How to determine the monetary value of care by family members

Discussion in 'General Discussion' started by aboehm, May 18, 2013.

  1. aboehm

    aboehm Newbie

    My Mom is the widow of a WWII vet. She does not need medical care in the home, just necessary supervision and aid in daily living, which my husband and I provide, unpaid. We fear that she will out live her savings and are wondering if these benefits might help. How do we determine the value of the care we provide, if it is unpaid? Is the benefit received designated exclusively to pay for specific care,or may it be used to cover general living expenses in order to help keep her in her home? We are fortunate that her needs are not greater, but are eager to apply for any benefit that she is entitled to.
  2. Red Headed Mommy

    Red Headed Mommy Jr. Member

    As stated on the veteran website:
    The Aid and Attendance (A&A) Pension provides benefits for veterans and surviving spouses who require the regular attendance of another person to assist in eating, bathing, dressing and undressing or taking care of the needs of nature. It also includes individuals who are blind or a patient in a nursing home because of mental or physical incapacity. Assisted care in an assisting living facility also qualifies.

    To qualify for A&A it needs to be established by your physician that you require daily assistance by others to dress, undress, bathing, cooking, eating, taking on or off of prosthetics, leave home etc. You DO NOT have to require assistance with all of these. There simply needs to be adequate medical evidence that you cannot function completely on your own.

    The A&A Pension can provide up to $1,732 per month to a veteran, $1,113 per month to a surviving spouse, or $2,054 per month to a couple.

    Based on what you have said, your mom does have a medical need for assistance--you are just providing it without charging her. In order to qualify for the benefit, a doctor must also sign a form indicating that she has a medical need for this assistance.

    Once you have know you have the military service dates covered, as well as the medical need satisfied, the next issue is financial need. To qualify for the a full award, her countable income must be zero or negative on a monthly basis.

    Here is some information that may be helpful. You first must determine if your mom may outlive her your case, I would contact a local home health agency and find out what they would charge to provide the same help that you are donating to your mom....this would be a good place to get the idea of its value.

    Determining Countable Income
    The VA suggests that its adjudicators use a certain amount of personal judgment on this issue. But the bottom line is: does it realistically appear that the veteran or surviving spouse may outlive their assets? If so, they are likely eligible.

     Do NOT count their residence or vehicle when estimating net worth.
     Do NOT count a life insurance policy (because the policy holder must be deceased in order to benefit from it).
     DO count CDs, annuities, stocks, bonds, savings, checking, IRAs, Keogh, etc.
     DO count any assets owned by the spouse as well.
     As a rule of thumb, assets should not exceed $80,000. That amount drops depending on the age of claimant.

    List below the estimated ANNUAL income of the veteran or surviving spouse
    Estimate total income (If married include spousal income): $

     All income must be included. This includes social security, pension, interest income, dividends, income from rental property, etc.

    List all unreimbursed, recurring health care expenses

    This includes:
    Assisted Living costs (per month): $

    Nursing Home costs (per month): $

    Home Care service (per month): $-->This sounds like what you are providing. Once you know its value, you can make a determination if you need to start charging her for this service to qualify for this benefit. If so, she will need to be paying you with a check (not cash so there is a verifiable record). This money is a source of income to you, and must be reported on your income taxes as such.

    Health Insurance premium (per month): $

    Medicare premium (per month): $

    Regular (unreimbursed) prescriptions
    (per month & verifiable through a pharmacy print‐out): $

    TOTAL Expenses per month: $ Multiply x 12 to get total annual expenses: $

    Subtract your total annual health care expenses from your total annual income and write the amount here:
    This is your "countable" income

    If this number is zero or negative, she would qualify for a full award. If it is less than $1,113, she would qualify for a partial award.

    Sorry for the long message--I hope this helps and makes sense :)
  3. Gigi

    Gigi Newbie

    This was a great explanation but I have a question. If I am indeed handling all the medical and daily living needs for my mother, could she just gift me $13,000 a year as payment and therefore I would not have to add to my tax return as income? The $13,000 would still be far less than the cost of paying a home care assistance company to send someone to the home.

    I am also assuming that my mother needs to start paying me before we apply for A & A, correct?

    Any feedback on this would be greatly appreciated.
  4. vbcoder

    vbcoder Jr. Member

    Gigi, this may answer your question.
  5. vetadmin

    vetadmin Administrator Staff Member

    It is usally a good idea to call local agencies to see what they would charge for providing the same services to give you an idea of what would be considered a fair fee in your area.

    Yes, she needs to be paying at the time of making application. You cannot make applicaiton on projected or anticpated cost and expenses.
  6. Red Headed Mommy

    Red Headed Mommy Jr. Member


    I like your thought process, but I don't THINK it would achieve what you are trying to do.

    This IS beyond the scope of what I know technically, but let's "talk" about it practically.

    Gifting is allowed by the IRS as a non-taxable event and frankly gifting is permitted beyond that amount, but it reduces the lifetime estate exclusion for the giver. Such gifts have the result of reducing the financial assets of the giver...but aren't an deductible expense.

    Where your proposed idea is different is that in effect, you are trying to " gift" WAGES for services being rendered, I.e. caring for the family member. It would seem to ME you couldn't then count it as an expense for A&A purposes as on ongoing medical expense..which is what I think you are trying to accomplish...since you are not paying for is a gift.

    I am still trying to think through mentally the accounting entries for this, but I THINK it would have to be treated as a "gift expense" on your mother's side and not as a medical expense, in order for YOU NOT to have to report it on your income taxes. I think of these as a balancing act...for your mom to get a medical deduction, it has to be someone else's income. If it is just a gift, it transfers cash from one person to another.

    I HOPE this makes sense. I DO NOT HAVE any references to cite, but this is how this former accountant thinks through it....just MY opinion.

    Hope it helps and others will jump in!

    Hang in there!
  7. vbcoder

    vbcoder Jr. Member

    Red Headed Mommy, You are an Angel! :)
  8. robzebr

    robzebr Newbie

    Just some quick comments... on all of this..

    The max gift is 14,000 a year for 2013... anything over that is taxed as the gift tax of 35%. The person doing the gifting is taxed not the recipient. You can give 14,000 to each child and grandchild.... so if there are 10... one can gift away 140,000 a year and incur no gift tax...

    The range of compensation for a home care person is between 12 and 26 an hour with the average being 19.. it depends on the geography...

    A person is either paying you or gifting you the money... if she is paying you then both you and her have to pay the fica and medicare taxes etc in order to be a legit employee... she gives you a W2 form and you declare the income on your tax return..

    If she gifts you 13,000... then its just that a gift... doesn't need to go on your tax return...

    I haven't seen anywhere that the paying of a home care person already has to be in place in order to apply for A&A. It might be that way ... I just haven't seen the requirement in print..

    Life Insurance... My Dad has what he calls a funeral policy. He got it so his children and grand children don't have to worry about funeral expenses in our time of grief... Here is the problem... there is no such thing as a "funeral policy". Its a life insurance that in my Dad's mind is earmarked to pay for funeral expenses.

    Now consider this:.. When you check somebody into a nursing home they ask you: Does your Dad own any insurance policies..? Why do you think they are asking that? Because its just another asset like a savings account, IRA etc... SO they put a lien on it... let's say my Dad runs up big bills... the insurance policy is at risk to the nursing home... to pay for residual bills... so the policy is gone and then Dad passes away... so now a funeral has to paid for and the life insurance policy that my Dad wanted to go for the funeral just went to pay for nursing home bills.

    There is a solution. Its called different things in different states... Transfer of Ownership and Absolute Assignment... You call the insurance company and they send you the form. Me and my Dad fill it out and then either me or both of us head down to the funeral home.. and they plug in some numbers. The funeral home will make sure that the estimate exceeds the worth of the policy so as to leave nothing on the table that a nursing home can get... I send it back to the insurance company and in 7-10 days the insurance company either transfers ownership or absolutely assigns the policy to the funeral home... In doing this it insures that my Dad's wishes of the policy going towards the funeral are maintained.

    FYI. In central New Jersey the cost of a traditional funeral is between 9,000 and 13,000. It varies based on the decisions that are made.. How many days for viewing? You are basically renting the room just like at the Borgata Casino ... If you stay 2 days you pay for 2 days...Caskets are all over the map... depends what you want ... Cardboard, Pine, Honduran Mahogany with gold vermeil inlay or the Michael Jackson casket... My Dad is a hard working product of the Newark depression in the 1930's ... so cost aside .. to go for the Michael Jackson casket just doesn't fit what the man was about... My Dad is a pine guy.

    So I have to assume that the funeral is going to be at least 9,000. So now at least I know that once I get this done... this small 5,000 policy will go towards it.. meaning the deficit of 4,000 has to be addressed... Not great but at least I know what I am dealing with up front and there are no surprises regarding funeral costs...
  9. vetadmin

    vetadmin Administrator Staff Member

    Couple of things here:

    You can't compare Medicaid and this pension as the same rules don't apply. If you go into a nursing home, and apply for Medicaid, there is a 5-year lookback and annuities are going to count as an asset, and if there is anything else that can pay for or offset expense, then Medicaid laws apply and not VA pension. Secondly, Medicaid laws vary from state to state, so what applies in NJ would not be the same for other states.

    This pension is not about gifting. It is only intended to help offset the costs of care for those who otherwise would be unable to afford it.

    You can do pre-paid funeral/cremation situation, and in the case of a large back award, you can use that money to pay for it in advance.

    When you make application for this pension, it is based on "expenses" currently being paid. Not projected or anticipated. So in the case of home care of facility, yes, the care does need to be in place, and yes you do have to be paying for it at the time of application.
  10. robzebr

    robzebr Newbie

    I wasn't linking A&A to anything ... just quick comments on different subjects... Sorry if I went off track as to the original topic...

    "When you make application for this pension, it is based on "expenses" currently being paid. Not projected or anticipated. So in the case of home care of facility, yes, the care does need to be in place, and yes you do have to be paying for it at the time of application."

    Thank you for this! I didn't know this. So that means that the agreement with the caregiver has to be formalized... a family caregiver now has to go on the payroll with w2's etc... ?

    What if the home care services are already being done... and the applicant is hoping get the A&A pension to now start paying the family member who had up until present had been doing it with no compensation?
  11. vetadmin

    vetadmin Administrator Staff Member

    You don't have to have a contract in place for a family member, but it is suggested that you have an informal one. The applicant does need to be paying, and it is the responsibility of the person receiving payment to handle their own taxes. The veteran or widow do not have to provide w2s.

    All you would need is the invoice from the company providing care, and once the pension came through if they want to change over to a family member you would want to keep the payment in line with what they were paying so that it does not throw the financials out of whack.
  12. robzebr

    robzebr Newbie

    "All you would need is the invoice from the company providing care,"

    The family member is doing it now... so there is no company involved...its just that the family member has not been compensated. Hopefully that can change if the AA is approved...

    "and it is the responsibility of the person receiving payment to handle their own taxes. The veteran or widow do not have to provide w2s."

    But then how does the caregiver do their taxes? Usually one would get the W2 or a 1099... and if its a W2 then both the employee and the employer pay half of all the fica medicare social security taxes...

    The elder person wouldn't actually have to do anything... the accountant could handle all that I quess... but if somebody is on a W2 then the employer is supposed to file quarterly payroll taxes...

    Even with a 1099 the accountant would have to provide that..

    In the case of a care giver being paid 12,000 a year.. on their tax return they have to say where it came from. I would think they would need something ... w2,1009 to substantiate the 12,000...

    ... unless its not necessary in a family caregiver situation..? I don't know...
  13. suse

    suse Jr. Member

    A family member is a caregiver for my husband and our accountant issues a 1099 each year. I think it has to be mailed in January for the previous year. The taxes are the responsibility of the caregiver.

  14. robzebr

    robzebr Newbie

    Thank you Suse... Yes a 1099 means no quarterly reports... makes life a lot easier...

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