Wednesday, September 12, 2018

Financial Power of Attorney and Trust – Understanding the Differences

Someday you may want or need to have someone help you manage your assets and financial life. Two common methods of authorizing someone to step in are the financial power of attorney and the trust. While both of these tools are used to authorize someone to handle financial matters for you they have some significant differences.
The Power of Attorney 
In my experience the financial power of attorney is the method clients use most frequently to appoint a surrogate for financial matters. With a financial power of attorney one person (the “principal”) gives another person (the “agent”) the authority to make decisions for and manage the assets of the principal to the extent authorized in the document. The powers granted can be very broad or very limited. The power can take effect immediately or only in the event of your incapacity.
With a power of attorney legal title to the managed assets remains with the principal.  A power of attorney ceases to operate when you revoke it or when you die. This is a powerful (and potentially dangerous) document that should be carefully drafted by your lawyer to fit your specific circumstances, needs and wishes.
The Trust
With a trust you (the “settlor”) transfer legal title to specific assets to a “trustee” to be managed by the trustee for the benefit of specified persons (the “beneficiaries”). You can name yourself or a family member or a trust company as trustee or co-trustee. You can also name yourself as primary beneficiary and designate other “contingent” beneficiaries in the event of your death.  
There are dozens of different types of trust. Trusts are used to protect assets from nursing home and other care costs, provide for a spendthrift child or one with special needs, save taxes, protect assets from divorce or creditors, obtain professional financial management and so on.
In order to plan for the possible reduced capabilities that can come with aging, many people create a revocable trust which is funded with some or most of their assets. The trustee then manages the trust assets as directed by the settlor. (If the settlor names himself or herself as initial trustee, an alternate trustee can be named to step in when that becomes appropriate.) This type of revocable trust, which becomes effective during the settlor’s lifetime, is sometimes called a “living trust.”
 The revocable trust is commonly used by individuals who want to get professional management of their investments and other assets. The settlor hires a trust company, like a bank trust department, to serve as trustee. Professional management can offer a number of advantages for settlors and their families although that discussion is beyond the scope of this article.  Since the trust is revocable it can be modified by the settlor to change the trustee or the beneficiaries and can even be cancelled entirely.
The power of attorney and the revocable trust are both tools people use to authorize someone else to manage their finances when that becomes desirable. But the trust and power if attorney approaches have a number of important differences that you should discuss with your lawyer.  For example, a trustee can only manage assets that have been legally transferred to the trust. Powers of attorney can cover a broader set of financial issues such as signing personal tax filings and dealing with assets that are not held in trust. So, it may be wise to have a power of attorney even if you are setting up a trust. On the other hand, unlike the power of attorney, a trust can continue to operate after your death. This means that a trust can serve, to some extent, as a will substitute.   
Power of attorney or trust. Which is the best planning option for you and your family? Or should you have both? The answer will depend on your particular individual and family circumstances and goals. One size does not fit all.  Discuss your situation with an experienced elder law attorney to determine the approach that is best for you.

Thursday, July 12, 2018

Accounting for your Actions as Power of Attorney

Serving as Financial Power of Attorney for a parent or friend is serious business. You may see it as just helping mom pay her bills. But the law imposes many significant legal duties on someone who acts as power of attorney for another.   

When you act as someone’s power of attorney the law refers to you as the “agent” and the person for whom you are acting as “the principal.”

In Pennsylvania your duties as agent are specified in the Probate, Estates and Fiduciaries Code. Section 5601.3 of the law (20 Pa. C.S.A. §5601.3) lays out your duties when you are acting as someone’s agent under a power of attorney/ It says the agent must:

(a)  General rule.--Notwithstanding any provision in the power of attorney, an agent that has accepted appointment shall:
(1)  Act in accordance with the principal's reasonable expectations to the extent actually known by the agent and, otherwise, in the principal's best interest.
(2)  Act in good faith.
(3)  Act only within the scope of authority granted in the power of attorney.
(b)  Other duties.--Except as otherwise provided in the power of attorney, an agent that has accepted appointment shall:
(1)  Act loyally for the principal's benefit.
(1.1)  Keep the agent's funds separate from the principal's funds unless:
(i)  the funds were not kept separate as of the date of the execution of the power of attorney; or
(ii)  the principal commingles the funds after the date of the execution of the power of attorney and the agent is the principal's spouse.
(2)  Act so as not to create a conflict of interest that impairs the agent's ability to act impartially in the principal's best interest.
(3)  Act with the care, competence and diligence ordinarily exercised by agents in similar circumstances.
(4)  Keep a record of all receipts, disbursements and transactions made on behalf of the principal.
(5)  Cooperate with a person who has authority to make health care decisions for the principal to carry out the principal's reasonable expectations to the extent actually known by the agent and, otherwise, act in the principal's best interest.
(6)  Attempt to preserve the principal's estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal's best interest based on all relevant factors, including:
(i)  The value and nature of the principal's property.
(ii)  The principal's foreseeable obligations and need for maintenance.
(iii)  Minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes.
(iv)  Eligibility for a benefit, program or assistance under a statute or regulation.

This is an imposing list of responsibilities. Note that one of the requirements is that you must: “Keep a record of all receipts, disbursements and transactions made on behalf of the principal.” This means you should have records that allow you to account for every dollar of income and assets you receive and disbursements you make.” 
Pennsylvania law provides that you can be called to account for your actions. You may have financial liability if  you are unable to adequately demonstrate the propriety of your actions.
So you should maintain careful and complete records of all steps you take on behalf of the principal. It is important that you retain receipts and maintain good records of all checks written, other disbursements made, all liabilities of the principal with which you have involvement or knowledge, all income and other assets you receive, and all actions you take on behalf of the principal. The maintenance of such records minimizes the possibility that you will be exposed to liability. It may make sense to hire an accountant to help you set up the books.
Before you start to act as someone’s power of attorney you should review your duties as set out in Section 5601.3. And be sure you read the power of attorney document and understand your duties and responsibilities before you start to act on behalf of your principal. If there is anything you don’t understand, get legal advice up-front not after the fact.
If ever you are acting as an agent and are not sure you are doing the right thing, seek out professional advice not only to protect the principal, but to protect yourself.

Further Information:

Tuesday, July 3, 2018

Act 53 Expands Pennsylvania Law on Neglect and Abuse of Care Dependent Persons

[The following article was written by Tammy A Weber, Managing Attorney of Marshall, Parker and Weber. Ms. Weber is currently the chair of the  Pennsylvania Bar Association’s Elder Law Section].

Neglect and abuse of care-dependent persons by caretakers is an unfortunate and sad reality.  Act 53 of 2018 expands the scope of the criminal offense of certain neglect or abuse of a care-dependent person by a caretaker as well as the definition of caretaker.  The legislation was introduced May 5, 2017 as HB 1124, was unanimously passed by the House last session, amended by the Senate on June 18, signed in the Senate and in the House after unanimous votes, presented to the Governor on June 22, and signed by him on June 28, 2018.  Act 53 takes effect in 60 days. 

Under the current section 2713 of the Crimes Code, a caretaker commits the offense of neglect of a care-dependent person if the caretaker intentionally, knowingly or recklessly causes bodily injury by failing to provide treatment, care, goods or services necessary to the health, safety or welfare of the care-dependent person or intentionally or knowingly uses physical restraint, chemical restraint or isolates a care-dependent person contrary to law or regulations such that bodily injury results.

According to the legislation, “[t]he General Assembly finds and declares that it is the legislative intent in enacting this act that a distinction should be recognized between intentional acts and negligent acts, particularly when this act is enforced against family members of a care-dependent person who are not trained to provide care.”

Act 53 adds an additional offense definition under 2713(a)(3) in which a caretaker would commit the offense of neglect.  That is, if the caretaker “intentionally, knowingly or recklessly endangers the welfare of a care-dependent person for whom he is responsible by failing to provide treatment, care, goods or services necessary to preserve the health, safety or welfare of the care-dependent person.”  A violation of this would be a second degree misdemeanor, punishable by up to two (2) years’ imprisonment and/or a fine of $5,000.00.  If there is a determination of a course of conduct of this offense, the penalty increases to a third degree felony, punishable by up to seven (7) years’ imprisonment and/or a fine of up to $15,000.00.

The caretaker definition is expanded and now includes “an adult who resides with a care-dependent person and who has a legal duty to provide care or who has voluntarily assumed an obligation to provide care because of a familial relationship, contract or court order” and “an adult who does not reside with a care-dependent person but who has a legal duty to provide care or who has affirmatively assumed a responsibility for care, or who has responsibility by contract or court order.”

The new offense under 2713.1 is triggered by a caretaker who acts with the intention to harass, annoy or alarm a care-dependent person and who:

(i)      strikes, shoves, kicks or otherwise subjects or attempts to subject a care-dependent person to or threatens a care-dependent person with physical contact;
(ii)     engages in a course of conduct or repeatedly commits acts that serve no legitimate purpose;
(iii)     communicates to a care-dependent person any lewd, lascivious, threatening or obscene words, language, drawings or caricatures; or
(iv)    communicates repeatedly with the care-dependent person at extremely inconvenient hours.

If the person is convicted under this new subsection, it would be a first degree misdemeanor, punishable by up to five (5) years’ imprisonment and/or a fine of up to $10,000.00.  Act 53 establishes a third degree felony for a caretaker who commits the offense of stalking against a care-dependent person.

If during an investigation, the Departments of Aging, Health or Human Services have reasonable cause to believe a caretaker has violated this section, a report shall be made immediately to local law enforcement or to the Office of the Attorney General. 

According to 2016 sentencing data from the Pennsylvania Commission on Sentencing, there were 11 convictions under Section 2713, 10 were misdemeanors of the first degree and one was a felony of the first degree.  Nine of those convicted received probation; one received county intermediate punishment and one received a county jail prison sentence.

We are hopeful that more caretakers who commit the above-described acts will be held accountable.

Tammy A. Weber is a Certified Elder Law Attorney and the Managing Attorney of the law firm of Marshall, Parker & Weber, LLC with offices in Williamsport, Wilkes-Barre, Jersey Shore and Scranton. For more information visit or call 1-800-401-4552.

Tuesday, June 26, 2018

My mother has Medicare. Won't that take care of the nursing home bills?

Medicare is the federal health insurance program for people who are 65 or older and certain younger people with disabilities or specific diseases. Payments by Medicare for nursing home care, if any, are only provided on a limited basis, and not for long-term needs.
There are many limitations. For example, Medicare requires a qualifying in-patient hospital stay within 30 days of your nursing home admission. In addition, Medicare requires that the patient is receiving daily skilled care in the nursing home.  Otherwise, you get no payment from Medicare.
 Most people residing in nursing homes are not receiving what Medicare considers to be skilled care. ("skilled care" is care which involves skilled nursing or rehabilitative personnel such as registered nurses, LPNs, or physical therapists).  Because of these restrictions, most people who enter a nursing home don't get any Medicare coverage at all.
And even if you do qualify for Medicare, it will only pay for a limited period.  As long as you meet the prior hospitalization and skilled care requirements, Medicare will pay in full for the first twenty days.  After that, if you continue to meet the skilled care requirement, you must pay the first $167.50 a day [in 2018] and Medicare will pay the rest of the daily bill.  (Many people have Medicare Supplement or Managed Care coverage that will pay the initial $167.50 for them).
It turns out that Medicaid (not Medicare) is the program that covers most (62%) of nursing home residents. Consult with an experienced elder law attorney to learn how you can qualify for Medicaid payment of nursing home or home care costs.
Click here for information from on the limitations of Medicare coverage of nursing home costs.