According to a new poll conducted by the AP-NORC Center for Public Affairs Research, 3 in 10 older Americans say they would rather not think about getting older rather than planning, and around one-quarter say they feel they probably will not need long-term care as a senior. According to government figures, 70 percent of Americans will need long-term care at some point after they reach the age of 65, whether from a relative, a home health aid, assisted living, or a nursing home. And they’ll need it for an average of three years.
]]> Most of those who participated in the poll said they expected family to take the initiative to help out if they need long-term care, though 60 percent of them said they had not yet spoken with any loved ones about that possibility.In addition to misunderstandings about the need for long-term care, the survey also demonstrated that many older Americans do not really understand what costs are involved in long-term care. Almost 60 percent of survey participants underestimated what kind of money they would need. This makes sense in light of the fact that Medicare is the main payer of long-term care in the United States.
Because the costs of long-term care—whether it be in a nursing homes, assisted living, home health care, or another setup—can be a drain on savings, it is important to consider how it is one will pay for such care when the need arises. Doing a little planning can help protect your estate, allowing you to pass more of your wealth to your heirs, but the planning must be done correctly.
Source: Source: Poughkeepsie Journal, “Poll: Boomers lag on long-term care plan,” Jennifer Agiesta, Lauran Neergaard, May 4, 2013.
]]>In our last two posts, we were talking about a federal appellate decision that did not have anything to do with Ohio but that could in the future. This recent decision conflicts with decisions in two other U.S. Circuit Courts of Appeal so, because the stakes are fairly high, the Supreme Court could end up making the final decision.
]]> In the most recent case, the 7th Circuit said that the retirement fund was not exempt because, essentially, it was not the debtor's retirement account. Two decisions out of other circuits, however, disagree.The 8th Circuit ruled in 2010 that the language of the exemption does not differentiate between the debtor's retirement funds and inherited retirement funds. This is a bankruptcy case, so the bankruptcy code must apply, right?
Just last year, the 5th Circuit went a step further to say that an asset "set apart" for retirement at any time falls under the exemption. Again, the bankruptcy code applies.
This 7th Circuit panel, though, relied on the tax code and the rules surrounding inherited IRAs there. Because the tax code includes specific rules about how inherited IRAs should be handled, the exemption does not apply.
The Supreme Court could also, then, be deciding whether bankruptcy rules take precedent over the tax code. It could be an interesting discussion.
More to our point, there was a way for the mother to protect her daughter and beneficiary from the expense and uncertainty of this lawsuit. She could have put the money in a trust.
We'll finish this up in our next post.
Source: Thomson Reuters News & Insight, "In circuit split, court says inherited IRA fair game in bankruptcy," Nick Brown, April 24, 2013
]]>The case is about an inherited retirement account and the beneficiary's bankruptcy. If anyone is wondering what bankruptcy has to do with trusts and estate plans, please bear with us. After we explain the court's ruling and the conflict with other circuits, we think most people will be hollering, "Why didn't she put the money in a trust!"
]]> The bankruptcy code exempts individual retirement accounts from a debtor's assets. That means that creditors cannot get at those funds and the court cannot require that the debtor liquidate the account to settle his or her debts. In this case, though, the account belonged to the debtor's mother, not the debtor, and that made all the difference for the court.The court first pointed out that distribution of an inherited IRA must begin within a year of the original owner's death; distribution must be completed within five years. That rule alone means that the money is different from money the debtor herself set aside for her retirement. That money is not available (without penalty) to the debtor until she is 59 1/2 years old.
It is a meaningful and pivotal difference, the court said, and that means that the money is, in fact, available to creditors.
It also means that the 7th Circuit is in conflict with the 5th and 8th Circuits. We'll discuss the split in our next post.
Source: Thomson Reuters News & Insight, "In circuit split, court says inherited IRA fair game in bankruptcy," Nick Brown, April 24, 2013
]]>When an employee enrolls in his employer's 401(k) retirement plan, the employee is asked to designate beneficiaries for the account. It works a little like a life insurance policy -- or, come to think of it, a trust: If something happens to the employee, the money is then distributed to the beneficiaries.
]]> There are some rules about inherited IRAs, though. The most important for our purposes is that the money cannot remain in the account indefinitely. Instead, the funds must be distributed; the process must begin during the first year following the owner's death and must wrap up in five years.In the 7th Circuit case, the IRA had belonged to a woman's mother. The woman had inherited the money when her mother passed away. Before they had time to do anything with the money, the couple found themselves in financial straits and declared personal bankruptcy.
Now, IRAs are exempt in a bankruptcy; creditors cannot attach to dedicated retirement funds. So when the couple listed their assets, they omitted the IRA the woman had inherited from her mother.
The IRA was worth $300,000, and the couple's liabilities were between $500,000 and $1 million, more likely toward the low end of the range. If that $300,000 were included as an asset, and if it could be tapped by creditors, most of the couple's debt could be wiped out.
Yes, the money was in a retirement fund, said the bankruptcy trustee, but whose retirement fund is it?
To be continued ...
Source: Thomson Reuters News & Insight, "In circuit split, court says inherited IRA fair game in bankruptcy," Nick Brown, April 24, 2013
]]>Power of attorney gives the attorney-in-fact or agent far-reaching authority over the finances of a person who is most likely physically or mentally incapable of managing his own affairs. In most cases, the first step to take when considering such a delegation is to consult with an experienced estate planning attorney. This is true from Ohio to Timbuktu.
]]> Tackle this when you or the person who needs the power of attorney is still capable of making these decisions. The principal -- that is, the person handing over his finances or health-care decisions -- must be competent at the time the power of attorney is executed. This is why a power of attorney is so often a part of an estate plan.The next step is to identify a reliable, trusted person to serve as agent. This person can be a total stranger, like a personal banker, or a trusted relative. This person must be worthy of the immense responsibility, not to mention the fiduciary duty, that comes with being named as agent.
Think carefully about what the power of attorney should include. If you only want someone to pay your bills but not to write checks to charity or send cash to grandchildren at holidays, include that in the document. If you want a second person to participate in bigger decisions, that can go in as well.
Make sure your power of attorney will be accepted everywhere you do business or plan to be. If you have a vacation home outside of Ohio, have an attorney look over the document to make sure your wishes will be honored there. If your bank has specific instructions for a power of attorney, or its own form, make sure you comply with those requirements as well.
Think about every contingency, and review the list a few times before you make your final decisions. The best way to protect yourself or your loved one is by being prepared.
Sources:
Wall Street Journal, "Power of attorney: It's easily abused," Elizabeth O'Brien, March 19, 2013
Government Accountability Office, "Elder Justice: National Strategy Needed To Effectively Combat Elder Financial Exploitation," November 2012
Even in Ohio, family members take advantage of vulnerable, elderly relatives by using legal tools that are meant to protect the seniors' interests. In the wrong hands, a power of attorney, for example, can lead to financial disaster.
]]> Most estate planning tools have some kind of court involvement. A guardian must report regularly to the court on the state of the ward's accounts. This hasn't always been true for attorneys-in-fact who are appointed by a power of attorney. And that's why several states, including Ohio, have adopted the Uniform Power of Attorney Act.As we said in our last post, the act delineates the legal duties granted by a power of attorney, including the attorney-in-fact's, or agent's, duty to act in good faith. The law also provides protections for third parties, like bank and trust personnel, that are reluctant to honor a power of attorney because they believe there is financial abuse involved. That third party also has a duty to report those suspicions to the state's adult protection services department.
The law allows more than one person to be the attorney-in-fact/agent. In theory, the provision allows for greater oversight. More importantly, the act imposes liability on agents who violate these laws; the agent must pay back any money lost because of the wrongdoing and pay attorney's fees and costs.
A good power of attorney document can include all of these provisions as well. But there is more to executing a power of attorney than that. We'll finish this up in our next post.
Sources:
Wall Street Journal, "Power of attorney: It's easily abused," Elizabeth O'Brien, March 19, 2013
Government Accountability Office, "Elder Justice: National Strategy Needed To Effectively Combat Elder Financial Exploitation," November 2012
Our firm helps families with estate planning matters like the ones discussed above. To learn more about our Akron, Ohio, practice, please visit the power of attorney page of our website.
]]>When you sign a power of attorney, you hand over control of your finances to the person named in the document as your attorney-in-fact or agent. A power of attorney can be for a limited period of time or the rest of your days. This is a very flexible document.
]]> It is so flexible, though, that many states have trouble keeping track of them. The courts have little if any authority to monitor what the agent is doing. And banks have different rules for confirming the validity of a power of attorney.Wills, trusts and other estate planning matters are generally governed by state law, not federal law. That can confuse the matter even further -- and it can mean seniors are even more vulnerable to abuse.
To address some of the enforcement and uniformity concerns, several states, Ohio among them, have adopted all or portions of the Uniform Power of Attorney Act. The law specifically outlines the duties of the agent designated by a financial power of attorney. For example, as the principal's fiduciary, the agent has a duty to act in good faith; the agent must also keep accurate and complete records of his transactions on behalf of the principal.
We'll go into the uniform act a little more in our next post.
Sources:
Wall Street Journal, "Power of attorney: It's easily abused," Elizabeth O'Brien, March 19, 2013
Government Accountability Office, "Elder Justice: National Strategy Needed To Effectively Combat Elder Financial Exploitation," November 2012
]]>Consider, for example, all of the time and money we spend on talking to seniors, their families and their caregivers about scams that are run by strangers. Someone calls your 80-year-old mother on the phone and weasels her credit card information out of her, or her social security number. The truth of the matter is that strangers are not the only offenders when it comes to financial abuse. A MetLife study showed that 34 percent of elder abuse cases were perpetrated by family members, friends and neighbors.
]]> Another area of concern identified in the GAO report was how many among us could recognize signs of elder financial abuse. As a friend or neighbor, you may not have access to someone's checkbook or financial statements. You can, however, keep an eye out for some telltale signs that someone is being exploited:Being alert to things like this is just part of our responsibility to the seniors in our lives. The other part is to take our concerns to people who can intervene, including law enforcement, if necessary.
Of all the ways someone can exploit a senior, though, the GAO found that one of the most important documents in an estate plan was often used against the elderly friend or relative: the power of attorney.
We'll continue this in our next post.
Source: Wall Street Journal, "Power of attorney: It's easily abused," Elizabeth O'Brien, March 19, 2013
We help our clients with basic tools of estate planning that can protect the interests of seniors. If you'd like more information about our Akron, Ohio, law firm, please go to our "Wills and Other Basic Tools" page.
]]>These scammers are not after most of us; they are after the vulnerable adults, like the lonely elderly person whose fixed income is just barely enough to live on and the seniors whose memories are failing or whose judgment is impaired by age-related illnesses. For these people, answering the phone can result in financial havoc.
]]> Of course, strangers are not the only ones bilking the vulnerable out of their money. Family members and business partners can just as easily take advantage. According to the MetLife Mature Market Institute, financial abuse in general robs $2.9 billion every year from the elderly in this country. In an effort to bring attention to the problem and to teach people ways to protect themselves and their loved ones, the Administration on Aging has dubbed 2013 the "Year of Elder Abuse Prevention," or YEAP.While we all agree that financial abuse is a terrible thing, there is a good chance that we don't really know how to identify a victim or someone at risk. The AoA suggests that there a few dead giveaways that someone is being financially exploited.
We will review some of those signs in our next post, and we will review some legal tools that can keep financial predators at bay.
Source: Wall Street Journal, "Power of attorney: It's easily abused," Elizabeth O'Brien, March 19, 2013
Our firm works with individuals and families on ways to prevent financial abuse of the elderly. Please visit our "Wills and Other Basic Tools" page for more information about our Akron, Ohio, estate planning practice.
]]>So says a decision handed down by a state supreme court in the James Brown estate litigation. And, to paraphrase the concurring justice's opinion, this means you, intervening state official.
]]> We have been writing about the James Brown probate litigation for a number of reasons, but the main message the court wanted everyone involved to hear was that just because you don't like the man's estate plan doesn't mean you can set it aside. The concurring opinion was especially hard on the state attorney general's role in the matter.The decision goes through the arguments and points of law one-by-one. The majority finds fault with the family's contention that Brown was the victim of undue influence. The majority then disagrees with the lower court's finding that the family's concerns were justified and put forward in good faith. Most of all, the opinion finds it extraordinary not that a state official would insert himself into the matter but that the state official would take it upon himself to rewrite the estate plan and give half of the estate to individuals who had been deliberately excluded from the will and trust documents.
If that weren't bad enough, the attorney general then gave his office control over the charitable trust that Brown had established -- in fact, the attorney general dissolved Brown's trust and established a replacement trust, putting himself and his successor in charge. Fortunately for the beneficiaries of the trust, the poor children and young adults of Brown's home state, the court has ordered that the original trust be re-established and that the family get not a dime of the money that was never intended for them.
The matter is not completely closed, however. There are still matters pending about the trustees who were the appellants in this case. The court asked the lower courts to resolve those matters as quickly as possible.
Then, Brown's millions can be distributed as he originally directed, as was his right and if that would certainly make the singer feel good.
Sources:
Courthouse News Service, "Settlement Nixed in Estate of James Brown," Dan Mccue, March 1, 2013
Wilson v. Dallas, 2013 WL 697042 (S.C.), via Westlaw, with apologies to Jane Austen
We work with estate plans and challenges to wills and trusts similar to the ones in this post. If you're interested in finding out more about our Ohio law practice, please visit our Estate Administration & Probate page.
]]>Next -- stay with us, we are almost there -- imagine that the donor's grown children and purported wife object to the trust. The poor kids, the beneficiaries of the trust, step back from their opportunities and wait for the courts to settle the matter. Before that happens, though, a state official steps in. He proposes a settlement between the family and the people in charge of the trust, and everyone agrees. The family will get half of the pile of money, and a new trust to benefit the poor children will get the other half.
]]> The beneficiaries take a step closer to the money the donor promised them. The people in charge of the original trust object to the proposed settlement and to the state official's involvement, and another court battle begins. For six years, the beneficiaries stand by as opportunities to better themselves slip away. At every turn in the litigation over singer James Brown's estate, the poor children of his home state have taken one step forward and two steps back.The state official who inserted himself into the proceedings was the state's attorney general. He claimed that his office had an interest in the outcome because his office is responsible for overseeing charitable operations. The settlement he brokered, however, managed to completely undo the estate plan that James Brown had crafted very carefully over the years. Not only that, but the attorney general gave himself what amounted to absolute power over the trust.
Brown's original trust documents included very clear instructions about the education trust's operation. There would be three trustees at all times, and when one cycled off the trust would follow a specific succession plan. Under the attorney general's plan, he replaced the existing three trustees with one trustee and put himself in charge of that trustee and his successor.
The family was fine with this -- they had half of Brown's fortune, when, under his will, they would have had just his personal belongings and the contents of his home. The ousted trustees objected, though, and the case went back to court.
And, again, the beneficiaries of the James Brown "I Feel Good" Trust -- the poor children who would have been eligible for education grants -- stepped back from the money.
To be continued.
Sources:
Courthouse News Service, "Settlement Nixed in Estate of James Brown," Dan Mccue, March 1, 2013
Wilson v. Dallas, 2013 WL 697042 (S.C.), via Westlaw
We work with families and individuals on trust and estate planning matters like the ones described above. Please visit our website to find out more about our Akron, Ohio, practice.
]]>Before Brown passed away in 2006, he established a trust specifically to fund his grandchildren's educations and the educations of disadvantaged youth in his home state. His will left only his personal belongings and household goods to his six children; everything else was to go to the trust -- a so-called pourover trust.
]]> The will was challenged almost immediately by both his children and his companion. It was a risky move for the children (all adults at the time of Brown's death), because the will also included a "no contest" clause. Any beneficiary who challenged the will or the trust, the clause said, would forfeit any claim to the estate.The companion's complaint was complicated as well. She and Brown had married in 2001, a year after the will and the trust documents were executed. As it turned out, though, she was already married. Brown filed for an annulment, and his companion filed for divorce. Eventually, they settled the matter. In that settlement, she gave up any present or future claim of a common law marriage with the singer. And, before they exchanged vows, the companion signed a prenuptial agreement in which she waived any rights to a statutory share of Brown's estate or to any interest in the estate as an omitted spouse.
With all of that behind them, the family still challenged the will. They claimed that Brown had been the victim of undue influence when he signed the will, and they asked the court to declare the will invalid. Once the will was out of the picture, so would the trust be.
The matter got exponentially complicated after that. We'll explain what happened in our next post.
Sources:
Courthouse News Service, "Settlement Nixed in Estate of James Brown," Dan Mccue, March 1, 2013
Wilson v. Dallas, 2013 WL 697042 (S.C.), via Westlaw
Our firm handles similar estate and probate administration issues to the ones discussed in this post. If you would like to learn more about our Akron, Ohio, practice, please visit our website.
]]>Complicated family structures tend to require more intricate estate plans. In order to avoid conflict down the line and legal entanglements, it is necessary for the adults in blended families to ensure their estate plans--trusts, wills, power of attorney, etc.--are well-documented, intentional, clear and kept up-to-date.
]]> Those with stepchildren or children from a previous marriage should be intentional and precise in dictating the distribution of their assets in a will. If a will does not specify how a person wanted their assets distributed, the law will make assumptions that may conflict with the person's intentions.For example, unless a will states otherwise, adult children from an earlier marriage are eligible to inherit a large portion of the estate. Additionally, if the beneficiaries of insurance policies and investment accounts are not updated, it is possible that one's ex-spouse may inadvertently inherit money.
After any life change, such as a first, second or subsequent marriage, or the birth or adoption of children, it may be important to visit one's estate planning attorney to ensure that one's will and other estate plans continue reflect one's final wishes. This is very important to avoid disputes and ensure one's will is not unnecessarily tied up in probate.
Source: Poughkeepsie Journal, "Plan estate carefully for blended family," Bernard A. Krooks, Feb. 23, 2013
]]>Ohio seniors have learned, though, that long-term care insurance is anything but straightforward. Insurance companies miscalculated how popular the products would be, and they were surprised when the bills started to come in. Seeing that long-term care coverage was a losing proposition, a number of insurers dropped out of the market. The ones left standing began to experiment with policy terms and pricing schemes -- and consumers started to drop out of the market.
]]> Still, the challenge remains: How do we prepare for the financial burden that comes with a long-term illness, especially as a senior on a fixed income? Enter the continuing-care retirement community.CCRCs are a hybrid of retirement homes and assisted-living facilities. Residents can live independently, or they can avail themselves of different levels of medical care, up to and including 24-hour skilled-nursing care. None of this comes cheap, but CCRC's do come in different categories -- seniors at least have some options.
The first category, Type A, offers what the industry terms "life care." These communities offer the entire range of care options, from independent living to 24-hour care, for one flat fee. The advantage is that the monthly cost will not vary as a resident moves from one life stage to the next. The cost variable is how long the resident lives.
What about Types B and C? We'll discuss those in our next post.
Source: Wall Street Journal, "Looking Beyond Long-Term Care," Kelly Greene, Feb. 15, 201
We work with clients on long-term care planning issues like the ones addressed in this post. Please visit our estate planning page to learn more about our Akron, Ohio, practice.
]]>Ohio levies sales tax on sales of rare investment coins and precious metal bullion. A previous tax exemption for such sales, which had been in place since 1989, was repealed in 2005 after a major scandal concerning the theft of funds taken by a coin dealer from a rare coin investment fund. The coin dealer was placed in charge of running the investment fund by the state's Bureau of Workers' Compensation.
]]> Now, a number of representatives in the state legislature are considering reinstating the sales tax exemption for rare coins. Lawmakers and coin dealers alike have criticized the sales tax, calling it a tax on money, since essentially a "sale" amounts to cashing in the rare coin for its value. Seven representatives have signed on to sponsor the bill to restore the exemption, even though the state is currently trying to expand sales tax revenues.The exemption would benefit more than current collectors. Industry sources say that rare coin shows and coin collectors have avoided doing business in Ohio since the exemption was repealed; restoring it would bring that business as well as conventions back to the state.
Source: Toledo Blade, "Proposed bill would restore tax-exemption measure dropped after Noe scandal in Ohio," Jim Provance, Feb. 9, 2013
Our firm helps with estate planning tax questions like the one addressed above. Please visit our website to learn more about our Akron, Ohio, practice.
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