Archive for Estate Planning
ELDER ABUSE: A SCARY STORY FROM AUSTRALIA
In our last newsletter, we wrote about potential issues for a dutiful child caring for an elderly parent, but what about the risk that the caretaker child is neglectful or even abusive? This week we wanted to share a truly horrifying tale of an Australian woman’s failure to care for her elderly mother.
Cynthia Thoresen, as many aging widows do, moved into her adult daughter’s house when living alone became too daunting. The daughter, Marguerite, obtained a government benefit to help with Cynthia’s care, which became her only income. A couple of years later, Marguerite stopped taking her mother to doctors and filling her prescriptions. Already Marguerite is not looking like the dutiful caretaker child, but it gets much worse.
Sometime in November 2008, Cynthia fell in the house and broke her leg. When Marguerite finally called an ambulance approximately 3 weeks later, Cynthia was screaming from the pain. We will spare you the gory details of Cynthia’s condition, except to say that she had lain in bed with a broken leg and without any medical care or personal hygiene all that time. Cynthia died in the hospital a few weeks later from a blood clot caused by the broken leg.
Shockingly, Marguerite has not faced any legal consequences for her mother’s death. What is even more appalling is that she claimed to have been honoring Cynthia’s wishes by keeping her out of a nursing home. Although no plan can guarantee against elder abuse, we believe that thorough disability planning (legal, financial, and practical) can significantly limit opportunities for such horrific neglect.
“UNDUE INFLUENCE” AND THE CARETAKER CHILD
We often see a middle-aged “child” becoming the caretaker for an elderly parent. Sometimes siblings are grateful that such care is being provided. However, many times those same siblings become very unhappy if the caretaker child is left with a bigger slice of the inheritance pie, or worse yet, has become joint owner with mom on a bank account before mom’s death, so that 100% of those funds go to the caretaker child rather than being split equally under mom’s will. A lawsuit invariably follows against the caregiver child.
The question is whether we have a “dutiful” child whose sacrifices to care for an elderly parent were rewarded by a voluntary gift from mom or a “scheming” child who utilizes the close relationship to “unduly influence” mom to get the bulk of her assets. Undue influence is presumed when (i) a person with a confidential (close) relationship with the decedent, (ii) is active in procuring or securing the preparation or execution of a devise (will or other gift) and (iii) is a substantial beneficiary of that devise.
The problem, as was recognized in the recent Florida case of Estate of Kester v. Rocco, is that any child who is truly caring for a frail, elderly parent will most likely (i) have a close relationship with mom; (ii) help mom choose an attorney, drive mom to the attorney, and discuss mom’s plan; and (iii) receive a large part of mom’s assets under her plan, therefore meeting the undue influence test. However, the court in Estate of Kester said that undue influence should not be presumed when the only evidence presented was that the caregiver child had a close relationship with and often assisted his aging parent.
Although the guidelines aren’t perfectly clear, this recent case provides help for all those dutiful, caring children who want to take care of their elderly parent without worrying that they will be a target for their ungrateful siblings.
LEGISLATIVE UPDATE: BETTER PROTECTION AGAINST UNETHICAL LAWYERS
Florida attorneys have long been prohibited by our ethical rules from soliciting or accepting gifts from clients, including drafting a will or trust that names the attorney (or his close relative) as a beneficiary. The concern is that an attorney who is asking for or receiving a gift from a client has a personal stake and thus will not be able to properly advise the client regarding the transaction (what we call a “conflict of interest”). There is also the possibility that an attorney could exploit his relationship as a trusted advisor to obtain a gift from his client.
In the past, case law enforced this ethical rule by allowing an improper gift to an attorney to be challenged and, if certain things were proved, voided. There is now a new statute, effective October 1, 2013, which makes such improper gifts automatically void. This should provide better protection for clients (and their families) by decreasing the amount of time and money necessary to contest an improper gift. The statute also provides that the winner of such a contest will recover the costs and fees paid to bring the lawsuit.
Of course, both the ethical rule and the new law make exceptions for a gift from an attorney’s spouse and other close family members. Additionally, even an unrelated client can make a gift to an attorney under the right conditions. To read the full text of the statute click here.
More Estate Administration Mistakes: 5.3 Million Dollar Verdict Against Trustee!
Just a few weeks ago, we cautioned our readers against do-it-yourself estate administration due to the great responsibility that comes with being a trustee or personal representative. A recent case confirming a judgment of more than $5.3 million against a trustee shows just how serious the courts are about the duties that come with these roles.
The trustee in that case was slammed by both the trial court and the appeals court for the mistakes he made. The most obvious error, and the one pointed out by the angry beneficiaries (the deceased trustmaker’s wife and children), was that the trustee paid himself $1.2 million in trustee fees … without telling the beneficiaries. However, the court also used the trial as an opportunity to examine all of the trustee’s past actions. It found other mistakes adding up to millions of dollars in damages to the beneficiaries. These included failure to fulfill basic trustee duties such as providing timely and accurate trust accountings.
The lesson to be learned is that it is crucial to be aware of, and properly perform, your duties as a trustee or personal representative. If not, you likely will not fare well in court. The trustee here could and should have avoided the lawsuit and enormous judgment by obeying the legal requirements placed on him as trustee. For the full appellate court opinion, click here.
Estate Administration: Another Do-It-Yourself Minefield
Hopefully our faithful readers all know by now that there are many hazards to do-it-yourself estate plans. What you may not know is that trying to administer your loved one’s estate without legal help is just as treacherous. It is a great honor to be named as a loved one’s personal representative (executor) or trustee, but these roles come with great responsibility and many legal duties.
Unfortunately, we recently have encountered several individuals and families who thought that they could simply read the will or trust and hand out assets without speaking to an attorney. Please do not make this mistake! If you are administering a will, you do not have the authority to handle the estate just because your name is in the document – you must be appointed by a probate court. Even if you are a trustee who manages to avoid probate court, Florida law imposes significant duties on you both when you start acting as trustee and every year thereafter. Both personal representatives and trustees may be removed and even held personally liable if they fail to perform their duties properly.
We have seen some serious legal messes created by good people who tried to do the right thing but just did not have the right advice. Don’t become one of them by trying to do it yourself – we are here for you and happy to help. For more information on do-it-yourself disasters, check out our past articles: Perils of Do-It-Yourself Estate Planning; Why Would You Risk Going to Jail Rather than Talk with a Lawyer?; IRS Gift Tax Audits: Yet Another Reason to Avoid Do-It-Yourself Estate Planning
The Freshman 15: What Parents Need to Know Before Your Child Starts College
1) It’s that time of year…and most parents are a little nervous about a child going off to college all by themselves.
2) That’s normal! It may even be for good reason because….
3) Your child is a legal adult as soon they turn 18!
4) This means that, as a parent, you are no longer your child’s “legal guardian.”
5) You no longer have the right to make decisions regarding your child’s living situation, school, or health care.
6) You also no longer have the right to access records from your child’s school or doctor.
7) Your 18 year old “child” now even has the power to open bank accounts, borrow money, and obtain credit cards.
8) However, you have no right to review bank or credit card statements or even to be notified about the status of their accounts!
9) This can, of course, lead to some nasty surprises for parents if their inexperienced child’s spending gets out of hand.
10) There also can be serious issues if the child is sick or injured and you cannot obtain information about their health. This may also be a concern if the child travels out of the country on a break or study abroad trip.
11) The good news is you can protect your child right now with basic estate planning documents!
12) For example, a Durable Power of Attorney will give you access to your child’s finances. This will allow you to just check in or to take over if it becomes necessary.
13) As another example, a Durable Power of Attorney for Health Care allows you to step in and make medical decisions for your child if they are unable to make the decisions themselves.
14) Once you have such documents, you can even store them electronically so that any medical facility can easily access the documents. At Cramer Law Center, we partner with DocuBank, a service that stores that information and also gives you and your child a wallet-sized card with emergency contact information on it.
15) Cramer Law Center is here to help you and your child take this important step towards college preparation. Call us today to discuss our flat-fee “Back to School” plan!
How Stretchy is an IRA?
It appears that the government, in its search for funds to balance the Federal budget, has set its sights on yet another estate planning tool: the stretch IRA. Both Congress and President Obama have proposed severely limiting the ability to “stretch” the payments from an IRA over the lifetimes of persons younger than the owner.
Currently, stretch IRAs are an effective way to preserve and grow assets for future generations. Children and grandchildren named as beneficiaries of IRAs can take withdrawals from their share of an IRA over their own projected lifetime, rather than being forced to take distributions based upon the life expectancy of the (older) owner. This means that withdrawals are delayed and the IRA can grow, either tax-deferred or tax-free, for significantly longer periods of time.
However, the proposed change to the law governing IRAs would take away the ability to stretch IRAs over generations. Retirement accounts inherited by anyone other than a spouse would be required to be entirely paid out within five years of the owner’s death. This would cause beneficiaries to have to pay income tax sooner and in larger amounts than under a stretch out. With more and more individuals planning for retirement with IRAs due to the disappearance of employee pension plans, such a change would significantly affect estate planning in America. We will be watching this issue as part of our mission to keep our clients’ plans current.
For more on the exact changes proposed, where they are coming from, and what you can do now, see:
With Elder Care, You Get Eggroll!
China has passed a law effective July 1 requiring adult children to regularly visit or talk with their parents as well as care for them financially after the parent becomes 60 years old. The parents can even sue their children in court for failing to follow this law and the court can force visits or impose a fine upon the children. The Chinese have a long-standing tradition of caring for their elders, but previously had not incorporated this tradition into their laws. Following this tradition, the Chinese government passed this law in order to try to ensure that their aging population would be cared for on both the physical and spiritual levels.
There are probably many parents out there that think this law is a great idea and would love to tell their children that they have to visit on a regular basis. Certainly, there is also a western tradition of caring for our parents, going back to the commandment to “Honor thy father and mother.” However, here in the US, there is no law on the books to mandate good elder care by the younger generations. Rather, people must take personal responsibility for making sure that they are taken care of when they get older. People in the US have to plan for their legal and financial futures.
In-depth personal estate planning can help you accomplish your goals for your elder care, not just your goals for when you pass away, but if you become disabled or need your income supplemented by the government through programs such as Medicaid. There are several estate planning tools which can be used to take care of you. As one example, you can choose a trusted disability trustee to help care for you and leave that person specific instructions about how you want to live in the event that you become disabled.
The important thing to realize is that in the US, people have to take responsibility for their own futures and well-being. You can do this through personalized estate planning (or through lobbying Congress for our own version of the Chinese law!), but everyone needs to plan for their own elder care.
As Confucius said: “Wise man seek counsel.”