Tag Archives: elder law

How to Include Cryptocurrency in an Estate Plan

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The growing popularity of cryptocurrency means it is increasingly something that must be considered when planning an estate. If you own cryptocurrency, providing instructions in your will is a must.

Cryptocurrency is virtual money that exists only in digital form. The most popular cryptocurrency is Bitcoin, but there are many different types. Usually the only way to access the funds is through a computer, using a personal passcode.

Unlike a bank account, there is no physical record of the currency, so if you own cryptocurrency it is essential that you declare it in your will and also let the person who will be handling your estate (your fiduciary) know about it. Also, unlike with a bank account, the fiduciary does not have to provide a death certificate or power of attorney in order to access the currency. As long as the fiduciary has your passcode, he or she can take control of the currency. This means you need to be sure that your fiduciary is someone you can trust with this information.

You do not want to put the passcode directly into your estate planning documents, which if they go through probate could become public documents. Instead, simply list the cryptocurrency as an asset in your will and put the instructions on how to access it in a separate document that is also referenced in the will. The instructions should be as specific as possible, and it can be updated as needed. If you lose the passcode to the currency, it may not be possible to recover it, so it is important to store it in a safe place, like a safe deposit box.

Your attorney can help you make a plan for your digital assets.

Bank Pays Price for Refusing to Honor Request Made Under a Power of Attorney

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A durable power of attorney (POA) allows the person creating the POA, called the “principal,” to name a trusted agent who can act on his behalf in almost any situation. But because of the risk of abuse, many banks will scrutinize a POA carefully before allowing the agent to act on the principal’s behalf, and often a bank will refuse to honor a POA. Bank of America rebuffed a Florida agent’s request that funds be withdrawn from the principal’s account. The agent fought back in court and won a $64,000 judgment against the bank.

Clarence Smith, Sr., named his son, Clarence Smith, Jr., as his agent under a POA. When his father no longer wanted to manage his own finances, he asked Clarence Jr. to step in as his agent. Clarence Jr. reviewed his father’s account activity and became suspicious about some withdrawals from a bank account that Clarence Sr. owned jointly with a friend from his retirement community.

Acting as his father’s agent under the POA, Clarence Jr., asked Bank of America to transfer $65,000 from the account into a new account that listed only his father as the owner. Before doing so, Bank of America contacted the other person named on the account. When she told the bank that she did not want the funds withdrawn and also accused Clarence Jr. of stealing his father’s money, Bank of America refused to honor Clarence Jr.’s request. The other account owner then withdrew all of the funds from the account and placed them into her own account, effectively preventing Clarence Sr. from accessing his own money. Clarence Sr. died several weeks later.

Clarence Jr. sued Bank of America under a Florida law that imposes penalties on financial institutions that refuse to honor reasonable requests from agents named in properly executed POAs. A jury returned a verdict against the bank and awarded $64,142 to Clarence Sr.’s estate. The jury found that Bank of America had not acted reasonably when it rejected Clarence Jr.’s request, even though the joint owner of the bank account had not agreed to the release of the funds.

While this case clearly illustrates the conflicts that can arise through the use of a POA, it also raises the issue of the proper use of joint bank accounts in estate planning. Under most state laws, when two or more people own “joint” bank accounts, each of them has the right to the entire account, no matter whose money is actually in the account. While joint accounts can often be useful, sometimes, as in this case, joint owners or their agents can disagree about the use of funds in the accounts. When that happens, the party who makes it to the bank first often wins. Your attorney can explain the pros and cons of joint ownership, draft an effective POA, and assist family members when disputes arise.

What to Do If You Are Appointed Guardian of an Older Adult

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Being appointed guardian of a loved one is a serious responsibility. As guardian, you are in charge of your loved one’s well-being and you have a duty to act in his or her best interest.

If an adult becomes mentally incapacitated and is incapable of making responsible decisions, the court will appoint a substitute decision maker, often called a “guardian,” but in some states called a “conservator” or other term. Guardianship is a legal relationship between a competent adult (the “guardian”) and a person who because of incapacity is no longer able to take care of his or her own affairs (the “ward”).

If you have been appointed guardian, the following are things you need to know:

  • Read the court order. The court appoints the guardian and sets up your powers and duties. You can be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, you may or may not have to seek court approval for various decisions. If you aren’t sure what you are allowed to do, consult with a lawyer in your state.
  • Fiduciary duty. You have what’s called a “fiduciary duty” to your ward, which is an extremely high standard. You are legally required to act in the best interest of your ward at all times and manage your ward’s money and property carefully. With that in mind, it is imperative that you keep your finances separate from your ward’s finances. In addition, you should never use the ward’s money to give (or lend) money to someone else or for someone else’s benefit (or your own benefit) without approval of the court. Finally, as part of your fiduciary duty you must maintain good records of everything you receive or spend. Keep all your receipts and a detailed list of what the ward’s money was spent on.
  • File reports on time. The court order should specify what reports you are required to file. The first report is usually an inventory of the ward’s property. You then may have to file yearly accountings with the court detailing what you spent and received on behalf of the ward. Finally, after the ward dies or the guardianship ends, you will need to file a final accounting.
  • Consult the ward. As much as possible you should include the ward in your decision-making. Communicate what you are doing and try to determine what your ward would like done.
  • Don’t limit social interaction. Guardians should not limit a ward’s interaction with family and friends unless it would cause the ward substantial harm. Some states have laws in place requiring the guardian to allow the ward to communicate with loved ones. Social interaction is usually beneficial to an individual’s well-being and sense of self-worth. If the ward has to move, try to keep the ward near loved ones.

The 2020 Social Security Increase Will Be Smaller than 2019’s

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The Social Security Administration has announced a 1.6 percent increase in benefits in 2020, nearly half of last year’s change. The small rise has advocates questioning whether the government is using the proper method to calculate the cost of living for older Americans and those with disabilities.

Cost-of-living increases are tied to the consumer price index, and a modest upturn in inflation rates and gas prices means Social Security recipients will get only a small boost in 2020. The 1.6 percent increase is lower than last year’s 2.8 percent rise and the 2 percent increase in 2018. The average monthly benefit of $1,479 in 2019 will go up by $24 a month to $1,503 a month for an individual beneficiary, or $288 yearly.

The cost-of-living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $132,900 to $137,700.

For 2020, the monthly federal Supplemental Security Income (SSI) payment standard will be $783 for an individual and $1,175 for a couple.

The smaller increase may mean that additional income will be entirely eaten up by higher Medicare Part B premiums. The standard monthly premium for Medicare Part B enrollees is forecast to rise $8.80 a month to $144.30. According to USA Today, advocates are questioning the method used to calculate cost-of-living increases. The Bureau of Labor Statistics uses the Consumer Price Index for Urban Wage Earners and Clerical Workers to set the inflation rate. This method looks at prices for gasoline, electronics, and other items that younger workers rely on. The advocates suggest using a different index (the Consumer Price Index for Elderly) that puts greater emphasis on medical and housing expenses.

Most beneficiaries will be able to find out their cost-of-living adjustment online by logging on to my Social Security in December 2019. While you will still receive your increase notice by mail, in the future you will be able to choose whether to receive your notice online instead of on paper.

Powers of Attorney Come in Different Flavors

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A power of attorney is a very important estate planning tool, but in fact there are several different kinds of powers of attorney that can be used for different purposes. Before executing this crucial document, it is important to understand what your options are.

A power of attorney allows a person you appoint — your “attorney-in-fact” or agent — to act in your place for financial or other purposes when and if you ever become incapacitated or if you can’t act on your own behalf. There are four main types of powers of attorney.

  • Limited. A limited power of attorney gives someone else the power to act in your stead for a very limited purpose. For example, a limited power of attorney could give someone the right to sign a deed to property for you on a day when you are out of town. It usually ends at a time specified in the document.
  • General. A general power of attorney is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself. For example, a general power of attorney may give your attorney-in-fact the right to sign documents for you, pay your bills, and conduct financial transactions on your behalf. You could use a general power of attorney if you were not incapacitated, but still needed someone to help you with financial matters. A general power of attorney ends on your death or incapacitation unless you rescind it before then.
  • Durable. A durable power of attorney can be general or limited in scope, but it remains in effect after you become incapacitated. Without a durable power of attorney, if you become incapacitated, no one can represent you unless a court appoints a conservator or guardian. A durable power of attorney will remain in effect until your death unless you rescind it while you are not incapacitated.
  • Springing. Like a durable power of attorney, a springing power of attorney can allow your attorney-in-fact to act for you if you become incapacitated, but it does not become effective until you are incapacitated. If you are using a springing power of attorney, it is very important that the standard for determining incapacity and triggering the power of attorney be clearly laid out in the document itself.

Regardless of what type of power of attorney you use, it is important to think carefully about who will be your attorney-in-fact. Your attorney-in-fact will have a lot of control over your finances, and it is crucial that you trust him or her completely. For more information on choosing an attorney-in-fact, click here.

While many pre-packaged do-it-yourself power of attorney forms are available, it is a good idea to have an attorney draft the form specifically for you. There are many issues to consider and one size does not fit all. Contact your attorney to learn more.

Preventing a Will Contest

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Emotions can run high at the death of a family member. If a family member is unhappy with the amount they received (or didn’t receive) under a will, he or she may contest the will. Will contests can drag out for years, keeping all the heirs from getting what they are entitled to. It may be impossible to prevent relatives from fighting over your will entirely, but there are steps you can take to try to minimize squabbles and ensure your intentions are carried out.

Your will can be contested if a family member believes you did not have the requisite mental capacity to execute the will, someone exerted undue influence over you, someone committed fraud, or the will was not executed properly. (For more information on will contests, click here.)

The following are some steps that may make a will contest less likely to succeed:

  • Make sure your will is properly executed. The best way to do this is to have an experienced elder law or estate planning attorney assist you in drafting and executing the will. Wills need to be signed and witnessed, usually by two independent witnesses.
  • Explain your decision. If family members understand the reasoning behind the decisions in your will, they may be less likely to contest the will. It is a good idea to talk to family members at the time you draft the will and explain why someone is getting left out of the will or getting a reduced share. If you don’t discuss it in person, state the reason in the will. You may also want to include a letter with the will.
  • Use a no-contest clause. One of the most effective ways of preventing a challenge to your will is to include a no-contest clause (also called an “in terrorem clause”) in the will. This will only work if you are willing to leave something of value to the potentially disgruntled family member. A no-contest clause provides that if an heir challenges the will and loses, then he or she will get nothing. You must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.
  • Prove competency. One common way of challenging a will is to argue that the deceased family member was not mentally competent at the time he or she signed the will. You can try to avoid this by making sure the attorney drafting the will tests you for competency. This could involve seeing a doctor or answering a series of questions.
  • Video record the will signing. A video recording of the will signing allows your family members and the court to see that you are freely signing the will and makes it more difficult to argue that you did not have the requisite mental capacity to agree to the will.
  • Remove the appearance of undue influence. Another common method of challenging a will is to argue that someone exerted undue influence over the deceased family member. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your will in drafting your will. Family members should not be present when you discuss the will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive you to the attorney.

Bear in mind that some of these strategies may not be advisable in certain states. Talk to your attorney about the best strategy for you. To find an experienced elder law attorney in your state, click here.

Updating Your Estate Plan When Your Finances Change

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Sometimes homes and portfolios lose value or income and investments increase significantly. If this is the case for you, do you need to change your will? If your finances have changed markedly since you wrote your will, you should check your estate plan to see if you need to make any changes.

If your will or estate plan divides your estate into percentages for beneficiaries, then changes in value won’t affect how your estate is distributed. However, if you include specific bequests in your will, a fall or rise in your estate could have consequences. For example, if your estate plan gives $50,000 to your favorite charity and the rest of your estate to your children, a reduction in the value of your estate could mean your children won’t get as much as you intended.

A change in value of assets could also affect your estate plan if you intended to treat your children equally by giving them assets of equal value. For example, suppose your will gives your house worth $500,000 to your daughter and your stock worth $500,000 to your son. If the value of either the house or the stock portfolio increases or decreases significantly in value, your children will no longer receive equal gifts. It is also important to update your estate plan if the overall nature of your assets has changed. For example, if you sold the stock and bought real estate instead, this will affect the distributions to your children.

In addition, if your estate has significantly increased in value, it is important to reassess whether your estate will be subject to estate taxes. In 2019, estates worth more than $11.4 million for individuals and $22.8 million for couples are subject to estate tax. Most estates are not subject to federal estate tax, but some state tax smaller estates. It is important to be prepared for any eventuality.

Who Can Serve as Executor?

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One important reason to have a will is to be able to name your executor (also called a personal representative). An executor is the person responsible for managing the administration of your estate after you die. If you don’t choose an executor, the court will choose one for you.

The first decision is whether to choose a person or an institution to act as executor. A bank, trust company, or other institution can serve.

Next, you need to make sure the person or institution will be allowed to serve. States often have qualifications that a person must meet in order to act as executor. For example, minors and convicted felons may not serve in this capacity. In addition, some states don’t allow executors who live in another state unless they are family members. Your attorney can tell you who is qualified to serve in your state.

If you die without a will or the person named in the will can’t serve as executor, the probate court will choose an executor. State law dictates who has priority to serve. The surviving spouse usually has first priority, followed by children. If there is no spouse or children, then other family members may be chosen. If more than one person is has priority and the heirs can’t agree on who should serve, then the court will choose.

Grandparents Raising Grandchildren May Qualify for the Earned Income Tax Credit

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Raising a grandchild can be tough financially, but grandparents should be aware that there is a tax credit available that could help them. Working grandparents who are supporting their grandchildren may qualify for the earned income tax credit, which could reduce the amount they pay in taxes by thousands of dollars or allow them to receive a refund.

The earned income tax credit is a benefit for working people with low to moderate incomes and dependents, and this includes grandparents.  (Taxpayers without a dependent may also qualify, but it is more difficult.) To be able to claim the tax credit, you must be raising a child who meets the following criteria:

  • Is your son, daughter, adopted child, stepchild, foster child, brother, sister, half brother, half sister, step-sister or a descendent of any of them, such as a grandchild or niece or nephew
  • Is younger than 19 at the end of the year, younger than 24 and a full-time student at the end of the year, or any age and permanently and totally disabled
  • Lives with you for more than half the year

In addition, to qualify for the tax credit your income must be below certain limits, depending on how many dependents you have. The limits for 2019 are as follows:

  • One child.  Filing as an individual, your income must be less than $41,094. Filing jointly, your income must be less than $46,884.
  • Two children. Filing as an individual, your income must be less than $46,703. Filing jointly, your income must be less than $52,493.
  • Three or more children. Filing as an individual, your income must be less than $50,162. Filing jointly, your income must be less than $55,952.

The maximum amount of the tax credit also depends on how many dependents you have. In 2019, the following are the maximum credit amounts:

  • $6,557 with three or more qualifying children
  • $5,828 with two qualifying children
  • $3,526 with one qualifying child

For more information from the IRS about the tax credit, click here.

Will My Advance Directive Work in Another State?

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Making sure your end-of-life wishes are followed no matter where you happen to be is important. If you move to a different state or split your time between one or more states, you should make sure your advance directive is valid in all the states you frequent.

An advance directive gives instructions on the kind of medical care you would like to receive should you become unable to express your wishes yourself, and it often designates someone to make medical decisions for you. Each state has its own laws setting forth requirements for valid advance directives and health care proxies. For example, some states require two witnesses, other states require one witness, and some states do not require a witness at all.

Most states have provisions accepting an advance care directive that was created in another state. But some states only accept advance care directives from states that have similar requirements and other states do not say anything about out-of-state directives. States can also differ on what the terms in an advance directive mean. For example, some states may require specific authorization for certain life-sustaining procedures such as feeding tubes while other states may allow blanket authorization for all procedures.

To find out if your document will work in all the states where you live, consult with an attorney in the state.