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.

Saturday, May 19, 2018

Is a Personal Care Home the Same as a Nursing Home?

[This article was written by Elizabeth A. White, CELA* an attorney with Marshall, Parker and Weber].
           Is a personal care home the same as a nursing home? This is a common question for families looking into care options for themselves or their loved ones. The answer is, no, although sometimes the two get confused.
           Personal care homes are residences that provide seniors support with instrumental activities of daily living and/or activities of daily living. Assistance with instrumental activities of daily living can include help with housekeeping and laundry, medication management, shopping and meal preparation, using the telephone, and making appointments. Examples of activities of daily living that personal care homes may provide assistance with include eating, toileting, personal hygiene, and bathing. Each personal care home can provide a description of what services they provide to their senior residents. Usually there are more and more varied activities available to seniors in personal care homes than to those in nursing homes, because personal care residents are better able to participate than those living in a nursing home setting.
           Although nursing homes also provide assistance with many of the activities listed above, seniors needs in a personal care home do not meet the higher level of services provided in a nursing home. While seniors in personal care home environments need some help with care, this help can successfully be provided in a more community like setting.
           Personal care homes are licensed by the Department of Human Services to protect the health, safety, and well being of the residents. There is staff available at personal care homes at all times in case of emergency, but not necessarily medical staff. Personal care homes are not reimbursed by Medicaid, and therefore you cannot apply for Medicaid benefits to pay for living in a personal care home. Options for payment include private pay and Veterans benefits. Generally, personal care home level of care is less expensive than nursing home level of care.
           Nursing homes provide a higher level of care than personal care homes. Like personal care homes, nursing homes are also licensed and inspected, but under a different set of standards. Skilled nursing and certain medical treatments are provided in nursing homes and medical supervision is available 24/7. Nursing homes do accept third party reimbursement though benefit programs such as Medicare and Medicaid.
           It is difficult decision for a senior to move from their home. Well intentioned children or family members often think that their parent or loved one needs to move from living independently to a nursing home. A personal care home may be a good in-between to provide the required services to the senior, but allow the senior more autonomy than they may have in a nursing home setting.  Detailed assessments of a senior’s assistance needs can help to determine the best place for a senior to thrive.
           ____                                                                                      __________________                                                                                                                                                 *Certified Elder Law Attorney by the National Elder Law Foundation under authorization of the Pennsylvania Supreme Court

Sunday, May 6, 2018

The Big Financial Danger Facing Older Adults

Recently I wrote about how death taxes impact Pennsylvania residents and their heirs. The conclusion was that for most of us, federal death taxes are not an issue. And Pennsylvania’s inheritance tax can take a modest bite from our accumulated wealth. [See my recent article Death Taxes For Pennsylvania Residents]
For many Pennsylvania seniors a much bigger risk to their goals of lifetime financial and personal security and passing along an inheritance is the possibility that their life savings will be used up paying for their care before death. Most seniors require care during an extended period of time prior to their deaths. The cost of that care, whether it is received at home, in assisted living, or in a nursing home, can quickly deplete a modest estate. The Pennsylvania Department of Human Services recently announced that the average cost of a private room in a Pennsylvania nursing home is $330 a day. That’s over $120,000 a year!
Before my father passed away some years ago he spent 2 ½ years in a nursing home. At the current rates his 2 ½ year stay in a nursing home would have cost over a quarter of a million dollars. That is enough to wipe out the savings of most Pennsylvania seniors. 
So, for most seniors, it’s the potential cost of long term care rather than death taxes that should be the focus of their estate planning. Expert long-term care planning with the help of an elder law expert can help ensure that seniors will be able to:
    * remain financially independent,
    * maintain control,
    * maintaining privacy,
    * involve family members without burdening them,
    * maximize available government programs, and
    * leave an inheritance.
It is possible to put together a plan that will reduce the risk of long-term care costs.
 While last minute planning is possible the most effective planning is accomplished by those who plan well in advance of their need for long-term care. Seniors in their 60s and 70s should be planning now to protect themselves and their families from financial devastation in their 80s and 90s.
 As President John Kennedy said: “The time to repair the roof is when the sun is shining.” John F. Kennedy, Annual Message to the Congress on the State of the Union. January 11, 1962
Pennsylvania seniors and their families can get expert planning guidance at any one of the four offices (Williamsport, Wilkes-Barre, Scranton and Jersey Shore) of my law firm, Marshall, Parker and Weber. Visit our website or call us toll free at 800-401-4552 for more information.

Thursday, April 26, 2018

Proposed Law Gives Visitation Rights to Families of Incapacitated Persons

(This article was written by Matthew Parker Certified Elder Law Attorney* with Marshall, Parker and Weber.)
        A bill introduced in Pennsylvania’s Senate proposes to bring “Peter Falk’s Law” to Pennsylvania.  The law provides visitation rights to the families of incapacitated persons who are under the legal custody of a court appointed guardian.  The law also gives notification rights to families regarding the incapacitated person’s change in residence, admission to a hospital and death. 
        The late actor Peter Falk played Lieutenant Columbo on the television series “Columbo” from 1968-1978.  Wearing a wrinkled raincoat, disheveled and absentminded, Columbo would solve crimes with skill and insightfulness. 
        Late in life, Peter Falk developed Alzheimer’s disease.  He was allegedly isolated from his family and friends by his second wife who had been appointed his court appointed conservator (guardian).  As his guardian, his wife allegedly prevented Mr. Falk’s daughter and family friends
from visiting him, did not notify them of changes in his health and allegedly failed to notify them of his death in 2011. 
        Peter Falk’s story is not unusual.  Many families have similar experiences.  Often a second marriage has caused a rift between the second spouse and children from a first marriage.   The caregiver spouse refuses access to the children of a first marriage or refuses to notify them of changes in the health, residence or even death of the parent.
        Across the country, 12 states have enacted versions of a law often referred to as “Peter Falk’s Law”. Pennsylvania Senate Bill 113 proposes to bring that law to Pennsylvania.  The law would prohibit a court appointed guardian from restricting an incapacitated person’s right to visit with family and friends.   There may be restrictions on the visitation rights, such as to those who pose a threat to the incapacitated person. 
        If the guardian refuses access, a family may proceed to court to have a judge order the visitation and possibly replace the guardian.   The language of the law provides that you can define those who will have visitation rights in documents such as a power of attorney or advance directive. 
        The law also proposes that the guardian will have to provide notice to designated persons of the incapacitated person’s residence change, admission to a nursing home or assisted living facility, a hospital and death.   Given the growing popularity of these laws across the country, Pennsylvania may soon be one of those states granting visitation rights to the families of incapacitated persons.  

·      Matthew Parker has been Certified as an Elder Law Attorney by the National Elder Law Foundation

Sunday, April 8, 2018

Death and Taxes in Pennsylvania

Should you be worried about death taxes?
Many Pennsylvania seniors share similar financial and estate planning goals. We want to be sure that we have enough resources to provide for our needs during our lifetime. And we want to pass a little something – as much as possible really – on to our families after our deaths.
For most of us, death taxes are a nuisance, but won’t prevent us from reaching these planning goals. Death taxes don’t affect our lifetime financial security because they only come into play when we die.  And with proper planning they won’t affect the financial security of our spouse because in most cases there is no tax on what we leave to our surviving husband or wife.
For most of us death taxes hit our families only when both spouses are gone and our home and savings pass to our children or other heirs.  At that point, they usually do take a bite.
Here is my simplified overview of how death taxes apply for Pennsylvania residents. Pennsylvania families face two forms of death tax, state and federal. This information is based on the tax laws as they exist in 2018.
Federal Transfer Taxes: The federal government imposes a set of taxes (estate, gift, and generation-skipping) on the transfer of wealth. Under current law few families are affected.
Generally, there is no tax on what you leave to your spouse or charity. And there is no tax on the first approximately $11,2 million (in 2018) that passes to your other heirs. A married couple can potentially protect approximately 22,4 million from the tax. These exclusions increase each year with inflation. There is the potential that the exclusion amounts could be reduced in the future, but they will still likely be more than most people require. If you are one of the few people who do have an estate over the exclusion limits you need to plan to avoid or limit federal transfer taxes. The tax rates are high – the federal estate tax is 40% on the excess – but that tax can be greatly reduced or eliminated by good advance estate planning.
While a 40% federal death tax is severe, it doesn’t affect many people. Fewer than 1% of all estates are subject to federal estate tax. For most of us, it is not a worry.
Pennsylvania Inheritance Tax: The Pennsylvania inheritance tax does affect the things that most Pennsylvania residents leave to their children and grandchildren after their deaths.  It will impact most Pennsylvania families.
Inheritance tax is imposed as a percentage of the value of a decedent’s estate transferred to beneficiaries whether the assets pass through probate or not. There is no bottom threshold – even small estates are subject to PA inheritance tax. The tax rate varies depending on the relationship of the heir to the decedent.
With a few special exceptions the rates for Pennsylvania inheritance tax are as follows:
  • –         0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger;
  • –         4.5 percent on transfers to direct descendants and lineal heirs (see below for definitions);
  • –       12 percent on transfers to siblings; and
  • –         15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.
Direct descendants (4.5% rate) include all natural children of parents and their descendants (whether or not they have been adopted by others), adopted descendants and their descendants and step-descendants. Lineal heirs (4.5% rate) include grandfathers, grandmothers, fathers, mothers and their children. Children include natural children (whether or not they have been adopted by others), adopted children and stepchildren.
There are some inheritance tax exemptions written into the law. The proceeds of life insurance policies on the decedent’s life are not taxed, and special rules may apply to IRAs and other retirement plans.
Certain farm land and other agricultural property may be exempt from Pennsylvania inheritance tax, provided the property is transferred to eligible recipients. For more information about these agricultural exemptions and related requirements, see my earlier post: Pennsylvania eliminates tax on inheritance of family farms if law’s conditions are met.
Inheritance tax payments are due upon the death of the decedent and become delinquent nine months after the individual’s death. If inheritance tax is paid within three months of the decedent’s death, a 5 percent discount is allowed.
While the Pennsylvania inheritance tax can take a bite out of your estate, it is rarely devastating. Let’s say that when you die, your leave your home and investments to your children and that the net value of the inheritance is $300,000.  The PA inheritance tax would be 4 ½% of that, or $13,500, and the children would receive $286,500 in value.
If the $300,000 estate were left to a brother or sister the toll would be much higher. The PA inheritance tax would be 12% of that, or $36,000.
For more information on Pennsylvania Inheritance Tax see Elizabeth White’s article Common Pennsylvania Inheritance Tax Questions.

Sunday, March 18, 2018

Mistakes Retirees Make - Failing to Plan for Beficiaries with Special Needs

[Pennsylvania retirees often make legal and estate planning mistakes because of a lack of accurate information and guidance. These mistakes can impact the retirees’ financial security and prevent them from achieving important goals.] 
The existence of a child, grandchild, or other potential beneficiary with a disability (often referred to as “special needs”) complicates the estate planning of a parent or grandparent.  Proper planning of your will, trusts, and beneficiary designations becomes even more crucial to protecting your heirs. 
 With wise advance planning, you can provide for all of your family members without jeopardizing a special needs individual’s current (or potential) eligibility for important government benefits such as Supplemental Security Income (“SSI”) and Medicaid.  These “needs based” government programs can provide substantial support for your special needs beneficiary but only if you set things up so that the beneficiary will be able to meet the programs’ financial standards.
 The rules are complicated and it’s easy to make a mistake.  Here are some of the common mistakes I see retirees making when planning for a special needs beneficiary: 
(1) Making outright distributions from a will, trust, insurance policy, annuity, or retirement plan to the special needs individual.  The receipt of this kind of outright inheritance will likely make the beneficiary ineligible for continued SSI and Medicaid benefits;
  (2) Disinheriting the special needs person – which may leave an already vulnerable beneficiary even more dependent upon the uncertain future generosity of the government. 
 (3) Leaving property to another family member with an “understanding” that they will use the funds to take care of the special needs individual – this plan is fraught with danger and complexity.  What if the other family member dies, runs into medical or financial or marital difficulty, or becomes estranged from the special needs person?  
(4) Establishing a “support trust” for a special needs beneficiary - which may force the trust’s funds to be spent down before public benefits become available. 
There are much better ways to plan. One effectibe planning tool is the “Special Needs Trust” which can be created to take effect either during your lifetime or upon your death.  A Special Needs Trust can provide for the beneficiary’s continuing eligibility for government benefits, protect the inheritance from claims for government reimbursement, and protect the inheritance from loss to third parties, including siblings, grandparents, aunts, uncles and friends who may have the best of intentions.   
 The Special Needs Trust must be carefully drafted by a lawyer who is familiar with this area of law.  A wrong word can make all the difference between creating a fund that will enhance the beneficiary’s life by supplementing public benefits, and a fund that will quickly be exhausted replacing those government benefits.