On Friday, May 15, 2015 at 11:20:43 AM UTC-4, taxed and spent wrote:
"(PeteCresswell)" wrote in message
...
Every will I have seen so far contains boiler plate to the effect that
the executor is directed to immediately pay all medical expenses.

Seems counter-intuitive to me. Why not directives to pay all
lawn-maintenance expenses? All utility bills?... and so-forth.

What is so special about medical expenses - except for the potential for
a feeding frenzy by caregivers plus the huge difference between
insurance/Medicare payments and actual charges?

Seems like a bad idea on the face of it.

What am I missing.
--
Pete Cresswell

Aside from a question mark at the end of your question, you are missing the
tax implications.

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
dependents.



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.

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.