Author Topic: Is there a solution to this clusterfuck?  (Read 7376 times)

ruthiegirl

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Is there a solution to this clusterfuck?
« on: August 25, 2015, 09:38:32 PM »
This is off-topic, but I don't have anyone to ask IRL. 

I am going to visit my mom next month.  She lives alone and is ill with diabetes.  She has had no health insurance for many years and has paid out of pocket for her meds and a couple of eye surgeries. 

She and I have a tough relationship, but she is still my mom and I would like to be able to help her.  I offered to help her sign up for health care while I am visiting.   After a long and difficult conversation, I have learned all kinds of frustrating details. 

In order to sign up for health care, she needs to provide last year's tax information.  She spilled that she has not filed taxes in many years.  She has not worked for a long time and has been living on the proceeds from a house she sold a few years ago.  She believes she does not need to file taxes, because she has had no income.

She then tells me that she is still married to my father.  They have been separated for many years, but never bothered to finish filing the paperwork.  I do not know if he is filing married jointly or separate. 

She received a huge inheritance last year, has not claimed the money and has no intention of doing so.

And like a dumbshit, I actually offered to help her sign up for healthcare, but now that I look at all of this I can see that there a multiple hurdles to overcome before taking that step...properly divorcing my dad, filing her back tax forms, claiming the inheritance and keeping current on her taxes in the future. 

There are many tough conversations that need to happen before we are going to come to any resolution, but am I on the right track?  Can I just bury my head back in the sand?





Rezdent

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Re: Is there a solution to this clusterfuck?
« Reply #1 on: August 25, 2015, 09:59:50 PM »
Hi ruthiegirl
not sure I can help, but what age is your mom?

ruthiegirl

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Re: Is there a solution to this clusterfuck?
« Reply #2 on: August 25, 2015, 10:02:28 PM »
She just turned 64.

Cpa Cat

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Re: Is there a solution to this clusterfuck?
« Reply #3 on: August 25, 2015, 10:03:49 PM »
Couple of things:

Divorce: Unless your father is forging her name, he can't be filing MFJ.

Inheritance: She doesn't have to claim this. Estate taxes are handled at the estate level (if applicable, but if the estate is under 5M, it's basically exempt). The inheritor does not have to declare this money. Now, if she is the executor, she should be filing an estate tax return for the estate. Sometimes states have lower estate tax thresholds, so there could potentially be liability. But this only applies if she was the one responsible for handling the estate.

Does the health care exchange actually require a tax return to be filed? If so, she is likely correct about her income level and requirement to file. You could always file a tax return for 2014. If she doesn't owe anything, there is no penalty for doing so. Wherever her inheritance is, one would expect a K-1 (trust), or a 1099 from a brokerage firm, or a 1099-INT from a bank. So you might acquire that for her tax return.

« Last Edit: August 25, 2015, 10:05:52 PM by Cpa Cat »

Abe

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Re: Is there a solution to this clusterfuck?
« Reply #4 on: August 25, 2015, 10:04:40 PM »
You are on the right track.

Here is a list of documents that can be used for proof of income (or lack thereof) for subsidy coverage:
https://www.healthcare.gov/help/how-do-i-resolve-an-inconsistency/

If your father's income would prevent qualification for a subsidy, she will have to get formally divorced:
http://www.consumerreports.org/cro/news/2014/03/can-i-get-an-obamacare-subsidy-if-i-m-married-but-filing-separately/index.htm

She does not need to claim an inheritance, people can refuse to do so.

I am not sure that she needs to file taxes if her income for the prior years was less than the minimum. She may just have to show proof of lack of income (bank statements showing no deposits in last year?)
https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Does-Everyone-Need-to-File-an-Income-Tax-Return-/INF14399.html

However, if she wants to get a subsidy in the future she will have to file federal income tax forms.

I don't know if those healthcare law navigators are still available, but ask your state Medicaid office if they have someone who can provide assistance for this situation.


ruthiegirl

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Re: Is there a solution to this clusterfuck?
« Reply #5 on: August 25, 2015, 10:28:35 PM »
Wow, wow, wow!   Seriously, thank you so much for the information.  I will read through everything carefully. 

So, from what I see here: 

-- not filing taxes is not a problem since she made no income and is not yet eligible for social security.

-- she does not need to claim the inheritance.

-- she will not be able to apply for health care without my divorcing my father or having access to his tax records and even then may not qualify due to the inheritance money.

That gives me a place to start.  And man!  A weight has lifted a bit off of my shoulders.  I was having an anxiety attack after talking to her about all of this.  She has a long history of refusing to pay taxes and then having to pay enormous fines. 

I was not prepared to sort out a complicated and emotional financial issue.

Thank you again. 

Dicey

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Re: Is there a solution to this clusterfuck?
« Reply #6 on: August 26, 2015, 02:14:19 AM »
She received a huge inheritance last year, has not claimed the money and has no intention of doing so.

She does not need to claim an inheritance, people can refuse to do so.

We may have a semantics issue here, Abe. I think ruthiegirl 's mother has received (claimed) the inheritance, but does not intend to report (claim) it to the IRS.

Also, there are most definitely limits on how much can be inherited without tax consequences. IDK, but someone around here will.

Oh ruthiegirl, you have my sympathies. I also have a cool folding shovel you can borrow have, if you want to go that route. Head in sand might be the best way to survive this visit.

lakemom

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Re: Is there a solution to this clusterfuck?
« Reply #7 on: August 26, 2015, 05:56:41 AM »
If she's 64 should she be eligible for medicare?  And also SS?  I thought SS was at 62 for early, 65 for normal, and older for late application for SS.  I'm too young to worry about the ages yet but I'm fairly certain for those already over 60 those are the correct ages.  And no matter how much she has in the bank (investments) I'm fairly certain that medicare is age based not income based.  It is certainly worth going to the website and reading up on SS and Medicare to be better informed of your mother's choices.  She may be eligible to file for spousal benefits on your father's SS.

As for the taxes, find a good local accountant and set up a consultation with them to see what needs to be done tax wise for your mom's situation.  Really, they're not going to send her to jail they'll just want any money she owes along with some interest and fees and much of that can get waived and the rest put on a payment plan.

Finally, have her get the divorce especially since they have been separated for a very long time.  Do you and your Dad still have a relationship?  Do she and your dad?  Have them get it done.  You may have to be the one to approach your father if your mother is unwilling to but if he has assets a decent lawyer for your mom may be well worth the cost of hiring an attorney.

Argyle

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Re: Is there a solution to this clusterfuck?
« Reply #8 on: August 26, 2015, 06:27:33 AM »
Why would she want not to claim the inheritance?  If she's low-income, as I gather, that could make an important difference down the line.  Claiming it might be quite a straightforward process.  In one case where I inherited some money (sadly not "huge"), it was just a matter of cashing a check.  What would make her not want to do that?  Does she have bad feelings toward the person who died?  Maybe she'd feel better if she took the money and passed it straight on to you? :)

Zaga

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Re: Is there a solution to this clusterfuck?
« Reply #9 on: August 26, 2015, 06:28:54 AM »
There's something called "Coming in out of the cold" for people who haven't filed their taxes in years.  If she goes to an accountant with her info she will just have to file for the most recent 3 years.  She will need info about her husband's filings to make this work.  And get that divorce finalized.  This will require a lawyer.

Medicare will kick in when she is 65.

Full retirement age for SS is 67 right now I believe, so in a few years she will have that income.

Cpa Cat

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Re: Is there a solution to this clusterfuck?
« Reply #10 on: August 26, 2015, 08:35:33 AM »
I think when the OP said her mother refuses to "claim the inheritance," she meant that her mother has RECEIVED the inheritance, but refuses to claim it as income to the IRS.

In fact, it is not her mother's responsibility to claim the inheritance as income or pay taxes on it. As the inheritor, she does not do these things. The value of the estate is declared on the estate tax return and estate taxes (if applicable) are paid from the estate prior to the inheritance being distributed.

The only income for her to claim is the income she is currently earning on the inheritance - wherever it is, it is likely earning at least interest that she should be aware of and declare on her tax return.

I disagree that she needs her husband's tax filings - she can inquire with him if he took the standard deduction or itemized for 2014 - that is all she needs to know. If it appears that her income is below the threshold for filing for all of the last three years, I would have her file MFS for 2014, just for the record. If she doesn't owe anything and isn't entitled to a refund, then there's no real reason to go back 3 years.

Then finalize her divorce and apply for health care. 2015 open enrollment is coming up. She may even qualify for medicaid, despite her assets.

If she wants to apply for health care prior to a divorce, then she would need her husband's tax information - but only for the last year.


Argyle

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Re: Is there a solution to this clusterfuck?
« Reply #11 on: August 26, 2015, 08:45:38 AM »
Assuming she's been married more than ten years, she may be able to claim social security based on her husband's income rather than her own, which could be more.  She should get the local office to run the figures.

OP, can you clarify what you meant by "claim the inheritance"?

mozar

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Re: Is there a solution to this clusterfuck?
« Reply #12 on: August 26, 2015, 09:42:41 AM »
If she was married more than ten years then gets divorced then she is eligible for the dovorced spouse benefit which will be half of ss. Or she can not do the divorce and get full ss from spouse when they die. I think the divorce option is better, but I see that a lot with baby boomers and older who dont want to divorce.

Zaga

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Re: Is there a solution to this clusterfuck?
« Reply #13 on: August 26, 2015, 10:20:21 AM »
I think when the OP said her mother refuses to "claim the inheritance," she meant that her mother has RECEIVED the inheritance, but refuses to claim it as income to the IRS.

In fact, it is not her mother's responsibility to claim the inheritance as income or pay taxes on it. As the inheritor, she does not do these things. The value of the estate is declared on the estate tax return and estate taxes (if applicable) are paid from the estate prior to the inheritance being distributed.

The only income for her to claim is the income she is currently earning on the inheritance - wherever it is, it is likely earning at least interest that she should be aware of and declare on her tax return.

I disagree that she needs her husband's tax filings - she can inquire with him if he took the standard deduction or itemized for 2014 - that is all she needs to know. If it appears that her income is below the threshold for filing for all of the last three years, I would have her file MFS for 2014, just for the record. If she doesn't owe anything and isn't entitled to a refund, then there's no real reason to go back 3 years.

Then finalize her divorce and apply for health care. 2015 open enrollment is coming up. She may even qualify for medicaid, despite her assets.

If she wants to apply for health care prior to a divorce, then she would need her husband's tax information - but only for the last year.
She also needs to make sure he isn't claiming her as a dependent.

ruthiegirl

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Re: Is there a solution to this clusterfuck?
« Reply #14 on: August 26, 2015, 10:32:10 AM »
She cashed the check.  The money is in her possession and is enough for her to live on for the rest of her life.  Apologies for not being more clear.

What concerned me is that she started on a long rant about not telling the IRS that she has this inheritance and there was no way they were going to get her money.  With her history of not paying taxes, I worried that she was setting herself up for a huge tax audit and a long relationship with the IRS. 

From what I have seen and read here, it looks to me like she is will be fine.  Through sheer dumb luck, she has stumbled through.  She would like to believe that she is being rebellious, but I think she is following the law. 

I will talk to her more about all of this and see what she wants to do about health care.  She is eligible for medicare next year and she may choose to wait rather than deal with my father.  Right now, her eye sight is failing and she will be declared legally blind by the end of the year.  I don't know what will happen at that point.  Part of this trip is to determine how long she can live on her own and find out her long term plans. 

Thank you again for all the help. 


ruthiegirl

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Re: Is there a solution to this clusterfuck?
« Reply #15 on: August 26, 2015, 10:32:47 AM »
Oh ruthiegirl, you have my sympathies. I also have a cool folding shovel you can borrow have, if you want to go that route. Head in sand might be the best way to survive this visit.

Ha!   I may take you up on that! 

ruthiegirl

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Re: Is there a solution to this clusterfuck?
« Reply #16 on: August 26, 2015, 10:35:46 AM »
She also needs to make sure he isn't claiming her as a dependent.

Yes, I think you are right.  A phone call to my dad is in order. 

wenchsenior

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Re: Is there a solution to this clusterfuck?
« Reply #17 on: August 26, 2015, 11:27:27 AM »
She received a huge inheritance last year, has not claimed the money and has no intention of doing so.

She does not need to claim an inheritance, people can refuse to do so.

We may have a semantics issue here, Abe. I think ruthiegirl 's mother has received (claimed) the inheritance, but does not intend to report (claim) it to the IRS.

Also, there are most definitely limits on how much can be inherited without tax consequences. IDK, but someone around here will.

Oh ruthiegirl, you have my sympathies. I also have a cool folding shovel you can borrow have, if you want to go that route. Head in sand might be the best way to survive this visit.

Yes, I would NOT assume that the inheritance is automatically tax free. It depends on amounts, but it also depends on what type of inheritance vehicle it was. My mother inherited some money (not a huge amount, but a nice chunk), and while most of it was tax-free, she DID have to pay about 5K total taxes on one portion of it (it might have been insurance or something, but I can't remember). She owed both Federal AND some to the state of the deceased's estate (not the state where my mom, the inheritor, was living). So you will definitely need to get some tax/legal advice about this and how to proceed just in case.

wenchsenior

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Re: Is there a solution to this clusterfuck?
« Reply #18 on: August 26, 2015, 11:40:58 AM »
As to the other stuff, my mother was in a very similar situation. No income, no insurance, no assets, pre SS in her early 60s. But she was legally divorced.

Eventually, she took SS about a year early (age 63 or 64) and filed to claim half of her ex husband's benefit, which was larger than her own (you can choose which to claim). The SS was a bit too much to qualify for Medicaid, so she then signed up for Medicare (remember that one part (A, I think) is automatic and free, but you have to choose which version of the other part (B?) you want, and that costs some money that is taken out of the SS check).

The health insurance was SUCH a relief after 20 years without. Be warned however that dental work is not covered for the most part, and those bills are still high and out of pocket.

Normally, my mother does not need to file taxes because her SS income is so low. However, when she later inherited a bit of money, she DID have to file that year. As I noted above, she did owe some taxes on it, both federal and state, on part of that inheritance (which was, I think, a combo of insurance and regular investments). Several years later, the estate is still not completely finalized (there is a piece of real estate still to be sold) and we will have to check in again at that time, to see whether she will again need to file taxes for whatever year she finally receives the proceeds.

Axecleaver

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Re: Is there a solution to this clusterfuck?
« Reply #19 on: August 26, 2015, 12:40:04 PM »
It really depends on how much income the inheritance is generating for her, and how the money was invested (or if it was invested at all).

Regarding health insurance, based on what you've written she most likely qualifies for Medicaid. It depends in large part on how much income her inheritance is generating for her. Medicaid is not based on marital status but on number of people in your household, that is, your actual living situation. In her case, if she lives alone, she's a household of one regardless of whether or not she's still married. Every state has a website to determine Medicaid eligibility, which is linked through the healthcare.gov website. Some states it's easier to go to social services in person. Due to her medical condition, she may be considered "Medically Frail" which has different standards for eligibility. I'd try to qualify her under having low/no income first.

You may want to get the divorce finalized to protect the inheritance, though! Since this was received while they were still married, your father may have a claim to some piece of that.

Finally, if she does take the Medicaid route, as a potential inheritor you should be aware of Medicaid estate recovery rules. This is a really insidious rule that allows states to recover expenses after a recipient's death for certain claims that occurred after they were 55 years old. There are many cases where poor, elderly folks with paid-off houses or family farms accepted end of life help from Medicaid and did not understand that the family farm would be repossessed after their deaths to pay back the state. Some states enforce these rules more aggressively than others. Some basic info here: http://www.medicaid.gov/medicaid-chip-program-information/by-topics/eligibility/estate-recovery.html

Cpa Cat

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Re: Is there a solution to this clusterfuck?
« Reply #20 on: August 26, 2015, 12:50:24 PM »
I think when the OP said her mother refuses to "claim the inheritance," she meant that her mother has RECEIVED the inheritance, but refuses to claim it as income to the IRS.

In fact, it is not her mother's responsibility to claim the inheritance as income or pay taxes on it. As the inheritor, she does not do these things. The value of the estate is declared on the estate tax return and estate taxes (if applicable) are paid from the estate prior to the inheritance being distributed.

The only income for her to claim is the income she is currently earning on the inheritance - wherever it is, it is likely earning at least interest that she should be aware of and declare on her tax return.

I disagree that she needs her husband's tax filings - she can inquire with him if he took the standard deduction or itemized for 2014 - that is all she needs to know. If it appears that her income is below the threshold for filing for all of the last three years, I would have her file MFS for 2014, just for the record. If she doesn't owe anything and isn't entitled to a refund, then there's no real reason to go back 3 years.

Then finalize her divorce and apply for health care. 2015 open enrollment is coming up. She may even qualify for medicaid, despite her assets.

If she wants to apply for health care prior to a divorce, then she would need her husband's tax information - but only for the last year.
She also needs to make sure he isn't claiming her as a dependent.

You cannot claim your spouse as a dependent. Not to mention the many other reasons she doesn't qualify as his dependent. It's somewhat irrelevant whether he is or not. This is like saying, "She also needs to know if he's committing tax fraud." No, she doesn't. If he is, and it becomes an issue, she can address it then and she will be in the right and he will face the consequences of that action.

Rosy

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Re: Is there a solution to this clusterfuck?
« Reply #21 on: August 26, 2015, 02:18:54 PM »
Here is what I know to be true about SS and Medicare

I am 66 and applied for regular SS late last year.

Medicare and Medicare Part B

Come to find out that I was too late in applying for Medicare. Medicare kicks in at 65 and you need to apply before you turn 65 - there is a grace period of several months, but I turned 65 in January and applied for SS in August 2014 so I had to wait for the Medicare Part B benefits to kick in July 2015 this year.
There is a premium charge, mine is $105 a month and it is automatically deducted from my monthly benefits.

Medicare Part A - is hospitalization and such - it is free - there is no premium - you are covered from the day you apply, but not before you turn 65.

There is another part (F?) just for medications
which I did not choose, because I already had and continue to carry full medical insurance. The important thing here is to know that - if you do not take this coverage now, you will be excluded from receiving it in the future - unless - as in my case, my insurance company already offered these prescription benefits and there is a written statement on their website to confirm this.
I was told by one of the insurance advisors for the elderly not to take the word of the insurer and not accept everything I would be told on line by the SS CSV line. Check everything out for yourself and get it in writing.
It can make a huge difference for people that are on expensive medications and will avoid gaps and caps in coverage for meds. 



Social Security


You can choose to apply under your husbands SS if that amount turns out to be higher than your own. However, you must have been married at least 10 years.

I am a widow and in my case it was just slightly higher, if things change they let you know and you can collect under your own SS.

Depending on the year of your birth you can apply and receive full SS or a lesser percentage - in my case I would have been eligible in Jan 2015, but since I applied in August 2014, I receive something like 3% less. I was fine with that.

It was really a fluke - I did not understand the process, I just thought I was getting close and wanted to find out what I needed to do. Well, the date of the phone call to the SS office became my date of eligibility, even though I did not get an appointment until the following month.
The lady there was super efficient - I had all the papers they had told me to bring on the phone - and she set me up right then and there.
 
I walked out of the SS office with a letter of confirmation stating the amount I would receive in approx one month - the direct deposit arrived 2 weeks later! I was stunned and thrilled.

IRS

If your mom had only a small income it is quite possible that she really did not need to file. See if you can get an annual figure from her bank on line or in person and if that's all she had it is as simple as checking it against the amount the IRS shows on their site - she may well be below and in the clear.

Social Security - just get her number and set up her SS account online at the SS website and it will tell you exactly what she can expect to get. No mystery there. The SS office will confirm whether she might be better off filing under her husband. No big thing either -give them a call.

Medicaid and SSI
She may be eligible depending on her income, if it is low enough. I am glad I was not eligible, that is all I know about that.

Divorce - if both parties agree and there are no property disagreements - there are simple legal offices that will do it for around $200 at least here in Florida.

It sounds like all around, these are all good things for your Mom, make sure she files for Medicare - they said up to three months ahead of turning 65 years old. Then look up on the SS website if she is eligible for SS next year on her birthday - maybe it would make sense to file early.


Hope there is a good reason she is turning down the inheritance and good luck to you - it will be fine - you can sort a lot of it out on the phone and online maybe even before you go:)
« Last Edit: August 26, 2015, 02:27:44 PM by Rosy »

El Marinero

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Re: Is there a solution to this clusterfuck?
« Reply #22 on: August 26, 2015, 02:43:11 PM »

Full retirement age for SS is 67 right now I believe, so in a few years she will have that income.

Someone who is 64 years old can retire at age 66 with full Social Security benefits. She could collect reduced benefits today.

Since she is/was married,  she has a choice of collecting off hers or her husband's record (or both just
at different times)

« Last Edit: August 26, 2015, 02:50:03 PM by El Marinero »

MDM

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Re: Is there a solution to this clusterfuck?
« Reply #23 on: August 26, 2015, 02:55:04 PM »
Note that "estate tax" (paid by the estate of the deceased, based on the total value of the estate) and "inheritance tax" (paid by the recipient of the inheritance, based on the amount that person inherited) are different things.  See http://taxfoundation.org/blog/state-estate-and-inheritance-taxes-2014 to get some idea of what might or might not apply here.

LadyMaWhiskers

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Re: Is there a solution to this clusterfuck?
« Reply #24 on: August 26, 2015, 03:16:42 PM »
Apologies if this was already mentioned, but finalizing the divorce will be a good step to protect the assets from the inheritance from any debts your father might incur. I don't think you mentioned where they live respectively, but in a worst-case scenario, creditors may look to your mom to settle debts he incurred. She would probably prevail in court even if they were still married, but it doesn't sound like a court case is any of your ideas of fun.

Good luck! Curious minds now want to know state of residence, if you're comfortable sharing that.