Rather Than Ending Medical Expense Deduction, Final Tax Bill Expands It

December 28, 2017

Included in the new tax bill, signed by President Trump on December 22, is a provision that could provide some temporary relief for families with high medical expenses.

Federal law currently allows families with medical expenses exceeding 10 percent of their adjusted gross incomes to deduct certain medical expenses from their income taxes, provided that they itemize their deductions. For the two months leading up to passage, the entire future of the deduction was in doubt.

The version of the tax bill that the House of Representatives passed November 16, 2017, would have scrapped the deduction altogether, prompting an outcry from disability rights advocates.  The Senate version, however, maintained the deduction. The final version, in fact, expands the number of families eligible for the deduction, at least temporarily.

For the current 2017 tax year and 2018, all families whose medical expenses exceed 7.5 percent of their adjusted gross income will have the option of deducting certain medical expenses. The threshold will, however, revert back to 10 percent for the 2019 tax year.

This 7.5 percent benchmark mirrors regulations that existed prior to the Affordable Care Act (ACA), which had raised it to 10 percent for non-elderly families. For the elderly, the 7.5 percent threshold expired in 2016 and also rose to 10 percent.

According to the IRS, 8.8 million households, or almost 6 percent of tax filers, claimed medical deductions in 2015.

Even with the expanded medical expense deduction, many families with high medical expenses could see increased financial burdens from the tax bill.  The bill eliminates the ACA’s requirement that people purchase health insurance, likely threatening the future of the ACA’s exchanges and sparking increased medical premiums. It also slashes the corporate tax rate from 35 to 21 percent and will cost the government an estimated $1.5 trillion in revenue over the next 10 years, increasing the likelihood of future cuts to Medicaid, Medicare and other major pieces of the social safety net.

“Each vote in favor of this bill was a vote against constituents with disabilities and sets the wheels in motion to quite possibly go back in time to an era when people with disabilities had little opportunity to live a life of their choosing, in the community,” The Arc, which protects the human rights of people with intellectual and developmental disabilities, said in a statement.

To read the text of the final bill, he Tax Cuts and Jobs Act, click here.

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What Is Undue Influence?

Saying that there has been “undue influence” is often used as a reason to contest a will or estate plan, but what does it mean?

Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes and to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats, or isolation. Often the influencer separates the individual from their loved ones in order to coerce. The elderly and infirm are usually more susceptible to undue influence.

To prove a loved one was subject to undue influence in drafting an estate plan, you have to show that the loved one disposed of his or her property in a way that was unexpected under the circumstances, that he or she is susceptible to undue influence (because of illness, age, frailty, or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so. Generally, the burden of proving undue influence is on the person asserting undue influence. However, if the alleged influencer had a fiduciary relationship with your loved one, the burden may be on the influencer to prove that there was no undue influence. People who have a fiduciary relationship can include a child, a spouse, or an agent under a power of attorney. For more information on contesting a will, go here.

When drawing up a will or estate plan, it is important to avoid even the appearance of undue influence. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your will in drafting your will. Family members should not be present when you discuss the will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive or accompany you to the attorney’s office. You can also get a formal assessment of your mental capabilities done by a medical professional before you draft estate planning documents. For more information on preventing a will contest, go here.

July 14, 2016

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