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Posts Categorised: Taxes

The Internal Revenue Service has issued the 2015 long-term care insurance premium deductibility limits.

Long-term care insurance is becoming more and more vital to getting quality long-term care for ourselves and our loved ones when it is needed most. Having the increased income tax deduction will make it easier for people to afford long-term care insurance. You should factor the availability of the deduction into your calculation whether long-term care insurance is the right choice for you and/or your loved ones. Generally, my advice to our clients is that long-term care insurance is ALWAYS a good idea provided that you can afford it. Now, with the increased deduction limits, and the fact that you can treat premiums paid for long-term care insurance for yourself, your spouse or any tax dependents (such as your parents) as a personal medical expense, long-term care insurance just became a much more worthwhile option for many of our clients.

Personal medical expenses, reported as itemized deductions on your individual income tax return, are deductible to the extent that they exceed 7.5% of your Adjusted Gross Income (AGI). The portion of the long-term care insurance premium that is allowed as a medical expense in 2015 (and the change from 2014) is shown in the table below.

Attained Age Before Close of Taxable Year



40 or below



Above 40 but not older than 50



Above 50 but not older than 60



Above 60 but not older than 70



Older than 70



To fit within the increased deduction limits, the long-term care insurance policy must be a “qualified” policy. A “qualified” policy, issued on or after January 1, 1997, satisfies certain requirements within the policy details. For example, policies that offer optional provisions for “inflation” and “nonforfeiture” protections are qualified policies. Policies purchased before January 1, 1997 are grandfathered into the new deduction limits, and will be treated as “qualified,” provided that they policies have been approved by the insurance commissioner of the state in which they are sold.

Taxation of Benefits: Benefits from reimbursement policies – policies that pay for the actual services a beneficiary uses – are not included in taxable income. Benefits from indemnity policies – policies that pay a predetermined amount each day, or otherwise called “per diem policies” – are likewise excluded from taxable income, except to the extent that the per diem amount received exceeds the beneficiary’s total qualified long-term care expenses per day. The per-diem limitation for periodic payments received under a qualified long-term care insurance contract for 2015 remains at $330 (the 2014 limit was also $330).

Planning Tips:  Long-term care insurance may be expensive, but there are things you can do to minimize the cost. For example, some long-term care insurance companies offer a “shared care” policy where husband and wife can share the benefit pool under one long-term care insurance policy. With a shared care policy, the pool of benefits is split between you and your spouse. This is especially helpful when there is a difference in ages between the spouses.

The most significant way to reduce the cost of long-term care insurance is think about how long you will need the policy. First, unless you have a family history that includes specific, long-term illnesses, the typical insured under a long-term care insurance plan is not likely to need coverage for more than five or six years. Second, when combined with a viable Medicaid plan, long-term care insurance is only required for a five- or six-year period. By limiting coverage to approximate a five- or six-year period, you can save thousands of dollars in premiums.

Medicaid Planning: A long-term care insurance policy is typically combined with a legal and ethical Medicaid plan to provide full and complete long-term care for you and/or your loved ones. Everyone is entitled to Medicaid-funded long-term care; eligibility for the government benefit is a different question. Eligibility for benefits depends on both a medical qualification and financial qualification.  The Law Offices of Jeffrey A. Asher, PLLC, will assist you with the financial eligibility question and get you and/or your loved ones Medicaid benefits when appropriate.

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Question: What are estate taxes?

Answer: Estate taxes, or what are sometimes called death taxes, or inheritance taxes, are generally owed and paid on the value of property in someone’s estate when they die. There is a federal estate tax and there are states that impose state estate taxes, although not every state has an estate tax. Some states don’t have an estate tax, but have an inheritance tax, which taxes the beneficiaries of the deceased person for the value of property inherited by them. Some states, like New Jersey, have an estate tax and an inheritance tax. This means that New Jersey potentially taxes the estate of someone who has died (through the estate tax) and the beneficiaries of the deceased person for the value of property inherited by them (through the inheritance tax).

The estate tax (or the inheritance tax) is generally calculated on the date of death values of property owned by the decedent (or inherited by the beneficiaries), although that calculation may be affected by deductions, credits, and/or adjustments in valuation.

The federal government allows an exemption from the federal estate tax. Every US citizen is entitled to an estate and/or gift tax exemption of up to $5,250,000 (in 2013). That means a person can die with property valued at up to $5,250,000 (in 2013) and not pay federal estate taxes. Those states that have an estate tax generally have their own state-level exemption, or they accept what the federal government assumes the state-level exemption should be (called the state death tax deduction). For example, New York State’s estate tax exemption is currently $1,000,000. This means a person who has an estate worth $4,000,000 would not have a federal estate tax (because the estate is less than $5,250,000) but would have a New York State estate tax (because the estate is more than $1,000,000). New Jersey’s estate tax exemption is currently $675,000. There is no exemption from the New Jersey inheritance tax, but certain classes of beneficiaries (such as, spouse and children) are exempt. North Carolina, for example, has a state estate tax, but the exemption mirrors the federal exemption. The federal exemption of $5,250,000, currently, is a lifetime exemption that can be used during life or at death. In other words, a US citizen may make gifts during life of up to $5,250,000, currently, without paying federal gift tax. However, having used the exemption during life there will be nothing left of the exemption at death. Connecticut is the only state that has a gift tax.

The federal estate tax return is due nine months following the person’s death, although extensions may be applied for. However, an extension of time to file the return does not mean also an extension of time to pay the estate tax. Penalties and interest will be owed on the unpaid amount of federal estate taxes. States’ estate tax and inheritance tax returns have their own deadlines. For example, the deadline to file a New York State estate tax return is nine months, unless extended. The deadline to file a New Jersey estate tax return is also nine months, but the deadline to file a New Jersey inheritance tax return is only 8 months. The deadline to file a Connecticut estate tax return is six months, unless extended.

As you can see, the road to navigate between and amongst the federal estate tax, state estate taxes, state inheritance taxes, gift taxes, filing deadlines, etc., is a winding and bumpy one. It is best to seek out a qualified Trusts and Estates Attorney to help you steer the course.”

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About This Blog

The Law Offices of Jeffrey A. Asher, PLLC produces this blog to provide general news and information about Estate Planning, Trusts & Estates, and Elder Law.