Seniors can benefit from the economic stimulus law enacted on February 13, 2008, but they need to file an income tax return. Seniors, disabled veterans, and veterans' widows will receive $300 payments if they earned $3,000 in Social Security or veterans' disability benefits in 2007.

In addition, workers who earned at least $3,000, but not enough to pay income taxes, will be eligible for payments of $300. For higher income individuals, the law provides rebate checks of up to $600 per individual. The stimulus payment begins to phase out for individuals with adjusted gross incomes (AGI) over $75,000 and married couples who file a joint return with AGI over $150,000.

Alas! In order to get a rebate you need to file an income tax return even if you do not have any tax liability. After all, if you want the US Treasury to send money, you will need to let them know you are out there! You very well might be able to use IRS Form 1040a. You will need to report any Social Security income on the tax return. Look around in all the stuff you got in January's mail for something called a "Form 1099-SSA" because you'll need to attach it to the tax return. This does not mean you will be taxed on your Social Security income, but you must report it in order to get the rebate. If you file the tax return on time, you should receive the rebate check in May or June.

For more information on the stimulus payments and what income tax forms to file, go to www.irs.gov or call 1-800-829-1040.

This is a multipart series that will delve into the whacky world of Medicaid nursing home benefits after the Deficit Reduction Act. I don't know how many installments we will have . . . enough to get the job done.

A Reminder From The Last Installment

The Medicaid asset rules are extremely complex. Please do not rely upon this simple explanation for a definitive answer.

SPOUSAL PROTECTIONS - ASSETS

Medicaid law provides special protections for the spouse of a nursing home resident, known in the law as the "community" spouse. Under the general rule, the spouse of a married applicant is permitted to keep one-half of the couple's combined countable assets up to $104,400 (2008). In addition, there is a minimum resource allowance for the community spouse of $20,880 (also 2008). The protected amount is referred to as a "Community Spouse Resource Allowance" or "CSRA".

The CSRA is calculated with respect to assets held by a married couple as of the beginning of the first continuous 30 consecutive day period that the applicant spouse has been confined to a hospital or nursing home or some combination of the two. For the sake of administrative convenience, DMA will actually measure the assets as of the close of the last business day of the preceding month. This is sometimes referred to as a "snapshot date". It does not matter when the Snapshot Date occurred. It is not at all uncommon to have a Snapshot Date that was triggered several years before the date of a Medicaid application.

So, for example, if a couple owns $90,000 in countable assets on the date the applicant enters the hospital and stays in it or a nursing home for 30 days or more, he or she will be eligible for Medicaid once their assets have been reduced to a combined figure of $47,000 - $2,000 for the applicant and $45,000 (one-half of $90,000) for the at-home spouse. If the couple owned $220,000 in assets, the spouse in need of care would not become eligible until their savings were reduced to $106,400 ($2,000 for the nursing home spouse and the maximum $104,400 for the community spouse).

Often, it is advantageous for the couple to try to have as much money as possible in their names on the Snapshot Date up to $208,800 so that the amount the community spouse is allowed to keep will be as high as possible. Sadly, many couples believe they understand the rules and spend half of their assets before a Snapshot Date only to later discover they must reduce their assets by half again!

After a determination has been made as to the nature and extent of an applicant's (and spouse's) assets, and whether any of those assets will be protected, the next major inquiry involves whether any assets have been transferred before the application.

This concludes the discussion of assets for Medicaid eligibility purposes. We now turn our attention to the much misunderstood (but very harsh) Medicaid transfer penalties.

THE TRANSFER PENALTY

The other major rule of Medicaid eligibility is the penalty for transferring assets. Medicaid has always imposed some sort of restriction on transferring assets before entering a Medicaid application - were it not for such restrictions, anyone could qualify for Medicaid simply by giving assets away at the time nursing home entry became necessary.

Early in 2006 Congress passed, and on February 8, 2006, President Bush signed, the Deficit Reduction Act ("DRA"). DRA mandates tough new restrictions on the transfer of assets made on or after the effective date of February 8, 2006.

In The Next Issue . . . .

The effects of DRA have been trickling down to the states and each of them has been grappling with how to implement DRA locally. North Carolina began enforcement of the new rules on November 1, 2007. Those new rules will be explained beginning in the next issue of Elder Law Update.

Ever wonder how Social Security calculates your monthly benefit?  Lots of folks have ideas, or have heard different things, such as the last 10 years, the last 3 years, the high 5 years in a row, etc., all of which are incorrect.

Benefit rates under Social Security Retirement, Survivor, and Disability programs are based on an individual's lifetime earnings.  Actual earnings are adjusted or "indexed" to account for changes in the average wages since the year the earnings were actually received.

Another way to help understand this concept is to compare the actual dollars earned, say 30 years ago, to the inflated value of that dollar today.  The benefit computation is actually based on the "indexed" or inflated dollar value.  Earnings for years age 60 and later are not indexed.  Using this formula, earnings for years after age 60 could actually be higher than earnings in a previous year, but the formula causes the previous earnings to be counted as "higher" based on the indexing. 

After the actual earnings are "indexed", Social Security calculates the average indexed monthly earnings for the years you earned the most money (based on the "indexing" method).  For retirement benefits, a period of 35 years is used.  For disability benefits and survivor benefits, shorter time periods apply, with less years used for younger workers.

From the average indexed monthly earnings, a 3 step formula is then applied at 90% of a certain amount (bend-points which are determined each year), 32% of the second bend-point, and 15% of the third bend-point.  These three amounts are added together to determine an individual's full monthly retirement rate, known as a Primary Insurance Amount, or PIA.  Multiply the PIA by 75% to determine the monthly retirement benefit at age 62.

Next month we will examine additional factors which can change the amount of the retirement benefit.  For more information, log on to www.socialsecurity.gov, click on Publications on the lower right side of the web site, then English publications, then scroll down to the appropriate year for YOUR RETIREMENT BENEFIT: HOW IT IS FIGURED.