When you were young your parents found ways to protect and provide for you. As your parents age they increasingly need your care. You need answers including legal realities. This article and the audio content describes the type of information you need to receive. It also provides practical tips to create open communication.
Dynamics of Communicating with the “Silent Generation”
People born before 1946 are known as the “Silent Generation”. Their world was shaped by the Great Depression, WWII, The Cold War and the Civil Rights Movement. They are often described as less open with personal issues including health and finances. They value simple concepts and rarely view themselves of wealthy regardless of their net worth. “Waste not want not” means much to them. Listen Here
Who is to receive property from your estate (Probate Property)
Who is in charge of your estate (Executor or Personal Representative)
What powers or oversight the Court should Require (bond waiver or power to sell)
A Will can also create a testamentary Trust. If you do not have Will, then your property is subject to intestacy rules. While you are generally free to dispose of your property as you desire, a spouse cannot be disinherited.
Generally it is a good idea to have two; one for financial and the other for medical decisions. A Power of Attorney designates a person who can make decisions on your behalf without a court order. Some examples include:
Financial: The ability to sell real estate; file taxes, write checks.
Medical: Make medical decisions for treatment, assisted or skilled nursing placement.
You do not lose your ability to make decisions for yourself by signing a Power of Attorney. It can be revoked. If you don’t have one and become incapacitated, your family may need an expensive guardianship in order to manage your property or make decisions about your care.
This is a document that informs medical providers and your family about what type of care you want, or don’t want, at the end of your life. For example, you may want life saving treatments withheld if certain conditions are met. If you don’t have a directive, the law presumes that you would want certain care such as feeding tubes.
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Biggest Estate Planning Mistake:
Too many people become confused by all of the choices and therefore do nothing. A better strategy is to start with the estate planning essentials and if necessary build from there.
Transfer on Death documents do not transfer title while you’re alive and are inexpensive to create. They do not allow for comprehensive planning.
Transfer on Death Deed: Is one way to avoid probate if certain conditions are met. This is a tool that can be used but it has drawbacks to a Trust. Most notably, it does not provide for contingencies and it requires a beneficiary to file an acceptance within 9 months of the death. A Transfer on Death Deed overrides provisions of a Will.
Transfer Title on Death: Now motor vehicles can be transferred on death without a Will, Trust or Probate.
Beneficiary designations are found as “Payable on Death” choices on bank accounts and beneficiary designations on life insurance polices, IRAs, Roths and brokerage accounts. These pass to the chosen beneficiaries without probate. In fact, a Will and a beneficiary designation disagree the Will loses. These are forms that are created by the institutions, clients are counseled on how to use them to their advantage. Often it is best to coordinate these with a Trust for maximum benefit.
Limitations of Transfer on Death and Beneficiary Designations: While these tools can avoid probate, unless used with a Trust they do not provide for comprehensive planning. If the person to inherit dies before the owner, then probate may still be needed for the next in line to inherit. It also does not provide for planning such as youthful heirs, disabled heirs or those who need asset protection.
A Trust allows the Trustee is able to manage or distribute Trust property without the need for oversight or control of the a probate court. Trusts can be very simple; such as distributing property outright. Trusts can also provide asset protection to the person who sets it up and to those who will inherit.
What’s Right for You?
Prices indicate a basic package. They include counseling, an estate planning binder, witnesses & Notary.
Essentials Package $750 Individual $900 Couple
Essentials Plus Package Individual $900, Couple $1050 (plus filing fee $13 per property)
John Ajemain, Forty-Six died in a bicycle accident. He had no Will or Trust. His brother and sister became the Personal Representatives (PRs) of his estate. They sought access to John’s “digital assets” in particular Yahoo e-mail account to review for other assets such as bank accounts and liabilities. Yahoo denied access and a court battle ensued.
How Yahoo Justified Refusal
Yahoo refused relied upon the two points. First they claimed that the Stored Communications Act “SCA”(18 USC Sec. 2701) prevented such disclosure. Yahoo also claimed that the terms of service agreement governing use of the Yahoo account allowed them to withhold or even destroy the information.
Stored Communication Act
The Court examined the SCA and found that the act was established to prevent “overzealous” law enforcement from gaining access to private accounts. However, the SCA provides an exception to the nondisclosure to “with the lawful consent of the originator”. Yahoo’s position was that the PRs “cannot lawfully consent on behalf of the decedent, regardless of the estate’s property interest in the e-mail messages”. In Yahoo’s view, only a living person had the authority to grant the consent.
Luckily, the court did not agree with Yahoo on this point. After an exhaustive examination of statutory construction, the Court held that the SCA could not be used to prevent disclosure to the PRs. It found that the PRs had the authority to provide “lawful consent” and that access to the records was necessary because Yahoo’s refusal “would significantly curtail the ability of the personal representatives to perform their duties”. The court stated that nothing in the SCA “would suggest that lawful consent precludes consent by a personal representative on a decedent’s behalf.”
Terms of Service Agreement, Yahoo’s Delete Button
Even though the Court threw out the SCA defense, it still wasn’t sure what to do the “Terms of Service Agreement”. According to Yahoo, that the Agreement trumps the PR’s property interest in the records. The Agreement says:
You agree that Yahoo, in its sole discretion, may terminate your password, account…and remove and discard any Content…for any reason”. The Court was not certain that this provision was enforceable or whether the essentials for a valid contract existed. In short, there wasn’t sufficient evidence to show that there was a “meeting of the minds” with regard to Yahoo’s Agreement. The Supreme Court sent the matter back to the Trial Court to take evidence on the matter.
What this Means to You
Unfortunately, the Court did provide a definitive answer to the question of whether the records will ultimately be handed over to the PRs. This will play itself out in the courts below. But there are things that you may consider. What is frightening is how hard Yahoo is fighting to keep John’s records from his PR. Yahoo is not alone in their position. This area of the law is evolving. While there are no definite answers the following are a few good ideas:
Digital Power of Attorney: Your power of attorney should provide your agent with the authority to access your accounts. This is increasingly necessary as many banks, financial products and other transactions occur digitally. Failure to have access may be disruptive in the event of a disability.
Digital Powers in Will: It is a good idea to include digital authorities in your Will which grants your Personal Representative the authority to access accounts.
Password Access: The powers stated above are useless if one does not have access to the passwords. Use a service like LastPass and DocuBank to keep track of your passwords.
Paper Copies: The Yahoo case shows why it is important to maintain some paper copies of your important records. Perhaps it is a good idea print out some statements and keep them with your other papers.
Helping the Kids Responsibly with Private Mortgages
Often a family member or child may need financial help. This may involve the purchase or renovation of a home or some other need. The person willing to may wish to help out but also wants to be repaid. A solution may be a Private Mortgage. This is where the parent loans the funds in a formal promissory note and uses a mortgage to secure payment. This arrangement can have the following benefits:
Lower financing cost for the children compared to a commercial note & mortgage
Higher rate of return for the parents compared to certificate of deposit
Security for the parents in the event of default
The son or daughter can avoid many of the costs of a commercial loan & mortgage, including:
A child with credit issues or unverifiable income may not qualify for a conventional loan
A Private Mortgage can protect the lender’s security from subsequent creditors’ liens
Parents can integrate the loan with their estate plan with debt forgiveness as part of the kid’s inheritance
If structured properly, the loan will not incur gift taxes
Flexibility, the note can provide for:
Interest only payments
Payment upon the occurrence of a certain event
What you will need:
Promissory Note or Line of Credit Note
One Time Mortgage Tax to County Treasurer (sliding scale from 0.02% to 0.1% of the principal)
One Time Mortgage Certification to County Treasurer Fee $5.00
One Time County Clerk Recording Fee ($13 for 1st page and $2 for each additional page)
(A $30,000 mortgage would cost about $55 in filing, certification and mortgage taxes.)
Expect about $500-700 for attorney’s preparation and review of documents.
Creation of a lender/borrower agreement may strain family relationships.
Foreclosure, if needed, can be expensive and damage family relationships
You must file IRS form 1098 and send a copy to the payer by January 31st of each year.
You must claim interest received as income.
Private mortgages provide a way to loan money to family members with the security of a lien.
A parent or spouse died but owned land or oil & gas mineral rights in Oklahoma:
Has one of these happened to you?
An investor wants to buy minerals owned by a family member who has died.
An oil company wants to lease minerals that were in your mother or father’s name.
Your relative was receiving royalty payments but won’t pay you until there is a probate.
These are calls we receive each week. Fortunately, Oklahoma has a several stream-lined ways to handle these issues. Here are a couple of ways to address the situation:
A Summary Administration is slightly different from an Ancillary Probate. It is available in three situations
The person has been dead more than five years;
The total value of the estate (property owned by the decedent) is $200,000 or less; or
The person was not an Oklahoma resident & there was not a probate anywhere else.
Generally, the process involves filing a petition (if there was a Will enclosing a copy), sending notice to all heirs and creditors. An Administrator, usually a family, member is appointed. If there are no issues or claims the process can usually be concluded within 90 days. At that point the property will be transferred or distributed to the family members according to the Will or if there is no Will by Oklahoma’s intestacy statutes.
This procedure is relatively quick. This process is used if the deceased person has had a probate in a state other than Oklahoma. For example, if there was a probate in California, that court would not have the power to transfer or re-title property in Oklahoma. The process involves filing copies of those pleading in Oklahoma, providing notice to all heirs, creditors and persons named in the will. If there is no objection the matter can often be concluded within two months.
What does an Ancillary Probate cost?
Affidavit of Heirship
Occasionally, an Affidavit of Heirship will be sufficient for a company to sign a lease with you or to release payments. However, this will not vest you with ownership of the property for up to ten years. If there are multiple individuals entitled to inherit or creditors claims this may not be the best approach.
Probate services available in the following Oklahoma Counties:
Nursing homes are expensive. Medicaid (called SoonerCare in Oklahoma) covers the cost of Nursing Home expenses for those who qualify. Unfortunately, many myths surround how to apply or become eligible.
You cannot own anything
You have to give everything away
You can only have $2,000
You cannot be eligible for 5 years
Medical:The person applying for Medicaid must need services provided either in home or in a skilled nursing facility.
Financial: The rules surrounding Medicaid eligibility are very complex. Medicaid is a federal program that states administer. There are rules regarding assets, however there are many exceptions and exemptions from those rules. In short, a person applying may have far more than $2,000 and still be eligible. Married couples can protect large portions of their life’s savings.
Citizenship: Applicants must be United States citizens. Certain exceptions apply to certain non-citizens residing here legally.
Medicaid Application and DHS
The Medicaid application process can be simple but many people fail to become qualified if they do not provide the correct information. The caseworker looks at the income and current assets. Perhaps the most troublesome requirement is the production of 60 months of records, including cancelled checks, from all financial institutions. These are required for any account even if it has closed during the 60 months.
Why does Medicaid Want 60 Months of Records?
The 60 months is called the “Look Back Period”. Transactions are examined to see if property was given away for sold for less than its fair market value. If such a transaction is found, the caseworker may impose a “Penalty Period”.
What is a Penalty Period?
The Penalty Period is amount of time the applicant must wait before Medicaid will begin paying for the care.
Penalty Period Examples:
Example 1: It may be possible to explain the transfer to the satisfaction of the caseworker. However, it is likely that the transfers will be penalized.
Applicant gave grandchildren $10,000 over the past 60 months (birthday or Christmas presents)
Medicaid divides that amount by the daily divisor The 2017 rate is $144.67
10,000 ÷ 144.67 = 69
Example 2: In a recent case, a penalty period was imposed on church tithing. The applicant appealed to a Fair Hearing and was able to show that the giving was a pattern that had not changed in decades. The Appeal wiped away the penalty period.
Applicant gave Church $10,000 over the past 60 months as a pattern of tithing or giving.
Medicaid divides that amount by the daily divisor The 2017 rate is $144.67
10,000 ÷ 144.67 = 69
69 days reduced to zero on appeal
Example 3: Father deeds $400,000 farm to son and applies for Medicaid 4.5 years later. This example demonstrates two points. First, if the date of application was delayed 6 months, then the transfer of the farm would not be considered at all. The second point is that there is no limit to the amount of the Penalty Period.
Applicant deeded son a farm valued at $400,000 4.5 years ago
Medicaid divides that amount by the daily divisor The 2017 rate is $144.67
400,000 ÷ 144.67 = 2765
2765 days (7.5 years)
What is a Fair Hearing?
A Fair Hearing is a process where the decision of a caseworker can be challenged. Denials of applications and imposition of Penalty Periods are good reasons that such an action may be considered. A notice of disagreement is filed. It is a good idea to prepare a brief stating the applicant’s side of the case. In the brief, the factual or legal conclusions behind the casework’s denial or penalty period can be fully challenged. At the hearing itself, the parties are allowed to present their sides. The Administrative Hearing Officer takes the matter to a committee that then issues an order which may agree with, overturn or modify the caseworker’s decision.
How an Elder Law Attorney Can Help:
It is never too late to plan even in crisis. Among the things Elder Law Lawyer can do includes:
Presenting the application for benefits in a way that explains the exceptions or rules for the caseworker.
Identify troublesome transactions that may cause penalties. Once identified, there are ways to cure the penalties, delay applications or take some other course to avoid or minimize the Penalty Period.
Developing permissible transfers that preserve assets while minimizing penalty periods.
File a Fair Hearing Request and represent you at the hearing.
While no attorney can guarantee results, applicants typically benefit from the services of an Elder Law attorney knowledgeable with the workings of Medicaid.
Marian joined her church in 1990. From that time on, she made tithed 10% of her income and other contributions to support her church. Her giving of first fruits continued even after she became ill. When she could no longer remain home, she sold her house and donated 10% of the proceeds to the Church.
Need for Medicaid / SoonerCare
Marian was out of money by the end of 2016. Medicare does not pay for long-term nursing home care. Her income was insufficient to cover the cost of her nursing home. In fact, she the cost exceeded her income by about $4,000 per month. She had no choice but to file for Medicaid. Medicaid, a separate program from Medicare, pays the difference between her income and the nursing home’s reimbursement rate. SoonerCare is Oklahoma’s version of Medicaid.
Medicaid Application and Examination
Medicaid is needs based program. A person with too many countable assets will be denied. In the past, people gave away property in order to qualify for this benefit. In order to prevent intentional impoverishment, strict rules were adopted. Now when anybody applies for Medicaid, the Department of Human Services (DHS) case worker is required to obtain financial records for the past 60 months. The purpose is to attempt to determine whether assets were given away to become qualified to receive Medicaid or without receiving something of equal value in return. Unfortunately, DHS is likely to treat all donations as improper gifts.
Church Giving Treated and Improper
In Marian’s case, she had given about $14,000 to her church over the past 60 months. DHS used that amount to calculate a “penalty period”. The penalty period is the length of time an applicant must wait before benefits are paid. It is calculated by dividing the value of the property given away by $144.67[i] to determine the number of penalty period days. This meant that she would not be eligible for benefits until 96 days after she was broke. Either the family must come up with the difference; the facility eats the cost or the resident faces eviction.
Appeal to Fair Hearing Judge
Fortunately, the caseworker’s decision is appealable. A Fair Hearing allows an applicant to file a request a hearing if DHS denies an application or imposes penalty period. Marian requested a hearing because the rule say:
A penalty would not apply if the individual can show satisfactorily that the intent was to dispose of assets at fair market value or that the transfer was exclusively for a purpose other than eligibility.
Because of Marian’s faithful pattern of tithing the Fair Hearing Judge agreed that no penalty should be imposed. However, if Marian suddenly began giving as her health declined, the decision may have gone against her.
Planning is the best tool to avoid a bad result. In fact, many families can save a significant amount of resources just by knowing the rules. Having an attorney experienced in Medicaid laws can help avoid denials and penalties.
Mother Fails to Plan for Care of Daughter After Her Death
A recent case[i] highlights the way that a Special Needs Trust and a Guardianship could have protected a vulnerable adult child. At age 30, the daughter[ii] overdosed on alcohol and methamphetamine while partying with her boyfriend Jesse. She suffered a cardiac arrest and brain damage due to lack of oxygen. After release from the hospital, she moved in with her mother and required 24-hour care. The injury left her with only the ability brush her own teeth and prepare simple meals. She processed information slowly and had a severe memory deficit. The daughter ended up on disability. The mother did not set up a Special Needs Trust or seek a Guardianship.
Mother Dies, Predator Pounces
Not actual photograph of Jesse
The mother suddenly died and left her daughter $450,000. Jesse quickly married the daughter. The daughter apparently did not realize she was married because she only referred to him as a friend that she trusts. Jesse failed to follow medical advice to hire a speech and occupational therapist because it was expensive and might not work. He failed to make or keep the daughters doctor appointments or even take advantage of free or low-cost options. Jesse thought that doctors or other family members should be making these arrangements. Most alarming, drug tests revealed showed that the daughter used increasing amounts of methamphetamine under Jesse’s care. This caused her to lose weight and become gaunt.
Predator Uses Daughter’s Money
When not working at a liquor store, Jesse lived with his mother apparently leaving the daughter to fend for herself. Jesse diverted at least $30,000 of the daughters social security benefits to himself. Instead of providing for her care, he used the daughters disability benefits for a road trip, jewelry and a new wardrobe. Recover of the money from Jesse was hopeless because he had no assets and was responsible for five children.
The court eventually appointed the daughter’s aunt as the guardian.
A Special Needs Trust Would have Protected Daughter
Predators smell money. The daughter was the perfect target for Jesse because she was trusting and incapable of managing her own affairs. Jesse was in a perfect position to exploit and controlled her with drugs and alcohol. The marriage was Jesse way to gain more control over her resources. A Special Needs Trusts (SNT) could have placed a Trustee in charge of the daughters money. Such an arrangement makes it more difficult for predators to exploit individuals. A SNT can also prevent the loss of SSI disability benefits.
A Guardianship Could have Prevented Exploitation and Provided Care
In addition to a SNT, a guardianship would have offered the daughter additional protection. In this case, the mother could have been named as a guardian. She then could have named a successor guardian in her own will. Generally speaking, a parent, spouse or child, who is serving as a guardian, can nominate an individual to serve as their successor guardian. The law and courts generally treats the person so nominated with priority over others who wish to be the guardian. In this case, it would have been better if her mother became a guardian then name the daughters aunt to be the successor guardian in mothers will.
Planning Key to Better Outcomes
This case illustrated how prevention of predator abuse can be greatly diminished through planning. Other considerations are continued qualification for programs such as Medicaid and SSI disability. Choosing trusted individuals to be in charge as a Trustee or Guardian is also vital. Had these protections been in place, the daughter would have been a less attractive target for predators. It would have also enabled her to receive the needed care.