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Money June 2015

Dollar Sense

Health and Money: Stuff You Need to Know About Your Health Insurance and Other Healthcare Issues

By Teresa Ambord

Did you know that some states (more than half) take this a step farther, making it a requirement? It’s called “filial responsibility laws.” While there is no federal law that compels you to help out, if your elderly parents are without resources, your state may require that you and your siblings pitch in.

Do You Have a Health Savings Account (HSA) at Work?

You may have enjoyed the comfort of an HSA account during your work life, knowing the money for your health needs would be there. Did you know that, once you turn 65 and begin receiving Medicare, you can no longer make contributions to your account? But you can still take withdrawals tax-free, to pay for many of your medical expenses. Among other things, you can:

  • Use your HSA money to reimburse yourself for the money that Social Security withholds from your benefits for Medicare Part B (which in 2015 is $104.90 per month).
  • Take tax-free withdrawals from your health savings account for Medicare Part D and Medicare Advantage premiums (but not supplemental medigap premiums).
  • Use tax-free withdrawals to cover part of your long-term care premiums ($3,800 per year if you are age 61 to 70, and $4,750 if older than 70 in 2015).

What about non-medical expenses? If you use HSA money to pay non-medical expenses before you turn 65, you’ll pay a 20% penalty plus taxes on the amount withdrawn. Once you turn 65, the penalty goes away, but the withdrawn amounts are still taxable.

According to Kiplinger, the personal finance advisers, if you are still working at age 65 and your employer is contributing money to your HSA, you may be better off delaying Medicare Parts A and B. But conditions apply, so be sure to talk it over with your benefits adviser at work before deciding what to do.

 

Money Left in HSA

What if you pass away leaving money in your HSA? Is it forfeited?

When you established your HSA you should have named a beneficiary. Of course, if your beneficiary is your spouse, your account becomes his or her account, and is not taxable as long as withdrawals are for qualified medical expenses (the same rules that applied to your use of the account). If your spouse makes withdrawals that are non-qualified, the funds withdrawn will be taxable.

But suppose your beneficiary is someone else, let’s say your daughter. At that point, an HSA loses its identity as a health savings account, and becomes gross income to your daughter. For example, if you pass away leaving $1,000 in your HSA, your daughter will need to include that money in her gross income. Taking the example a step farther, if your daughter receives $1,000 from your HSA and then learns that you had qualified medical expenses of $400 left unpaid, she can use the funds she received from your HSA to pay that bill, and will only have to claim the remaining $600 in her income.

 

Helping Your Parents with Some Expenses May Not Be Optional

Most people probably feel some moral obligation to take care of their aging parents with expenses like the cost of nursing home care or home health care. But did you know that some states (more than half) take this a step farther, making it a requirement? It’s called “filial responsibility laws.” While there is no federal law that compels you to help out, if your elderly parents are without resources, your state may require that you and your siblings pitch in.

The filial responsibility laws are not new, but some states have barely enforced them. That started to change a few years ago, when it became harder for the elderly to qualify for Medicaid help to cover long-term care costs. Hospitals, health care providers, and Medicaid are taking another look at those laws, and in some cases, demanding reimbursement.

What can they do? It depends on the state. Some states may bring a civil suit against you to recover the costs. Some states will add jail time to the penalty. But let’s say for example, a mother abandoned her kids when they were young, and had little or no contact since then. Now, the mother is elderly and in a nursing home. If that’s your situation, let the authorities know the details and you may qualify for an exception. In addition to being compelled to pay for medical or long-term care, you might also be required to pay for necessities, such as food, clothing and housing.

 

That Requirement Might Swing Both Ways

You should know, some states also require the reverse. That is, if you are a parent with an adult child who cannot pay for necessities… you guessed it, you might have to contribute. You may have heard about a Pennsylvania case where parents in their 70s had to pay the medical bills for their adult son who passed away.

Also in Pennsylvania, a son was held liable to pay $93,000 for the cost of his mother’s nursing home care, according to elderlawanswers.com. Making this case even more unusual was the fact that his mother had a living husband and two other adult children, who were not ordered to pay… and, there was a case pending with Medicaid over the payment. The son appealed the decision, but the appeals court agreed with the Pennsylvania Superior Court, saying that the law did not require the nursing home to seek other sources of payment, nor was it required to wait to see if the mother’s Medicaid claim was resolved.

Some elder law attorneys predicted several years ago that there would be a wave of lawsuits initiated by long-term care facilities against adult children. Today, that’s more true than ever.  If you find yourself smack in the middle of a situation like this, consult your attorney. Some states also have methods adult children can use to declare they are not responsible for their parents’ bills.

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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