Is Alzheimer's Care a Tax Deductible Expense?

Over the years I have been asked countless times by residents and families "Are the costs associated with the care they receive tax deductible?" While much of the tax code is subject to varied interpretations, and each individual should seek competent advice from their own professionals, it appears that the answer to this question is "likely."

Section #213 of the publication Selected Federal Taxation Statutes and Regulations states "There shall be allowed as a deduction the expenses paid during the taxable year not compensated for by insurance or otherwise for medical care of the taxpayer, his spouse or a dependent to the extent where that expense exceed 7.5 percent of adjusted gross income." The exact definition of medical care has been further explained in Section 1016 "If an individual in a nursing home or a home for the aged because of his physical condition and the availability of medical care is a principal reason for his presence there, the entire cost of maintenance, including meals and lodging is deductible." The key distinction is the purpose of living there. If it is for personal or family reasons, then only the portion of the cost attributable to medical or nursing cost is deductible. The reason that the deductibility becomes cloudy is that service fees in assisted living facilities bundle the medical care component with room and board, making it difficult to determine or justify what portion of the rent covers the care of the resident. Further, most assisted living facilities go out of their way to advertise that they are not a medical care facility. Officially it is defined as: "Assisted living facilities are a type of living arrangement which combines shelter with various personal support services, such as meals, housekeeping, laundry, and maintenance. Assisted living is designed for seniors who need regular help with activities of daily living (ADLs), but do not need nursing home care." Under this definition the deductibility of costs associated with these facilities may be hard to justify.

Publication 502 by the Department of the Treasury, Internal Revenue Service entitled Medical and Dental Expenses helps to clarify the question. "You can include in medical expenses the cost of medical care in a nursing home or home for the aged for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if the main reason for being there is to get medical care. Do not include the cost of meals and lodging if the reason for being in the home is personal. You can however, include in medical expenses the part of the cost that is for medical or nursing care." This means that in an assisted living facility, unless the purpose of the stay is to receive medical care, the cost of lodging and meals may not be deductible.

However, if the individual is chronically ill, as defined under the section entitled Qualified long-term care services all costs associated with the care and supervision of the individual may be tax deductible subject to the 7.5 percent adjustment. Chronically ill is defined in Publication 502: "A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as: 1) Being unable for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual, due to the loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence or 2) Requiring substantial supervision to be protected from threats to health and safety due to severe cognitive impairment." With the enactment of the Kennedy-Kassebaum bill, the law is now clear. Congress stated clearly that the tax code should provide equal consideration for persons with Alzheimer's disease or other irreversible dementia. The only cloudy area remaining is the fee structure of the facility in which they reside.

Another important consideration is the entrance fee, lifecare fee or "founder's fee". "You can include in medical expenses a part of the lifecare fee or founder's fee you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include is the amount properly allocable to medical care." Many of today's assisted living communities charge an entrance or maintenance fee. This fee is intended to cover administrative processing and maintenance of the property, rendering it a non-tax deductible expense according to the Internal Revenue Service.

Memory Care Units, which are dedicated to caring for people with Alzheimer's disease and related dementia rendering substantial supervision to protect residents from threats to health and safety due to severe cognitive impairment, meet the test. Residents fall under the care of licensed health care practitioners who certify their status. In units specifically designed for the care of those with Alzheimer's disease and related dementia, the care, meals and lodging are in integral part of the complete service plan to constitute "medical care." An entrance fee, if it is intended to cover the cost of the initial assessment, and development of the plan of care for the resident and relates completely to medical care, should qualify it as tax deductible under the definition.

What does all this mean? Well, depending upon your personal income, the deductibility of your monthly fees in a special care unit properly qualified can result in an annual after tax savings of between 15 and 20 percent. If you are looking at several different providers offering similar environments and care, this after tax savings could be a deciding factor on who to choose. So it might be more than worth your while to check this out with your accountant or financial advisor prior to making your decision on where to place your loved one.

Early Alzheimers Coping Strategies

The aging process is a natural part of life that everyone undergoes. It is a process of change. As we age our bodies' show this change in various ways: in our hair color, skin changes, muscle tone, and in a slowing and weakening of bodily functions. Advancing age may also bring about subtle changes in memory as well.

Dementia is the loss of intellectual abilities (such as thinking, remembering, and reasoning) of sufficient severity to interfere with a person's daily functioning. The most common form of dementia is Alzheimer's disease. Alzheimer's disease is a progressive, degenerative disorder that affects tissues in the brain, eventually resulting in abnormal brain function. In 1907 Alois Alzheimer, a German physician, first described the abnormal changes in the brain now associated with Alzheimer's disease.

As there are more than 50 diseases that can cause dementia or symptoms similar to Alzheimer's disease, a thorough medical evaluation is needed. Currently there are no definitive tests that can be done to diagnose Alzheimer's disease, rather a series of tests are conducted to rule out other causes of dementia that may be treatable. There are several cognitive tests that can be done that are about 90% accurate in identifying people who have very mild dementia. New advances in MRI testing also help detect early onset of Alzheimer's and may someday be able to predict the disease before a person ever experiences the first subtle confusion. Recently researchers have been experimenting with blood testing such as Presenilin, which can identify an early onset gene, and AOE which can tell you if you are high or low risk for contracting Alzheimer's disease.

Even though a diagnosis may be hard to accept, for some it may come as a relief. The ability to identify a particular physical disease may allow the patient and the caregiver to better understand and respond to the changes that they are seeing. Early diagnosis can be devastating to those who have the capacity to understand the meaning of their diagnosis, but can help equip those involved to understand the disease process and make appropriate plans for their care.

With the progression of Alzheimer's disease or other dementia, the patient may become increasingly dependant upon the caregiver for even the most basic tasks. Daily activities once performed routinely may require assistance or supervision by the caregiver. The caregiver may eventually need to reconsider the range of acceptable activities for the patient as their impairment progresses. The management of financial affairs, and previously safe activities such as driving and preparing meals, taking medications or going for unaccompanied walks may become hazardous. In later stages of the disease matters such as daily hygiene and dressing may be beyond the capabilities of the patient and will become the caregiver's responsibility.

People with Alzheimer's disease experience many common problems associated with their dementia. While not all people experience the same problems, there is a thread of commonality among them.4

Short-term memory loss is normally the first symptom noticed. Patients become forgetful, lose things and have trouble remembering most recent events. Establish a routine and provide a written daily agenda such as notes or a special calendar. Leave items in plain view that are used daily such as hearing aides, glasses so that they can take advantage of visual cues. Avoid questions that test their memory such as "What did you eat for breakfast?" or "Didn't you pay the credit card bill?" these serve only to make them more painfully aware of their loss.

People with dementia often experience word-finding problems, especially when they become fatigued or are emotional. Supply the word if she can't, if they lose their train of thought mid-sentence; tell them that they can come back to it later. Preserving the patient's self-esteem is critical. Some people may have difficulty following instructions or complex concepts. Use short sentences, and visual cues. Never assume that they have understood everything you have just said.

Many people will ask the same question repeatedly. This is quite common and indicates that they are trying to remember something that is important to them. Be patient, and answer their question as if it was the first time you heard it. If the information is critical, jot it down for them.

Denial is a common coping mechanism and a natural way of self-preservation. If you want someone with dementia to admit that they have it, they need to feel safe, supported, and that they have some control over their future. Resist the temptation to convince them of their condition. They are more likely to respond to emotional support, and opportunities to talk about their fears.

Changes in the brains of early stage patients cause impairments in memory, reason and judgment rendering it difficult for them to make decisions. Many feel overwhelmed when asked to make choices, causing them to feel ashamed of their condition. Limit situations where choices are necessary.

Paranoia, common in the disease, results from damage to the part of the brain that separated fact from fiction. It is also a way for the patient to avoid the painful realization that they have Alzheimer's disease. You will not convince an Alzheimer's patient that someone didn't take his wallet, so don't even try. Respond to the feeling behind the paranoia. Help him look around for it. Avoid denying their reality.

For many adults, driving represents independence, freedom, competence and control. It is a way to access healthcare, to buy necessities, to be productive and to stay connected to family, friends and the community. Concerns about driving are likely to surface during early stages of dementia, when individuals are still socially engaged and able to manage other daily activities. Giving up driving can be a deeply personal and emotional issue. Disorientation and changes in memory, visual perception and reaction time make driving dangerous for both the patient and everyone else on the road. The family should closely monitor driving abilities, and if they have concerns then they should have their doctor tell them that they can no longer drive. In most states the Department of Motor Vehicles can offer a competency test as well. Open conversations early in the disease about when driving should cease can help smooth the transition to not driving in the future.

Newly diagnosed seniors commonly experience depression. Symptoms of this are often associated with withdrawal, crying, agitation, and changes in eating habits or sleeping patterns, feelings of worthlessness or acting out. Depression can significantly lower a persons cogitative capabilities and their ability to fight-off illness. Ultimately this is the single biggest factor that will influence their quality of life. Depression is treatable with antidepressants but the best treatment for depression is socialization. Isolated people with dementia tend to focus on all the things that they can't do anymore, their limitations. But in social situations such as day care or senior living homes their focus becomes directed outward toward their environment.

Seniors who can learn to view changes in their life as a process of life rather than an end to it will treat themselves to a happier, healthier life. Families are often concerned that knowing what is causing their loved one's memory loss may trigger them to panic, or become depressed and hasten the degenerative process, while for many the opposite may be true. A patient who is kept in the dark about the source of their problems may tend to worsen because they desperately try to remember things and become frustrated, agitated and possibly depressed when they cannot. They need to know that something is causing the problems that they are experiencing and that it is not normal or a part of getting old. This way they can learn to understand the disease and their prognosis and be more receptive to the adjustments in their changing lifestyle.

"But I'm Not Ready Yet"

Why does your family member say, "I'm not ready yet" when confronted with the prospect of moving out of his or her home and into a senior living environment? Often it is a convenient way for a nervous person to terminate a conversation about what they see as an unpleasant prospect. Many seniors will feel the decision is premature - they desire to remain where they are more than they desire to move into a senior living community. The decision process to move into a senior living community can involve the psyches of many people (spouse, daughter, son, grandchildren, friends), and it is normally an emotionally charged personal decision. Residents as well as decision influencers will have their own prospective and biases about senior living according to their experience or knowledge of the business that is all filtered through their personal value system.

" I’m not ready yet." Translation: I'm afraid of giving up my home, independence and lifestyle for an unknown. What if I don't like it? What if they don't like me? What if they raise the rents and I can't afford to live here anymore? Seniors will often look for ways to avoid making the final decision. It is often out of fear or an unwillingness to commit. If an objection can be found they will usually find it, because it is what they are looking for most. When someone says they are not ready yet, what it really means is that perhaps they are afraid or do not understand all the benefits and value Senior living has to offer them personally.

Considering the demographics, its not surprising that there has been a tremendous amount of research into the lifestyles and values of older adults. While opinions differ, some general conclusions can be drawn. Seniors are interested in being depicted as active, interested, involved and see themselves as at least 10 years younger then their true chronological age. In fact, seniors' anxiety about their age is more closely associated with an aversion to the health complications associated with growing old that will eventually place restrictions on their personal freedom. They are in fact, looking for empowerment so that they can live fuller lives and stay in control longer. They are generally private people, especially about their finances, are comfortable with themselves, more experiential and less materialistic than their children. They see themselves as morally conservative and intellectually liberal, they are more aware and educated and consider learning to be a lifelong experience. It is also a time in their life when they experience a growth in their own spirituality and altruism toward their fellow man. They are among the greatest givers of time to volunteer causes than any other group. They are particularly interested in helping other, less active seniors. They are spouse and family oriented, proud and independent.

So how do you approach this proud and "independent" person who you suspect may not be safe living alone at home? How do you answer them when they say they’re not ready? Overcoming objections is part of any sales process. It helps you to gather more information and clarify needs.

1. Objection - "I'm not ready yet."

Response - "Good, then it's just a matter of working on the timing, isn't it?"

- "I understand how you feel. But tell me, just what do you think would have to happen to you before you felt that you were ready? Wouldn't it be comforting to you and your family that should such an event ever happen to you, you would already be in an environment where you could receive that cushion of care right when you really needed it?"

2. Objection - "I would have to sell the house."

Response - "That's right. Most seniors have sold their homes to finance their senior living and they will tell you it's the best decision they ever made. You can arrange a meeting with a very competent Realtor who will do a comparative market analysis on your home for no obligation. Many people are surprised at how much equity they have tied up in their homes that could be earning interest for them if they sold."

3. Objection - "I'm too old to move now."

Response - "That's interesting. There are many people living in senior living communities who are older than you... I'll bet you're not too old to get more out of life, right? This lifestyle provides you the opportunity of a secure, enjoyable, carefree retirement, and it could be the best years of your life. Statistics prove that people live on the average two to three years longer in a senior living community than in an apartment. There are several good reasons for this. One of them is companionship. One of the saddest things about growing older is that our friends pass away. We meet new friends, of course, but if we are not in a community setting we don’t have the ability to continually expand our friendships. Therefore, they are continually shrinking. If we stop driving in the years ahead, or our friends don’t drive, or the weather is bad, we tend to spend a lot of time within our private residence. Many meals are eaten with our only companion being Dan Rather. It’s easy to see how one can slowly become a recluse over a period of time. At a senior living community, companionship is always available."

4. Objection - "I'm just not sure."

Response - "There's some risk involved, isn't there? And you want to be certain you do the right thing. What information would you need to be more comfortable with your decision?"

- "I sense that there may be something that you are uncertain about. It is the (fee, moving, apartment, etc., until you zero in). Well, if it weren't for (the objection) do you think this lifestyle here might make sense for you?" "So, if I could (fix the objection) could you at least give it a try?

At some point, and in spite of all their objections, sometimes love gets tough. People who are isolated can become depressed and depression leads to health failure, which puts them at risk. When they were the parent they would not even think of allowing you as a child to be exposed to a potentially dangerous situation regardless of what you wanted. As an adult child, you may have the same decision to make for your parents.

In the end, overcoming objections is a process of developing a comfort level with the decision. Be patient with your loved one. Listen for other hidden meaning to their objections; they may be using the opportunity for a completely different motivation then to just throw out obstacles. Repeat the objection to clarify your understanding. Sometimes when people hear their objection repeated back to them it sounds worse than they really intend it to be. Confirm the objection by agreeing with them, don’t try to argue with them or pretend to know better. Seniors like to have their objections acknowledged and affirmed. Question their real intent behind the objection and look for common ground. Answer their concerns as best you can without being smart or glib. Confirm the answer by relating the experience to others in their situation that may have had the same objection but ultimately found that it might have been overstated. Finally close on some neutral ground and leave the discussion with something that you both agree on about the situation.

After 30 years of seeing adult children and their parents deal with these tough decisions, I have learned that it’s the process they fear rather than the end result. Most seniors, once admitted to a senior living community readily adapt. I found this with my own father who was initially resistant until he experienced two hospitalizations in as many months. Both of these could have possibly been avoided if he had someone monitoring his vital signs and insuring that his medications were being taken as prescribed. He has now moved into an assisted living community and has made some new friends and is much happier and healthier than when he was living alone in his house. After a few months there he admits that his quality of life has improved, and that’s our ultimate goal anyway, isn’t it?

Legalese for Caregivers

If you are feeling bad about your lack of knowledge regarding legal choices for your parents, go easier on yourself. Few people are prepared for the responsibilities of caring for an aging parent, preferring to procrastinate difficult discussions hoping the time may never come but it usually does. Few of us are fully informed about the legal options, which relate to their care should they for some reason become incapacitated or unable to make those decisions on their own. It is a good idea to seek professional advice in making and documenting your decisions in advance from a qualified elder law attorney. The following definitions may be helpful to you so that you know what basic options are available.

Advance directives are written instructions about one's health and wealth decisions in the event that one becomes incapacitated and unable to make those decisions for themselves. While State regulations vary, there are essentially two types of advance directives: a medical power of attorney, living will, and power of attorney.

A medical power of attorney is a document, which enables you to appoint someone whom you trust to make decisions about your medical care in the event you cannot make those decisions, yourself. Also known as a health care proxy, the person you appoint through a medical power of attorney is authorized to speak for you any time you are unable to make your own medical decisions, not only at the end of life.

A living will is a type of advance directive in which you put into writing your wishes about medical treatment should you be unable to communicate those wishes. A DNR or Do Not Resuscitate clause may be part of a living will which documents that you may not desire to have extraordinary efforts made on your behalf to give artificial respiration to revive you in the event of cardiac arrest or other catastrophic medical failure. It enables you to choose or decline certain or all treatments or insist on trying all possible treatments, or something in between. It is critical that the language you use in this document is as specific as possible. State laws also define when a living will may go into effect and may limit the treatments to which the living will may apply. Your right to accept or refuse treatment is protected by constitutional and common law. Patients' Bill of Rights enable you to bring a copy of your living will or medical power of attorney to the hospital to your treating physician so that your wishes can be adhered to. The Patient Self-Determination Act requires health care facilities who participate in Medicare and Medicaid to inform patients of their rights to execute advance directives.

A Power of Attorney is a document which enables an agent or attorney in fact to make financial decisions for you should you be unable to do so, or simply do not wish to do so. A power of attorney can be limited to bank accounts, transferring of assets, paying bills or it can be very broad encompassing all financial decision making on behalf of the person. There are two types of powers of attorney, a springing and a durable power of attorney. A springing power of attorney only becomes effective when a stipulated condition is met, such as the creator becoming incapacitated or incompetent. To determine incapacity, typically at least two physicians must declare the individual to be incapacitated. To declare someone incompetent normally requires an order from the courts resulting from a competency hearing which, if contested can be arduous. The more common type of power of attorney is the durable power of attorney, which is in effect as soon as the document is properly executed, and is always in effect until it is cancelled or replaced by the creator.

A legal guardian is an adult to whom the court has given authority and responsibility for providing care of an individual or an individual's assets, or both. To act as a legal guardian you must take control of the property; make sure that it is adequately protected against loss; establish a budget for the Ward; pay the Ward's debts as they become due; invest the property in a manner suitable to the Ward's circumstances and periodically report to the court about the assets, receipts and disbursements of the estate. A guardian need not be a relative of the individual. The court may appoint a guardian of the person when there is no one able or available to meet the needs of the individual because of the their own incapacity, or other reasons. This person is called a guardian-ad-litem. Guardianship is established only after legal documents are filed, a necessary investigation is conducted, the physician has provided testimony via affidavit and /or court hearing and the court appoints a guardian. Often the court may require that a bond be posted to secure the responsibilities of the guardian. Once appointed responsibilities for the individual may be very broad. Guardianship law may vary significantly from state to state.

The decision surrounding your advance directives should not be undertaken lightly. Capacity to make a health care decision encompasses the ability to understand and appreciate the nature and consequences of a health care decision, including the resident's diagnosis and prognosis, the benefits and risks associated with the decision, alternatives to the decision, and having the ability to reason and make judgments about the information. Capacity to make financial decisions so that one's assets and income can be efficiently applied to maximize one's quality of life can also be beyond the reach of the average person, so it is wise to seek professional guidance to fully understand the expectations of your role, or the role of the agent(s) you have chosen to act on your behalf in any such arrangement.

This information is not intended to provide legal advice but is merely informational. If you would like to have your current documents reviewed or these documents properly prepared and executed, please consult an attorney who handles elder law issues.

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Description

A complete family guide to making an informed decision regarding retirement communities and senior living options. Written by a 30-year veteran operations expert in Senior Housing and author. Learn about the different types of facilities, how they are priced, and how to choose which one is right for your situation. How the isolation of living at home alone can lead to avoidable health problems, tips on dealing with guilt, downsizing possessions and coordinating the move. Explore financial resources and understand what Medicare and Medicaid cover in senior housing. Finally, learn how to deal with caregiver stress and burnout and the family member who says "But I'm not ready yet." 

Family Review

Review by: Karen Doll on March 28, 2013 :     
The ebook "Making the Move to a Retirement Community" is an excellent resource for anyone who is personally considering this option or is the loved one of an elderly family member who needs detailed information on what is available and the obstacles you may encounter.
As a nurse practitioner nearing retirement age, as well as the caretaker for elderly parents, I find this book extremely informative as it guides you step-by-step in the process of selecting the best type of retirement living according to your needs.
I learned that retirement living does not necessarily have to mean assisted-living. I was not aware of the broad range of facilities available, from independent living communities featuring all inclusive meals and activities with home health services that can provide a cushion of care if you need it, to assisted living arrangements and continuing care.
My own parents have lived in the same house for years, and I now see the safety and isolation issues they are facing that can impact their health. Despite their years, they are not ready for assisted living, and I am happy to have learned about the availability of alternative living arrangements so they can enjoy a safer, more social lifestyle without the burden of meal preparation and home maintenance.
The author presents his information in clear concise language and covers all the basics one needs to know to make an informed decision as to how best to handle the transition with the ultimate goal of maintaining independent living for as long as possible.

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Caregiver Stress and Burnout