Well, welcome everyone back to another edition of Aging Insight. I'm Lisa Shoalmire, and I'm here with John Ross. We're elder law attorneys based here in our community. Elder law is a practice of law where we assist seniors, retirees, people who would like to become retirees someday, with all sorts of information and advice, and that can cover things from legal advice, financial advice, even health and housing advice. John, based on our experiences over the last decade plus, being elder law attorneys.
Yeah. People generally... They don't wanna have to go to a nursing home if they can avoid it, they wanna age on their own terms, they don't wanna be a burden on others, and they wanna protect and preserve those resources that they've accumulated through their lifetime and we know you can do it, we just know that you're also gonna need information on how to do it. And of course, one thing about this area of law, Lisa, is that it changes.
Yeah. This area of law, I think, changes more rapidly than many others and a lot of that, John, is due to our priorities as a country, as taxpayers, our budget priorities, and you know, John, that always comes back to impact seniors.
Yeah, especially at a time where you have a significant change in who's running everything up in the...
I think there has been, in fact has been a change up there in Washington. And we as elder law attorneys, we anticipate that because we've gone from a Democrat President to a Republican President and not just that but a Republican President with a Republican controlled Congress, that there may be some significant changes, in fact, in the first part of the year there's already been some changes, but to you as the viewer, how are those changes going to affect people who are at retirement, approaching retirement, in retirement, how is it gonna affect ya'll? Now, that being said, we don't know.
Right. It's one thing... As politics, you watch the news and there seems to be... There's so much noise about everything that's going on. But the first thing to keep in mind is that our government is a big lumbering beast and usually nothing's gonna change quickly. We're gonna know about things coming down, but it's always good to try to look ahead to discern what you might need to be prepared for. So today we're gonna talk about some of those things that you should just keep in the back of your mind that you might wanna be on the lookout for, and as you see more concrete proposals and all come forward, if you don't care for it, well then... Perhaps you should contact your congressman or your local politicians, but first of all John, I would say the first rule is, yes, there's been a big change but nobody should panic. [chuckle]
That's right. Don't panic, that's always good advice. And so, yeah, we're gonna talk about some stuff, but a lot of it's speculation.
But it's best to know what could be coming and how it might affect you so that you can make informed decisions later on. And of course, one of the big campaign promises with the new Trump Administration was lowering taxes, and so that comes in really two potential forms. The first one is income taxes. Income taxes have been pretty high recently. There's been a lot of push to lower those income taxes, both on the individual level and at the business level. Now, I suspect, my best guess is that there will be some significant changes to the income tax laws, but how is that actually going to trickle down to the average senior? Well, first of all, if all of your income, if you're a retiree and you're taking Social Security and all of your income is coming from Social Security, well that's tax-free anyway. Many of my clients don't actually even file a tax return because their only income is Social Security and any other income they have is so small that they're below the filing requirements and don't even have to file a return. But if you do have other income, maybe you have pension income, maybe you're taking significant withdrawals from an IRA or some other way that's creating some tax, you might end up seeing some small tax benefits in all of that. But a lot of times, Lisa, they talk about these, "We're gonna cut a billion dollars in taxes".
But when you divide that out over all of the people, the actual lessening of tax per person oftentime is pretty small. And generally speaking, your senior citizens are gonna be in the lower income tax brackets.
Right. So like you say, a lot of our seniors aren't paying tax anyway. The idea here is our best guess. And since we're wildly speculating, our best guess is that there may be an increase in the group of seniors who won't be paying taxes. Maybe they're just over the cut-off, so they're paying some tax. We expect that... I guess, the ceiling of that group that doesn't have to pay tax will actually rise.
That's right. Of course that's one type of tax. The other that we get asked questions about all the time is the death tax.
Right. When it comes to the death tax, this is a tax that is placed on the assets that a person owns at the time of their death. A lot of folks find the death tax to be really unfair because they... To accumulate those assets over your lifetime, most folks have worked for that and already paid taxes, and their savings that has grown, they've already paid taxes on that. And so most people just fundamentally don't like the death tax. I believe that the current administration has also said that he doesn't care for the death tax and one of the campaign promises was made that the death tax would be abolished. And so, John, I really do expect that to happen.
I do too. I think the estate tax is gonna go away. Estate tax, death tax, inheritance tax, whatever you wanna call it, they're all names for the same thing and I do expect that to go away. But the first thing you need to understand is, in 2016, of all of the people that died during 2016 only 0.2% of those people had to worry about the estate tax. And the reason is because under the current law, the estate tax only impacts you if everything you have adds up to more than $5.47 million. If you have less than that, then there is no tax at your death, and the death tax or estate tax just does not apply to you. So it only applies to a very, very wealthy segment of the population. That being said though, it probably will go away, but that may not necessarily be the best thing for everybody else.
Right. Last year in 2016, John, as elder law attorneys, tax and probate attorneys, I don't recall that we had to file a single estate tax return or death tax return for a client, period.
But we're kinda coming up where we need to take a break, so maybe we'll take a break and we'll come back and talk about what the loss of the estate tax could actually mean more tax.
Welcome back to Aging Insight, everybody. I'm John Ross here with Lisa Shoalmire, and today we're talking about some things that we think might be changing in the future, some laws and things that might be changing in the future due to the new administration. And we think taxes are gonna go lower, and we think the estate tax, death tax, whatever you wanna call it, is probably gonna go away completely. But does taking away the estate tax mean less tax at death? And you might be surprised to find out the answer to that question is probably not. That actually, more people may be subjected to tax at death without a tax.
But one of the benefits that's built into our tax code right now is something called a 'Step-up in basis'. So a step-up in basis is a name for a concept where at a person's death, the assets that they own get revalued as of the date of their death. So for instance, if you own stock and you bought it for $10 20 years ago, but on the date of your death it's worth $100, then as far as reporting to the government or anything, the value of that stock is now $100. And so if you sell the stock, and you sell it for $105, well John, there's a capital gains tax that taxpayers have to pay on anything, difference between a basis in the asset and their purchase price for the asset. And so, in my example, you would pay tax on the $5 difference, between your $100 basis and your $105 sales price.
That's right. But if you take away the estate tax, you take away one of the laws that's built into the estate tax which is that step-up in basis. A lot of time people's only asset is their home.
Right. And it's a home that they've owned for a long time. They've paid their 30-year mortgage off, and so they bought it for $10,000 but now it's worth $80,000.
And right now, if that person dies, and their children inherit that home, the children can basically turn around and sell that home right after death and pay no tax on that sale. But if you remove the estate tax, then when that parent dies, and the kid gets this $80,000 house and they sell it, they have to pay capital gain on the difference between what they sold it for, the $80,000 and what mom paid for it back in 1950.
And the other thing about that John, is that really impacts more of our local people, I mean more of our regular people. That death tax, estate tax, just hits the super wealthy people, but paying a capital gains on mom's house that she's lived in for 50 years, that's nearly everybody.
That's the other 99.8%. And so yeah, that's a big one. Of course if you're gonna cut all of these taxes, if you're gonna cut the estate tax out, if you're gonna cut all other income taxes, then you're gonna have less money go into the government, which means you're also gonna have to cut some other stuff. You're gonna have to cut some spending.
That's right. And so we expect some cuts that could come in various forms that might affect seniors. One of them that has been on the chopping block for years, is a law called the Older Americans Act. It's been around for quite a while. The Older American's Act is the program that provides services like Meals On Wheels. It's a program that's been around but it is very costly. There's a lot of administrative costs that are associated with this program, and it's something that people who look at budgets and stuff and they say, "I just don't know that we're getting our moneys worth with these programs.' And so, that is one that could either be seriously reduced as far as funding, or very possibly cut altogether.
Which for seniors that are receiving food service at their home through the Meals On Wheels program, if they remove the Older Americans Act that would completely cut that out altogether. And of course I know a lot of charities, I'm on the Board of Directors for the Alzheimer's Alliance and we have our Day Respite Center over there, and we provide a lunch for everybody that comes, that lunch is provided by Meals On Wheels. So if they remove the Older Americans Act, that removes Meals On Wheels, and if it removes Meals On Wheels, then the Alzheimer's Alliance has to go into their budget to help cover that, which means less programs that they can offer. So when you remove a program like that it can have a rippling effect out there through the community.
Well John, also in our community, I serve on the Board of Opportunities, and Opportunities offers a lot of programs for senior adults as well, including an adult daycare service and some housing services for seniors, and through the Older Americans Act, Opportunities is able to offer things like a chore service to their residents and who live in their low income senior housing units, to move the couch and vacuum underneath it, and put up the drapes. Those kind of things that maybe someone who's older, maybe they have some limitations and they can't do everything they need to do, and so the budgets for those type services also come under the Older Americans Act. So we are watching that very closely, and so if you do hear something about that program being cut, that will impact people in our community, because we know lots of people in our community that benefit from those programs.
Yeah, lots of folks use the programs under the Older Americans Act. One of the other ones is Medicaid. Medicaid is the biggest government benefit program for seniors. In fact there's a lot of different Medicaid programs. Everything from formula for breastfeeding mothers, all the way to nursing home. But, nursing home Medicaid is by far the most expensive of all of the Medicaid programs. In fact for every $1 that Medicaid spends, $0.75 of that $1, goes to a nursing home. So it's a very expensive program. And they've been looking at different ways to try to reduce the costs. Now Medicaid is run by the States. It's a Federal program but it's run by States. And right now, essentially the Federal Government gives the States an unlimited supply of funds so long as the person meets the qualifications. So if you qualify for Medicaid, you get to stay in a nursing home, and the State pays for it with money that is given to them on a person-by-person basis through the federal government.
But what they're actually talking about is changing this to something called a block grant. And a block grant is where the federal government just says, "Okay, state of Arkansas", or, "Okay, state of Texas, here's a big chunk of money. Now, use it however you wanna use it, but this is all you're gonna get from us for nursing home benefits," for example. They have done this block grant program, Lisa, with other Medicaid services, and historically, what you will see with these other Medicaid programs is when they switch it to a block grant program, the program is still there, but it's no longer funded, or funded as well.
Right, and perhaps the program starts the fiscal year, and everyone who needs services is able to get those services at the start of the fiscal year, but by 10 months into the program, the money's run out. The money's been spent. And so, there's two months where there's no money to pay for services. And we've seen that in therapy programs in the past, as far as a block grant program.
Right, we already see that with the in-home care Medicaid programs, which is, in Texas, is called the Star Plus Waiver Program, and in Arkansas, it's called Elder Choices. Those programs are funded very similarly, and, take the Star Plus Program in Texas, even if you qualify for it, all that does is put you on a waiting list, which currently can be as long as 18 to 24 months. Which means that, if you don't have any other funds, and you wanted to stay at home, you can't because...
You're not gonna get the support services. So what this does... Again, I think it's very possible that the long-term care Medicaid, the nursing home Medicaid, could very well end up in a similar situation where somebody's at the nursing home, for example, they've gone from the hospital to the nursing home, Medicare paid for the first 20 days, but then after that, that person would normally qualify for Medicaid. Unfortunately, there's a six-month waiting list, so what do they do? And this is gonna become very important for the people out there to figure out how to protect and preserve some of their resources so that they can pay for themselves during those waiting periods.
Right, so, again, some wild speculation, but we think just... I think some informed, or at least some educated speculation. So, well, we'll take another break, and we'll come back and talk about another issue or two that we see changing with the new administration. Stay with us.
Welcome back, everyone, to our last segment on today's Aging Insight. And today, we're just taking some big guesses about some things that we think might change on the horizon, as it comes for services and things that affect seniors and folks in our community. And we've talked about that there's likely to be an income tax cut, that, likely, the estate or death tax is going to go away, but that may cause some other taxes [chuckle] for our folks. Also, if there's less taxes and less income, there might be some spending cuts, particularly for programs that impact seniors. And also, we talked about the possibility of block grants for Medicaid services, particularly nursing homes.
Yeah, which could create some waiting lists. So, there's all of those. Now, of course, one of the big things that President Trump had touted during his campaign was the repeal of the Affordable Care Act, also known as ObamaCare. Now, back when ObamaCare first came out, I actually did a speech on how the Affordable Care Act would affect seniors. And the short answer was; not at all. The Affordable Care Act is designed for people who don't have other insurance, essentially, those folks from 18 to 65, because once you hit 65, you qualify for Medicare, and the Affordable Care Act no longer applies to you. However, there were some things buried in the Affordable Care Act that were there to benefit seniors. And one of the big ones was closing the "donut hole". Anybody who can go back in their memory a couple of years will remember that, if you had a Part D Medicare Prescription Drug Program, and you also had a whole lot of drug expenses during the year. Your insurance would cover you for a little while and your drugs were cheap, but then your insurance would essentially run out and so there would be another period of time where you had to pay full price.
But then once you had paid full price for a while, essentially the benefit kicked back in and you got your drugs cheap again and this is what they call the donut hole because it was cheap on the front, cheap on the back, and big in the middle, so kind of shaped like a donut. That was the whole idea. And so, buried in the Affordable Care Act was, every year they would slowly close that "donut hole" over the period of a couple of years until they got rid of it altogether and Part D Prescription Drug Programs would then pay the same for the insurance all the way through the year. That was part of the Affordable Care Act. So, although, generally speaking, the Affordable Care Act doesn't apply to seniors, if you repeal it, you're also gonna repeal some of those little laws like the closing of the "donut hole" and some of the Medicare care coordinating rules that were in there. Those, I don't think you'll see a whole lot of difference, but if you have high prescription drug costs and you're over 65, if they repeal the Affordable Care Act, you could feel that as a pretty good gut punch.
Right, and John, we really are speculating at this point, we know that President Trump certainly said he was going to repeal the Affordable Care Act, but sometimes President Trump would say something, some blanket statement but then he would come to the table and say, "Well, we're going to appeal this portion or this portion but we're gonna try to keep this portion in play." So, it's just something to watch and be aware of but, John, one of the biggest concerns all seniors have is whether or not there's gonna be any cut, or risk, or change to their Social Security and in this case, President Trump, on the campaign trail, constantly said that he was going to protect Social Security and that the seniors would face no change in their Social Security payments.
Yeah, if you're receiving Social Security that's probably not going to change in any way, shape, or form. Now, if you're approaching retirement, I suspect that the ages for when you can start taking Social Security are gonna start ticking up and for new people that are electing Social Security, you can probably also anticipate a higher Medicare premium being deducted from that Social Security. But I do think that most of those rules will not apply to people who are already receiving Social Security and especially receiving Social Security and having their Medicare automatically deducted because there's already rules in place to protect y'all from any changes.
Right. So, there you go, I think we started off by saying, "Hey, don't panic. There's definitely some changes that are likely to be on the horizon". But we'll just have to take a wait-and-see approach but stick with us on Aging Insight because as soon as we know of anything in concrete we will be bringing it to you so you can keep up with us by watching this program every week. You can also listen to our radio program Aging Insight on 98.7 in our local listening area and that's a live show, you can call and ask your questions and then you can always pickup an Aging Insight Resource Guide at your doctor's office and you can always go to the Internet and find us at aginginsight.com.
In this episode, John Ross and Lisa Shoalmire discuss new issues because of recent administration changes in the government.