Monday, January 31, 2011

ABC News has week long series on caregiving of aging parents and other relatives

ABC World News Tonight has started a roundtable, “’Families on the Brink: Roundtable Discussion on How to Help Aging Relatives” with Martha Stewart and Virginia Morris. The long article has some videos (“What about Mom and Dad”?)(, and the series will continue all week on ABC.  The writers are Margaret Ero and Enjoili Francis.  The basic link is here.  Diane Sawyer called this the “silver tsunami” and started by noting the lack of geriatricians and the lack of training, pay and respect for caregivers. Sawyer said that 70% of people who do the physical caregiving are women, and caregiving responsibilities can take ten years off a person’s life.

The link is here

It’s not just parents, it’s all relatives, including siblings. 

Stay tuned to this series.

I’ve just been through my own experience with this, with my own mother, who passed away Dec. 14, 2010 at age 97 after a long decline.   More details will come later. (See my review of "Biutiful" on my movies blog today, with its curious plot twist concerning caregivers, and Dec. 21 on my main blog.)

Update: Friday Feb. 4

The last installment focused on caregivers, and on efforts to keep seniors at home longer, with entities like "Home Instead" and "Villages".  Many times seniors can stay "home alone" with intermittent hired senior companions who receive small stipends.  But the problems get much more complicated than that, as I will cover in detail later. 

Friday, January 28, 2011

Family caregivers may not have to pay FICA tax when compensated -- check with tax advisor

Frequently, family caregivers can get paid, either out of the elder’s trust or savings, or long term care insurance policy, and sometimes state programs.  Technically, caregiving is wage-earning work subject to Social Security and Medicare taxes and reportable that way. But it appears that the IRS and Social Security allow exceptions in some cases: the income must be reported, but it may be exempt from these payroll taxes. The IRS Publication for this event is here.   It also gives a link to Publication 926.

It’s unclear what happens if the family member is supervising (as a “matrix manager”, working with an agency) caregivers  rather doing much of it hands on, or how managing finances, errands, doctor’s appointments, and the like fits in. Anyone in this situation (as I have been) should consult with a tax advisor relatively early in the tax preparation season (or, preferably, before a caregiving situation has developed).  But it seems as though there’s a good chance it would not have to be paid.

Thursday, January 27, 2011

CBO: Social Security will be drained by 2037, run a $45 billion deficit in 2011; funny money accounting explained by CNS

The Congressional Budget Office reported today that Social Security will run a $45billion deficit this year, and be broke by 2037.  The CNS (Congressional News Service) story explains the accounting trick here

The Trust Fund is legally obligated to take treasury bonds, with the “interest” counted twice in “balancing” the fund. It’s pretty hard to follow, but it looks like double journal entry accounting with one side missing to me.  I’ve worked on General Ledger before (at NBC in the 1970s).

ABC News carried the story about the empty bathtub shrine by 2037 for social security, and asked if the next generation will see “solvent social security”.

"Joint Tenancy" v. "Living Trust": Can "joint tenancy" be "too good to be true"?

Is “joint tenancy” an effective strategy to prevent future probate, without the expense of setting up a living (to become irrevocable) trust?

The elderly person may find this convenient, but there are disadvantages, such as loss of control if the dynamics in the family go wrong. The “Dummies” series has a good writeup” (June 2010) (“How to bypass probate with joint tenancy here.

The “legal series” publisher Nolo has a more detailed article “Avoid probate with joint ownership: learn how jointly owning property is one easy way to avoid probate” link here.  There are various wrinkles in some states, such as Texas and California. There is “Joint tenancy with right of survivorship”, “Tenancy by the Entirety”, and “Community property with right of survivorship”. 

You can’t use joint tenancy to avoid debt.

Here’s another writeup at “Investopedia”, link.

“Got Trouble” has a writeup giving the disadvantages of joint tenancy compared to trusts, link. With a trust, the proposed beneficiaries may at least sometimes be held to higher standards of behavior.

Nolo, in answering “question 28114”, maintains that a living trust may help the bequeathor to show that she understands what she is doing, should other parties challenge the outcome after death.  Claims of undue influence or bad faith might occur with either joint tenancy or a living trust.

Another advantage of the trust may be legal protection of the assets of the trust from lawsuits about unrelated matters brought by the trustees.  This doesn't always get mentioned. 

Abbreviations may be JROS, ROS, or JTWROS, or JNT.

Joint tenancy used to be a popular concept with same-sex couples. 

Sunday, January 23, 2011

Pundits say Obama should expect seniors to heed the moral arguments about "generativity"

Here we go again. In anticipation of the president’s “State of the Union” address, pundits (as on Chris Matthews Sunday morning) are saying that Obama must hit entitlements with the morality card.

It goes like this: if you are a relatively well-off senior, expect less, maybe nothing, from government entitlement programs. You’ve had your life. Now it’s the next generation’s turn.

We know where that can lead. Means testing?  Filial responsibility?

There’s another angle, to. More people today than in previous generations did not have children. They may not experience, in a personal way, a stake in future generations. All of this leads to consideration of “the social contract”.  We may come to think about personal responsibility and personal choice in a “less individualistic” way than has become accepted in the past three decades or so. Perhaps the childless would come under increased pressure to purchase long term care insurance, too. 

Of course, seniors are more likely to vote. It would be pretty hard for politicians to sell something that in today's culture sounds like self-sacrifice. 

Saturday, January 22, 2011

Debate over state "bankruptcies" and retiree pensions and bond assets; What's in a "public" safety net?

Yesterday, I wrote an “issues” posting about the idea that Congress could entertain the idea of quasi-bankruptcy for states and the disastrous effect that could have on tax-free bonds, which affect both pensions and retiree assets considerably.

I’ve also noted the controversy over Social Security and Medicare and ideas about “means testing” which could come at us much sooner than we had thought.

Coming from a libertarian-to-“conservative” background I strongly believe that people should own their own retirement accounts, should be incentivized to save in stable, conservative vehicles for retirement lifetime annuities. That’s a challenge with longer life expectancies, and with the idea that a 2008-style crisis could wipe out a financial system, no matter how prudent individuals are.  But annuities should be just that. They should be protected from confiscation or outright expropriation from politicians.  But shifting Social Security to a private system would present tremendous accounting problems.

Whatever my own social philosophy, I recognize that democratic societies have and need social safety nets.  To the extent that a portion of old age income should be provided by a safety net and not come from investment or forced savings vehicles, means testing is appropriate and rich people, whether by income or accumulated or inherited assets, should not collect those portions.

There’s no question that this whole question circles back to concepts like extended family and filial responsibility – and that in turn connects to debate about marriage, responsibility for personal choices, and even sexual orientation.  We ought to get this all down.


Thursday, January 20, 2011

Ben Stein: Raise taxes now, and don't pay rich people social security "entitlement" benefits

Ben Stein went on a verbal “rampage” tonight on Elliot Spitzer on CNN, about the need for higher taxes and that rich people should pay them. And he said he was a Republican – and that almost the entire Wall Street crowd comprises Democrats.

He said that it was ridiculous for wealthy seniors to receive social security benefits at all. There’s no reason for someone who didn’t get his hands dirty in a coal mine to get the same sort of entitlement. (So much for Homer Hickum.)

If you're going to do means testing, do you do it on income, or total assets?  Does liquidity matter?

My gripe has always been, if you want to redistribute wealth, at least admit you’re doing it. Don’t have FICA set up as an annuity premium, just blend it in with general progressive taxation.

But, of course, a totally privatized system would be outside taxation altogether. 

Wednesday, January 19, 2011

Social Security is in much worse shape than government admits, even in the short term

Charles Hugh Smith has a sobering article in “Daily Finance”, “Social Security Is in Far Worse Shape than You Think”, broadcast this morning to AOL users, link here.

His basic thesis is that Social Security badly missed even its deficit in 2010, let alone 2018. There was a $40 billion shortfall in fiscal 2010, about 8%. Congress dropped the FICA tax to help the middle class. Smith writes that that Social Security has borrowed money (with Treasury borrowing for it) to pay benefits for 15 of the last 25 months. That’s bound to pressure bonds and drive up interest rates and hurt the bond market soon (especially munis).

Does this argue for means testing soon?

Picture: Arlington County Fair, Aug. 2010

Tuesday, January 18, 2011

Should government employees "too old to work" receive workman's comp?

Senator Susan Collins (R-ME) wants to stop federal workers well into retirement age from receiving workman’s comp.  Over 1000 such workers of the Postal Service over 80 have been identified, including 132 over 90, and one who is 98.  The "complaint" is that such individuals have no intention of returning to work. 

Collins says that this “abuse” or “cheating of the system” may be widespread in other federal agencies.
Arguably, however, older ex-employees who were force out early due to injury would still be entitled to the retirement income that they would have earned.

The link for the “Federal Diary” story by Joe Davidson on p B3 of The Washington Post on Jan. 18 is here

Saturday, January 15, 2011

As banks start paying dividends again, pension funds could get a bit healthier

Pension funds, including those of public employees, and the portfolios of some better-off retirees may improve considerably as banks start paying dividends again, according to a New York Times story Jan. 14 by Nelson D. Schwartz and Eric Dash, “Banks are poised to pay dividends after 3-year gap; Billions for pensions; Milestone after bailout, but concerns about public reaction”. The link for the story is here

Many pension funds had depended on bank stock dividends for income, and in the past financial planners had often recommended bank stocks to older customers.  So some retirees may have taken particularly bad hits in 2008.

The ability of banks to pay dividends certainly depends on performance, which could be affected by new rules to protect smaller consumers, since banks (link airlines) came to depend so much on the fees.  They would also depend on the stress tests.

Wednesday, January 12, 2011

Most medical residents must pay FICA tax (Supreme Court opinion Jan. 11)

A story in the Washington Post Wednesday by Robert Barnes, while focusing on Elena Kagan’s first judicial opinion (on a bankruptcy issue), reported that the Court decided that medical residents can have social security FICA taxes withheld, even if they are “working to learn”. A case had been brought by the Mayo Clinic and another hospital in Minnesota (Mayo Foundation v. United States). The Treasury Department says that residents who work more than 40 hours a week are still “primary workers.”

The link is here.

The URL for the slip opinion is here.

At least the FICA withdrawals will be less in 2011 because of Obama’s Christmas present.

Monday, January 10, 2011

Illinois could have spectacular increase in state income tax over public pensions

There are media reports, as in the New York Times, that Illinois may increase its state income tax by a staggering 75% for some people to pay for state budget shortfalls, many of which may be reported to public employee pensions.

That certainly is a way to deal with budget crunches: in states with income taxes, voters are really likely to revolt over the chicanery involved in the past in public pension funds. What about California and New York?

It’s a little discouraging to hear social security and retirement income compared to “welfare”. Just ponder the social implications.

Wikipedia attribution link for Chicago aerial picture.

Saturday, January 01, 2011

New Year's Baby Present: A Fica payroll deduction cut for most people (not a tax cut)

Just when pundits are saying make Social Security more progressive and maybe means test, the Obama-Dem FICA tax cut of 2 points goes into effect in 2011. Higher wage earners may come out behind, however, because of another “Making Work Pay” initiative.


The story Dec. 19, 2010 by Bambi Hokanson is on Suite101 here.
Here’s an explanation of the “Making Work Pay” credit, under Obama’s name, link here.
Did the FICA takehome tax cut make sense?