Month: April 2013

We’re all living longer, and this means many of us will require long-term care such as nursing-home care or in-home services. The costs of these services can be overwhelming, but you can prepare for these financial demands with careful planning.

What’s covered?

Although Medicare does cover long-term care to a certain extent, this coverage is limited. Generally, Medicare only pays for about three months of nursing-home care immediately following a hospitalization, and copays may apply.

Medicaid will cover some long-term care costs, but to be eligible you have to exhaust virtually all of your personal resources. This could create complications for your spouse, who may have fewer assets and/or less income to live on if you need to be cared for in a nursing home.

Do you need insurance?

Bypassing long-term care insurance might be the right choice if you have a lot of money (in which case you can afford to set aside enough money for years of care while still leaving enough to support a spouse), or if you don’t have much money at all (in which case you’re likely to qualify for Medicaid soon after entering a nursing home).

But if you fall somewhere between these two extremes, you may want to consider long-term care insurance.

Determining what kind of policy to buy can be a major challenge, because the cost varies dramatically depending on your age, the amount of coverage and the features included. Discuss it with your advisor, who will help you select the option that’s best for you.

If you’re unhappy with the amount of taxes you’ve been paying on your investments, you might want to start planning now so that next year you maximize the money going into your pockets and minimize that going into Uncle Sam’s.

Here are some tips:

• Make all capital gains long-term gains; the tax treatment of a capital gain depends on how long you’ve owned the asset before you sell it. Gains on the sale of assets held for longer than a year are treated as long-term gains and are taxed at a maximum rate of 20 percent.
• On the other hand, gains on the sale of assets you’ve held for a year or less are treated as short-term gains and are taxed at the rate you’re currently paying on regular income, which can be much higher.
• Select which lots to sell. You can reduce your capital gain by selling shares purchased at the highest price. To do this you must specify to your financial planner or investment company which shares are to be sold.
• Use capital losses to offset capital gains – both long-term and short-term capital losses can be used to offset capital gains on a dollar-for-dollar basis. The maximum capital loss you can deduct in a year is $3,000, but any losses that exceed $3,000 can be carried forward into future years until you have written them off completely.

Note that if you take a taxable loss on an investment and feel it has the potential to rebound, you can buy it back – but only after 30 days, due to the so-called wash-sale rule. If you buy it back within 30 days, you won’t be able to take the loss.

By minimizing your capital gains taxes, you can potentially save thousands of dollars – it’s well worth the effort.

This article is not intended to provide tax or legal advice and should not be relied upon as such. Any specific tax or legal questions concerning the matters described in this article should be discussed with your tax or legal adviser.