacity plan, we can review it to make sure it’s been properly set up, maintained, and updated.

This article is a service of Myrna Serrano Setty, Esq. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a Planning Session. Mention this article and learn how to get this $500 session at no charge.

Use Estate Planning to Avoid Adult Guardianship and Elder Abuse

How Will The Coming Wealth Transfer Affect Your Family?

Whether it’s called “The Great Wealth Transfer,” “The Silver Tsunami,” or some other catchy-sounding name, it’s a fact that a tremendous amount of wealth will pass from aging Baby Boomers to younger generations in the next few decades. In fact, it’s said to be the largest transfer of inter-generational wealth in history.

Because no one knows exactly how long Boomers will live or how much money they’ll spend before they pass on, it’s impossible to accurately predict just how much wealth will be transferred. But studies suggest it’s somewhere between $30 and $50 trillion. Yes, that’s “trillion” with a “T.”

A blessing or a curse?

And while most are talking about the benefits this asset transfer might have for younger generations and the economy, few are talking about its potential negative ramifications. Yet there’s plenty of evidence suggesting that many people, especially younger generations, are woefully unprepared to handle such an inheritance.

An Ohio State University study found that one third of people who received an inheritance had a negative savings within two years of getting the money. Another study by The Williams Group found that inter-generational wealth transfers often become a source of tension and dispute among family members, and 70% of such transfers fail by the time they reach the second generation.

Whether you will be inheriting or passing on this wealth, it’s crucial to have a plan in place to reduce the potentially calamitous effects such transfers can lead to. Without proper estate planning, the money and other assets that get passed on can easily become more of a curse than a blessing.

Get proactive

There are several proactive measures you can take to help stave off the risks posed by the big wealth transfer. Beyond having a comprehensive estate plan, openly discussing your values and legacy with your loved ones can be a key way to ensure your planning strategies work exactly as you intended. Here’s what we suggest:

Create a plan

If you haven’t created your estate plan yet—and far too many of you haven’t—it’s essential that you put a plan in place as soon as possible. It doesn’t matter how young you are or if you have a family yet, all adults over 18 should have some basic planning vehicles in place.

From there, be sure to regularly update your plan on an annual basis and immediately after major life events like marriage, births, deaths, inheritances, and divorce. We maintain a relationship with our clients long after your initial planning documents are signed, and our built-in systems and processes will ensure your plan is regularly reviewed and updated throughout your lifetime.

Discuss wealth with your family early and often

Don’t put off talking about wealth with your family until you’re in retirement or nearing death. Clearly communicate with your children and grandchildren what wealth means to you and how you’d like them to use the assets they inherit when you pass away. Make such discussions a regular event, so you can address different aspects of wealth and your family legacy as they grow and mature.

When discussing wealth with your family members, focus on the values you want to instill, rather than what and how much they can expect to inherit. Let them know what values are most important to you, and try to mirror those values in your family life as much as possible. Whether it’s saving money, charitable giving, or community service, having your kids live your values while growing up is often the best way to ensure they carry them on once you’re gone.

Communicate your wealth’s purpose

Outside of clearly communicating your values, you should also discuss the specific purpose(s) you want your wealth to serve in your loved ones’ lives. You worked hard to build your family wealth, so you’ve more than earned the right to stipulate how it gets used and managed when you’re gone. Though you can create specific terms and conditions for your wealth’s future use in planning vehicles like a living trust, don’t make your loved ones wait until you’re dead to learn exactly what you want their inheritance used for.

If you want your wealth to be used to fund your children’s college education, provide the down payment on their first home, or invested for their retirement, tell them so. By discussing such things while you’re still around, you can ensure your loved ones know exactly why you made the planning decisions you did. And doing so can greatly reduce future conflict and confusion about what your true wishes really are.

 Secure your wealth, your legacy, and your family’s future

Regardless of how much or how little wealth you plan to pass on—or stand to inherit—it’s vital that you take steps to make sure that wealth is protected and put to the best use possible. As your Personal Family Lawyer®, we have unique processes and systems to help you put the proper planning tools in place to ensure the wealth that’s transferred is not only secure, but that it’s used by your loved ones in the very best way possible.

Moreover, every plan we create has built-in legacy planning services, which can greatly facilitate your ability to communicate your most treasured values, experiences, and stories with the ones you’re leaving behind. By working with us, you can rest assured that the coming wealth transfer offers the maximum benefit for those you love most. Schedule a  Planning Session today to get started.

 

This article is a service of the law firm of Myrna Serrano Setty, P.A. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a  Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call our office today to schedule a  Planning Session and mention this article to find out how to get this $500 session at no charge.

Seniors, should you sell your life insurance policy?

Seniors with a life insurance policy that they no longer need have the option to sell the policy to investors. These transactions, called “life settlements,” can bring in needed cash, but are they a good idea?

If your children are grown and your mortgage paid off, you may decide that there is no longer a reason to be paying premiums every month for a life insurance policy, or you may reach a time when you can no longer afford to keep up with the premiums. If this happens, you may be tempted to let the policy lapse and get nothing from it or to surrender the policy for its cash value, which usually is a fraction of its death benefit. Another option is a life settlement. This allows you to sell your policy to an investor for an amount that is greater than the cash value, but less than the death benefit. The buyer pays all future premiums and receives the death benefit when you die.

Life settlements offer seniors a way to get cash to supplement retirement income and help pay for living expenses, health care, or other needed items. They can be a good alternative to surrendering a policy or letting it lapse. But as with any financial transaction, you need to exercise caution.

The amount you receive from a life settlement depends on your age, your health, and the terms and conditions of the policy. It is hard to determine if you are getting a fair price for the policy because there are no standard guidelines for life settlements. Before selling you should shop around to several life settlement companies. You should also note that the amount you receive will be reduced by transaction fees, which can eat up a good chunk of the proceeds of the sale. In addition, you may have to pay taxes on the lump sum you receive. Finally, the beneficiaries of your policy may not be pleased with the sale, which is why some life settlement companies require beneficiaries to sign off on the transaction.

Before choosing a life settlement, you should consider other options.

If you need cash right away, you can borrow against your policy. If the premiums are too much, you may be able to stop premiums and receive a smaller death benefit. In some cases of terminal illness, you can receive an accelerated death benefit (this allows you to receive a portion of your death benefit while you are still alive). If you don’t need the cash but no longer want the policy, another possibility is to donate the policy to charity and get a tax write-off.

To find out the right solution for you, talk to your elder law attorney or a financial advisor.

For more information from the Financial Industry Regulatory Authority on the pros and cons of life settlements and questions to ask to protect yourself in a sale, click here.

This article is a service of attorney Myrna Serrano Setty, Personal Family Lawyer®. Myrna doesn’t just draft documents, she ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why she offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call us at (813) 514-2946 to schedule a Planning Session. Mention this article and ask how to get this $500 session at no charge.

Seniors and Student Loans

Seniors and Student Loans

The number of older Americans with student loan debt – either theirs or someone else’s — is growing. Sadly, learning how to deal with this debt is now a fact of life for many seniors heading into retirement.

According to by the Consumer Financial Protection Bureau, the number of older borrowers increased by at least 20 percent between 2012 and 2017. Some of these borrowers were borrowing for themselves, but the majority was borrowing for others. The study found that 73 percent of student loan borrowers age 60 and older borrowed for a child’s or grandchild’s education.

Before you co-sign a student loan for a child or grandchild, you need to understand your obligations.

The co-signer not only vouches for the loan recipient’s ability to pay back the loan, but is also personally responsible for repaying the loan if the recipient cannot pay. Because of this, you need to carefully consider the risk before taking on this responsibility. In some circumstances, it is possible to obtain a co-signer release from a loan after the loan recipient has made a few on-time payments. If you are a co-signer on a loan that has not defaulted, check with the lender about getting a release. You can also ask the lender for payment information to make sure the borrower is keeping up with the payments.

If the borrower defaulted and you are obliged to pay the loan back or you are the borrower yourself, you will need to manage your finances. Having to pay back student loan debt can lead to working longer, fewer retirement savings, delayed health care, and credit issues, among other things. If you are struggling to make payments, you can request a new repayment plan that has lower monthly payments. With a federal student loan, you have the option to make payments based on your income. To request an “income-driven repayment plan,” go to: https://studentloans.gov/myDirectLoan/index.action.

Defaulting on a student loan may affect your Social Security benefits.

If you have a private student loan, a debt collector cannot garnish your Social Security benefits to pay back the loan. In the case of federal student loans, the government can take 15 percent of your Social Security check as long as the remaining balance doesn’t drop below $750. There is no statute of limitations on student loan debt, so it doesn’t matter how long ago the debt occurred. If you do default on a federal loan, contact the U.S. Department of Education right away to see if you can arrange a new repayment plan.

What Happens After You Die?

If you die still owing debt on a federal student loan, the debt will be discharged and your spouse or other heirs will not have to repay the loan. If you have a private student loan, whether your spouse or estate will be liable to pay back the debt will depend on the individual loan. You should check with your lender to find out the discharge policies. Depending on the loan, the lender may try to collect from the estate or any co-signers. In a community property state (where all assets acquired during a marriage are considered owned by both spouses equally), the spouse may be liable for the debt (some community property states have exceptions for student loan debt).

For tips from the Consumer Financial Protection Bureau to help navigate problems with student loans, click here.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session and mention this article to learn how to get this valuable session at no cost to you.

Contact us at (813) 514-2946 or info@www.tampaestateplan.com

Can An Adult Child Be Liable for a Parent’s Nursing Home Bill?

Although a nursing home cannot require a child to be personally liable for their parent’s nursing home bill, there are circumstances in which children can end up having to pay.

This is a major reason why it is important to read any admission agreements carefully before signing.

Federal regulations prevent a nursing home from requiring a third party to be personally liable as a condition of admission. However, children of nursing home residents often sign the nursing home admission agreement as the “responsible party.” This is a confusing term and it isn’t always clear from the contract what it means.

Typically, the responsible party is agreeing to do everything in his or her power to make sure that the resident pays the nursing home from the resident’s funds.

If the resident runs out of funds, the responsible party may be required to apply for Medicaid on the resident’s behalf. If the responsible party doesn’t follow through on applying for Medicaid or provide the state with all the information needed to determine Medicaid eligibility, the nursing home may sue the responsible party for breach of contract. In addition, if a responsible party misuses a resident’s funds instead of paying the resident’s bill, the nursing home may also sue the responsible party. In both these circumstances, the responsible party may end up having to pay the nursing home out of his or her own funds.

In a case in New York, a son signed an admission agreement for his mother as the responsible party. After the mother died, the nursing home sued the son for breach of contract, arguing that he failed to apply for Medicaid or use his mother’s money to pay the nursing home and that he fraudulently transferred her money to himself. The court ruled that the son could be liable for breach of contract even though the admission agreement did not require the son to use his own funds to pay the nursing home. (Jewish Home Lifecare v. Ast, N.Y. Sup. Ct., New York Cty., No. 161001/14, July 17,2015).

Although it is against the law to require a child to sign an admission agreement as the person who guarantees payment, it is important to read the contract carefully because some nursing homes still have language in their contracts that violates the regulations. If possible, consult with your attorney before signing an admission agreement.

Another way children may be liable for a nursing home bill is through filial responsibility laws.

These laws obligate adult children to provide necessities like food, clothing, housing, and medical attention for their indigent parents. Filial responsibility laws have been rarely enforced, but as it has become more difficult to qualify for Medicaid, states are more likely to use them. Pennsylvania is one state that has used filial responsibility laws aggressively.

We recommend that your Health Care Directives explicitly lay down a financial liability shield for your agents.

This one provision can save great grief and money.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session. Mention this article to learn how to get this $500 session for free.

Call us at (813) 514-2946 or email us at info@www.tampaestateplan.com.

Fear of Losing Home to Medicaid Contributed to Elder Abuse Case

A California daughter and granddaughter’s fear of losing their home to Medicaid may have contributed to a severe case of elder abuse.

If they had consulted with an elder law attorney, they might have figured out a way to get their mother the care she needed and also protect their house.

Amanda Havens was sentenced to 17 years in prison for elder abuse after her grandmother, Dorothy Havens, was found neglected, with bedsores and open wounds, in the home they shared.  The grandmother died the day after being discovered by authorities.  Amanda’s mother, Kathryn Havens, who also lived with Dorothy, is awaiting trial for second-degree murder. According to an article in the Record Searchlight, a local publication, Amanda and Kathryn knew Dorothy needed full-time care, but they did not apply for Medicaid on her behalf due to a fear that Medicaid would “take” the house.

It is a common misconception that the state will immediately take a Medicaid recipient’s home.

Nursing home residents do not automatically have to sell their homes in order to qualify for Medicaid. In some states, the home will not be considered a countable asset for Medicaid eligibility purposes as long as the nursing home resident intends to return home. In other states, the nursing home resident must prove a likelihood of returning home. The state may place a lien on the home, which means that if the home is sold, the Medicaid recipient would have to pay back the state for the amount of the lien.

After a Medicaid recipient dies, the state may attempt to recover Medicaid payments from the recipient’s estate, which means the house would likely need to be sold.

But there are things Medicaid recipients and their families can do to protect the home.

A Medicaid applicant can transfer the house to the following individuals and still be eligible for Medicaid:

  • The applicant’s spouse
  • A child who is under age 21 or who is blind or disabled
  • Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A  “caretaker child” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

With advance planning, there are other ways to protect a house.

A life estate can let a Medicaid applicant continue to live in the home, but allows the property to pass outside of probate to the applicant’s beneficiaries. Certain trusts can also protect a house from estate recovery.

Don’t let a fear of Medicaid prevent you from getting your loved one the care they need. While the thought of losing a home is scary, there are things you can do to protect the house.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session and mention this article to learn how to get this $500 session for free.

Call us at (813) 514-2946 or email us at info@www.tampaestateplan.com.

A Tax Break to Help Working Caregivers Pay for Day Care

Paying for day care is one of the biggest expenses faced by working adults with young children, a dependent parent, or a child with a disability. But there is a tax credit available to help working caregivers defray the costs of day care (for seniors it’s called “adult day care”).

In order to qualify for the tax credit, you must have a dependent who cannot be left alone and who has lived with you for more than half the year.

Qualifying dependents may be the following:

  • A child who is under age 13 when the care is provided
  • A spouse who is physically or mentally incapable of self-care
  • An individual who is physically or mentally incapable of self-care and either is your dependent or could have been your dependent except that his or her income is too high ($4,150 or more) or he or she files a joint return.

Even though you can no longer receive a deduction for claiming a parent (or child) as a dependent, you can still receive this tax credit if your parent (or other relative) qualifies as a dependent.

This means you must provide more than half of their support for the year. Support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Even if you do not pay more than half your parent’s total support for the year, you may still be able to claim your parent as a dependent if you pay more than 10 percent of your parent’s support for the year, and, with others, collectively contribute to more than half of your parent’s support.

The total expenses you can use to calculate the credit is $3,000 for one child or dependent or up to $6,000 for two or more children or dependents. So if you spent $10,000 on care, you can only use $3,000 of it toward the credit. Once you know your work-related day care expenses, to calculate the credit, you need to multiply the expenses by a percentage of between 20 and 35, depending on your income. (A chart giving the percentage rates is in IRS Publication 503.)

For example, if you earn $15,000 or less and have the maximum $3,000 eligible for the credit, to figure out your credit you multiply $3,000 by 35 percent. If you earn $43,000 or more, you multiply $3,000 by 20 percent. (A tax credit is directly subtracted from the tax you owe, in contrast to a tax deduction, which decreases your taxable income.)

The care can be provided in or out of the home, by an individual or by a licensed care center, but the care provider cannot be a spouse, dependent, or the child’s parent. The main purpose of the care must be the dependent’s well-being and protection, and expenses for care should not include amounts you pay for food, lodging, clothing, education, and entertainment.

To get the credit, you must report the name, address, and either the care provider’s Social Security number or employer identification number on the tax return. To find out if you are eligible to claim the credit, click here.
For more information about the credit from the IRS, click here and here.

Are you worried about taking care of a loved one who has long-term care or special needs? We can help you put plans in place so that your family isn’t left with a mess if you become incapacitated or die.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session. Mention this article to learn how to get this $500 session for free.