On Thursday, May 14, 2015 at 6:44:19 PM UTC-4, J Burns wrote:
What's the NJ Death Act? I googled, found nothing. And what
payment, from whom and for what exactly are you talking about
that gets added to the estate? I've never seen payments for
medical bills by Medicare or insurance treated as income.
If the person is elderly, under Medicare, then Medicare pays
most of the medical bills, supplemental insurance or the estate
would pay the rest. I don't see why anything would be "added
to the value of the estate. A judgement? For what? Where did
that come from?
AFAIK, in NJ an estate is handled the same way it is anywhere
else. You total up the assets, pay out the bills due, including
any final income tax, the money gets divided up among the heir
per the will, any state or federal estate tax is paid.
On Thursday, May 14, 2015 at 9:59:42 PM UTC-4, Ashton Crusher wrote:
I assume you mean the final income tax return, if there is one.
A lot of folks die with just SS and some minimal interest or
other income, below the level where there is any tax due
or need to file. Medical bills *might* be deductible, but only
if you itemize deductions and the medical expenses exceed 10% of
adjusted gross income.
Even then, it seems bad to put in a will. All creditors really
should be dealt with equally. At the very best, giving preference like
that could lead an executor to make a very bad decision. Let's
say the estate only has $25K in assets and there are $25K in
medical bills. The executor just follows the bad instructions,
pays the medical bills, and there is no money to pay all the
other debts that total another $20K? Now, good chance you
could have some legitimate lawsuits, because those folks got
I just noted that mine says first to pay all just debts and funeral
expenses. Guess they included funeral expenses since they will not
incur until after I die.
I tell people that doctors will not let you die as long as you still
Medical care is a high-stakes game.
If medical professionals don't use extreme measures and perform them flawlessly, they'll certainly be sued.
Seems to me if we demand perfect service from them, we had better pay them first.
So when grampa tips over from a coronary and you don't want huge medical bills, think carefully about who you call.
Aside from a question mark at the end of your question, you are missing the
By authorizing the executor to pay the medical expenses "immediately", the
will is seeking to obtain a possible double tax benefit: 1) deduct from the
decedent's final personal income tax return; and 2) have the value of the
estate reduced by the amount of the medical expenses paid. If the medical
expenses are not paid within the proper time limits, tax benefit #1 is lost.
From IRS Pub. 559:
Medical expenses paid before death by the decedent are deductible, subject
to limits, on the final income tax return if deductions are itemized. This
includes expenses for the decedent, as well as for the decedent's spouse and
In 2014, medical expenses exceeding 10% of adjusted gross income (AGI) may
be deducted, unless the decedent or their spouse is age 65 or older. In that
case medical expenses exceeding 7.5% of AGI may be deducted.
Qualified medical expenses are not deductible if paid with a tax-free
distribution from an HSA or an Archer MSA.
Election for decedent's expenses. Medical expenses not paid before death
are liabilities of the estate and are shown on the federal estate tax return
(Form 706). However, if medical expenses for the decedent are paid out of
the estate during the 1-year period beginning with the day after death, you
can elect to treat all or part of the expenses as paid by the decedent at
the time they were incurred.
If you make the election, you can claim all or part of the expenses on the
decedent's income tax return (if deductions are itemized) rather than on the
federal estate tax return (Form 706). You can deduct expenses incurred in
the year of death on the final income tax return. You should file an amended
return (Form 1040X) for medical expenses incurred in an earlier year, unless
the statutory period for filing a claim for that year has expired.
The amount you can deduct on the income tax return is the amount above 10%
of adjusted gross income (or 7.5% of adjusted gross income if the decedent
or the decedent's spouse was born before January 2, 1950). Amounts not
deductible because of this percentage cannot be claimed on the federal
estate tax return.
On Friday, May 15, 2015 at 11:20:43 AM UTC-4, taxed and spent wrote:
Having a limit of one year after the date of death to pay
the medical bills in order to have them qualify for a tax
deduction I see. How that translates into boilerplate in
wills that directs the executor to "immediately" pay
all medical bills, that I don't get. It would seem to me
that it sets up the possibility for a naïve executor to
royally screw things up. If there aren't enough funds to
pay all the debts being one example. Follow that direction,
the other legitimate debtors get nothing? It would seem
it would make more sense to just point out the one year
time clock. Plus, a lot of estates, there isn't even going
to be any possibility to deduct medical expenses, because
they don't have enough income to even pay taxes.
On 05/15/2015 10:20 AM, taxed and spent wrote:
Nothing there has any real urgency and hence the urging of "immediate".
As long as the election is made and the expenses paid within the year,
it's all immaterial as to whether it's the day after or 364 days after.
As trader also says, nothing posited so far providee any reason for such
a clause being included.
I haven't been in a situation where there weren't sufficient assets as
his concern raised poses so I don't know just what precedent is; I'd
assume there would be rules that state who's first in line just as there
are in bankruptcy and that'll get sorted out as part of the closing of
the estate. Surely do agree that just writing a check for everything to
one individual creditor even if they have a legitimate claim is unlikely
to be the (right) answer.
1. Medical bills are usually big.
2. Between what's supposed to be billed to insurers and what's supposed
to be reimbursed, medical bills can be complicated to resolve.
3. Substantial items on medical bills may be open to dispute.
So the lawyer advises the client to instruct the executor to attend to
the medical bills immediately. Otherwise, the lawyer may not be able to
give the inheritor his money in time to get into law school.
All of those are even further reason to absolutely _avoid_ any rush to
But ensure, meanwhile, possibly paying out more than might be necessary
if judicious care were taken for 2) and 3) in resolving any claims as
economically as possible for the estate's benefit. Just 'cuz the
principal's gone doesn't relieve the executor from his fiduciary
responsibility to manage the assets prudently and to the benefit of the
It's still "just nonsense" as posited by OP; it would be interesting to
see an actual sample clause that raised the question rather than simply
a paraphrasing of an intent.
On Friday, May 15, 2015 at 2:53:01 PM UTC-4, dpb wrote:
Seems if paying medical bills within the one year limit for
tax purposes is the issue, then the more logical thing to do
is just explain that issue in some detail in a letter to the
executor that goes along with the will. That way the executor
understands the issue, knows what the deadline is, can get tax
advice if needed, and proceed accordingly.
And, of course, those are _current_ tax rules; who knows what would be
the actual rule at the time? Tax advice, etc., doesn't got in the will
at all; details _will_ be different.
As I noted (in less detail) earlier, the only reason I can see for
something like the OP's original purported verbiage would be in the case
of a draft document drawn up by an attorney on a medical institution's
payroll and hence working for the institution and them then making this
available as a purported "service". Sleazy, but not out of the realm...
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