FINANCIAL PUZZLES THE ELDERLY FACE

TWO TALES OF THE ELDERLY

The other day, I ran into two cases back-to-back which are typical examples of the financial and emotional decisions people face when taking care of the elderly.

Sue, (not her real name) had been a caregiver for her aunt until her passing and almost immediately had to care for her very ill father. Her father passed about five years ago but she’s now the fulltime caregiver for her mother, who has Alzheimer’s disease.

Sue is in her mid 60s and has to be available for her mother 24 hours a day, 7 days a week. She listed the long list of health challenges that she herself has, mostly due, I would guess, to the stress that fulltime caregivers undergo.

Sue is a tiny person and even though her mom is smaller than she is, cleaning, dressing, feeding and generally physically moving a person requires physical strength.

She has no income or assets and spends her time watching Korean dramas. She rarely leaves the house. She came into our VITA (Volunteer Income Tax Assistance) facility for free tax preparation because it would normally cost her $150 to get her taxes prepared just so that she can receive the $85 excise tax credits from the State of Hawaii. She was grateful for the $85 she would be receiving.

Soon after Sue left, Esther (not her real name) came in to get her taxes prepared. When I went through her paperwork, I saw that she had made a reverse mortgage on her home in July of 2011. I inquired as to why she decided to annuitize her home and her story broke my heart.

http://malamakupuna.blogspot.com/2010/10/reverse-mortgages-for-kupunas.html


Her sister was sick and they were spending down her sister’s assets for her care. Eventually, her sister would have to go on Medicaid (welfare) once the assets are spent. Her sister passed away in February 2011.

Esther was convinced by her advisors that since the paperwork was in the works, she should go ahead with the reverse mortgage. Part of the plan, as I understand it, was that Esther was to take the $200,000+ she received in proceeds and buy a single premium life insurance policy on her (Esther’s) life so that in the event that Esther passed, funds would still be available for her sister.

As a volunteer for VITA, I do not and cannot offer financial advice. I am there only to prepare income tax returns. In a previous life as a financial planner/enrolled agent, I have a habit of looking at tax returns from the other side.

Here’s what’s wrong with Esther’s situation.

1. Once Esther’s sister passed on, there was no need to close on the reverse mortgage loan. The sister passed in February and the reverse mortgage was made in July.

2. The life insurance situation was reversed. You normally cover the person needing the funds (in this case, Esther’s sister although she was likely uninsurable) so that you can make Esther whole for providing the money to care for her sister. When the sister passes, the insurance proceeds pays Esther for the funds provided.

She asked for advice and I suggested that she go to the bank who issued the reverse mortgage to see if the agreement can be backed out.

Here are some of the financial issues that our Kupunas are facing:

1. Most of the elderly do not anticipate the time when they would need to be cared for. Buying long term care insurance in adequate amounts (with inflation factors) is a start. Many live their lives believing that they will not be a burden to others, but, family members frequently make substantial personal, family, career and financial sacrifices to take care of elderly family members who cannot care for themselves.

Sue is an example of a person who has sacrificed her personal life for elderly family members. But she, too, will be left to fend for herself since she doesn’t have children. All because the kupuna didn’t provide for the situation.

2. Many Kupunas absolutely want to divide their assets equally to their children, regardless of which child does the care giving. The caregiver not only sacrifices his own career/family/finances, but risks health problems due to the stresses brought on by care giving.

3. Financial advisors sometimes put forth recommendations to line their own pockets rather than to improve the Kupuna’s financial situation. In the case of Esther, the person selling life insurance had the insured/beneficiary needs reversed and made five figures in commissions on the single premium policy. The mortgage broker made between $6,000 to $12,000 in fees for the reverse mortgage.

A reverse mortgage is to be used and considered only as the last resort. Once used, it usually cannot be undone. In Esther’s case, it should’ve been considered (if at all) only after her sister’s assets had been spent. And even then, it left Esther with nothing left to take care of her own care needs.

4. Frequently, family members who are also beneficiaries are not the best people to rely on. Family members often believe that the assets of their elderly family members are their rightful inheritances and would pressure the Kupuna to transfer the assets to them now so that they can get the government to pay for the care.

Some, who aren’t even the primary caregivers, who are the ones who suffer personal financial losses in the process, go so far as to resent having to spend their inheritance for the elderly person’s care.

When contemplating making changes like a reverse mortgage, consult an independent person who charges a fee. An attorney who specializes in estate planning, a knowledgeable CPA or a fee-based financial planner. Beware of financial planners who also sell a product where they also receive a commission such as insurance, stocks, real estate or reverse mortgages.

They have a conflict of interest and will have breached an ethical code of conduct by receiving both a commission and a fee.

GWEN JOHNSON... A SPECIAL VOLUNTEER

Gwendolyn Johnson… a step above the rest

I volunteer to prepare tax returns every year for the elderly under the VITA/TCE program at Leeward Community College. VITA stands for Volunteer Income Tax Assistance and TCE stands for Tax Counseling for the Elderly.

http://malamakupuna.blogspot.com/2012/01/free-tax-returns-preparation-for.html

One volunteer in particular, stands out among the rest of us. Gwendolyn Johnson has been volunteering ever since attending and graduating from Leeward with a degree in accounting.

Always smiling

Every Saturday morning, she is one of the first ones there starting up the computers or getting others to do so, making sure the signs are up that direct people to the proper room where the tax preparation is done, or making sure that all the forms for the volunteers and the clients are organized and ready to go.

It's no secret that I'm not the brightest bulb among the volunteers.  I always try to get a station close to Gwen so that I can ask her questions when I’m stuck. Tax laws and rules are so complicated that we need people like Gwen to consult with who know most of the rules.

With so many tax credits like Earned income Tax credits, dependent care credits, child care tax credits, education credits and low income rental credits, the folks coming to get their returns done know exactly how much they'll be getting back. If a preparer is off by a few dollars, they let him/her know.

Volunteers collaborating on tax matters

As the morning rush eases up and there is a lull in the tax preparation activities, she goes into the back room to help our “chef”, Victor Punua prepare food for the volunteers. One of the benefits that the volunteers at Leeward look forward to is the lunch that Victor prepares.

Gwen helping chef Victor prepare lunch

I once finished early and went back to see if I could help Victor and all he asked me to do was to go back and see if or when Gwen would be available. Har!

Of course, after everyone is fed, she is busy cleaning up and putting away the materials used in the preparation service.

It all began when her daughter and son graduated from high school and entered college. They both encouraged her to go back to school and 30 years after she herself graduated from high school, she was accepted at Leeward Community College. It was an exciting time for her because after raising her two children, she finally was able to do things for herself.

While taking a History course, she was having difficulty completing and comprehending class assignments. A counselor had her tested and they found that she suffered from dyslexia. This explained why Gwen always had difficulty reading and comprehending things throughout her life.

After further testing, they found that math and logic was what Gwen should be doing and she immediately changed her major to accounting. Her life was forever changed. Gwen took a class from Professor Roy Kamida who gave his students a choice of submitting two written projects or volunteer for five Saturdays under the VITA program. She chose the VITA program.

Gwen graduated in 2009 and continues to volunteer in the VITA program. This is her fifth year as a volunteer.  In fact, she brings much vitality to the program and Professor Kamida would have a difficult time without her. We all would.

A happy day for Gwen with her two children

Volunteers like Gwen are hard to find. Most people will do what is required. Gwen looks for things that need to get done and quietly does them.

This program at Leeward has one more month to run. Gwen is there every Saturday until the end of March from 9 AM to 12 noon. The service is also offered every Tuesdays and Thursdays from 1:30 to 5:30. Be sure to stop by to say hello.

Free Tax Return preparation for the Elderly

FREE TAX RETURN PREPARATION FOR THE ELDERLY

Every year, many older individuals do not file an income tax return because they are not required to do so by the Federal Government. If the individual is a resident of the State of Hawaii, however, he can get a “refundable tax credit” or cash, up to $85, depending on his income.

This is a refund of the 4.5% excise tax that Hawaii consumers pay when buying goods and services. The amount of the refund is based upon the person’s income. The lower the income, the more will be refunded.

Volunteers who come back year after year to help. Toni Tsusaki,

Gwen Johnson and Kyon Suk Florino

Frankly, most don’t bother because tax returns and rules are difficult to understand and comprehend. The tax law is one of the most complicated of all the laws that our government imposes upon its citizens.

Not to worry. If your tax returns are simple and you don’t have complicated investment income, business income or complicated itemized deductions, then you can have the return prepared at no charge to you. The program is put together by the IRS and is called VITA/TCE which stands for Volunteer Income Tax Assistance and Tax Counseling for the Elderly.

There are many different sites around Hawaii so I’ll introduce you to the site that I’m most familiar with on the Leeward Community College Campus. The site coordinator there is Professor Roy Kamida, who is a CPA. He has a cadre of volunteers who work alongside students at Leeward in preparing tax returns.

Professor Roy Kamida, deep in thought

Students benefit because they are able to obtain class credits and get real life experience in dealing with real life situations. The repeat volunteers keep coming back each year because they want to give back to the community and find that this is a very fulfilling method of doing so.

Each volunteer must pass a test administered by the IRS so that they can be certified to prepare tax returns. Professor Kamida provides 16 hours of class and lab training to help each person prepare for the certification test. He is also on hand to assist when volunteers run into problems while preparing a tax return.

Here is Roy at one of his training sessions

Go here to find other sites around the state that offers free tax preparation services.
http://www.hawaiitaxhelp.org/learn/site-listings/

Roy gets much help and support from Leeward's faculty as well

as faculty from U.H. West Oahu. Here, you have Della Anderson,

Shelley Ota and Sharon Cox helping to organize the registration.

At Leeward, tax services are available every Saturday morning from 9:00 AM to 1:00 PM beginning on February 4 and ending on March 31. They also offer this service on campus every Tuesdays and Thursdays from 1:30 PM to 5:30 PM. This service begins on February 7 and ends on March 22.

Two returning volunteers. Cathleen Gabayan, deep in thought

and Jack Hewitt

Many senior citizens are unable to go down to the Leeward facility because they aren’t physically able to do so. They can get a family member or social worker to collect their tax information and bring it down to the facility and a paper tax return can be prepared to bring back to the taxpayer for signing. For more information, Roy can be contacted at 808-455-0294 kamida@hawaii.edu. Ask him to send you an intake questionaire to start the process.

Two more returning volunteers. Jue Wang and

Victor Punua. Victor cooks and feeds the volunteers after each Saturday

session. I'm sure many return because of his cooking.

List of items needed to have a free tax return prepared:

•        Photo Identification for you and your spouse

•        Social Security Cards for you, your spouse and dependents

•        Birth Dates for you, spouse and dependents

•        Wage and earning from all employers Forms W-2, unemployment income 1099-G, retirement income 1099-R, Social Security benefits SSA-1099

•        Interest and dividend statements from financial institutions Forms 1099-INT & DIV

•        A copy of last year’s federal and Hawaii returns (2010) if available

•        Bank Routing Numbers and Account Numbers for direct deposit of refunds, optional

•        Other relevant information about your expenses:

•                    College tuition, textbooks and required supplies costs and scholarship information

•                    Amounts paid for daycare; providers’ addresses and identifying numbers

•                    Information for itemized deductions

o   Mortgage interest and real estate taxes paid for your personal residence

o   Charitable contribution receipts

o   Substantial out-of-pocket medical and work-related costs

Let’s do this together. Many don't file because it doesn't make sense to pay a person $100 to do a tax return to get $85 back. With this free service, it works.

Bringing Hula to the East Coast

Sabina Plaza McWilliams... Spreading Aloha

Here's Sabina dancing the hula on her last visit here. This

was at St. Francis West hospice

A childhood friend, Sabina Plaza McWilliams tries to come home to Hawaii once a year with her sister, Juanita Plaza Carter. Sabina lives in Southern Florida while younger sister Juanita lives in Glendale, California.

Here are sisters Juanita and Sabina in

front of St. Francis West Hospice

Sabina entertains at nursing homes in South Florida by dancing the hula with a group called Kamaaina Dancers. The group is based at the Northeast Focal Point Senior Center in Deerfield Beach Florida. This is in the Coral Springs area, just above Fort Lauderdale and below Boca Raton.

Sabina resting in the lobby of St. Francis West Hospice

The group is instructed and choreographed by Donna Flynn who began dancing 40 years ago in Palo Alto, California. She started Kamaaina Dancers over 15 years ago and they perform at least 8 shows a year for senior communities, assisted living facilities and other organizations. What nominal fee they charge goes to the Alzheimer's center.

When dancing in a group like this, the members must dedicate a lot of time to rehearsing, because although all are seasoned dancers, each school or halau has its own style when dancing a number. So the seven members meet once a week. The oldest dancer is 87 years young.

Sabina is the newest member, having been with the group for five years and is the only Hawaii-born member. Most of the members have been to Hawaii for a visit.

We grew up in Kapalama where the Post Office is now situated on King Street.

Sabina was first introduced to hula at Palama Settlement and eventually went on to learn from Kuulei Stibbard on Beretania Street. She also danced with a group from Papakolea where she developed her soft and graceful hand motions.

Sabina dancing to "To You, Sweetheart, Aloha"

After graduating from Farrington High School, she moved to Los Angeles where she performed with a small group in Hollywood and at private functions in Beverly Hills and Bel Aire. She is so happy to be back into hula.