Progress on promotion of advanced planning

The American Bar Association’s Commission on Law on Aging reports that the Secretary of the US Department of Health and Human Services has sent a comprehensive report to Congress entitled “Advance Directives and Advance Care Planning.” The report, requested by Congress in 2006, focuses on (1) the best ways to promote the use of advance directives and advance care planning among competent adults as a way to specify their wishes about end-of-life care; and (2) addressing the needs of persons with disabilities with respect to advance directives.

The report thoroughly reviews the literature on “every aspect of advance care planning, analyses of key ethical and legal issues, and a discussion of opportunities to enhance the effectiveness of advance care planning and advance directives. The report is particularly timely as health care reform is in the public policy forefront, and several bills are pending on the Hill regarding advance care planning and improving care near the end of life.”

Charlie Sabatino, Esq., the head of the ABA’s Commission (and someone I feel privileged to know) has written a comprehensive analysis of the legal and public policy issues. I look forward to reading Charlie’s analysis.

They’re off to college! But can you help in case of emergency?

Great post in one of the blogs at about an commonly-overlooked issue. A parent’s ability to help their child with medical issues — like acting as an advocate in the event of an illness — ends when the child turns 18 unless the child has signed a health care proxy and HIPAA-compliant release for medical information. If these documents aren’t signed and on file at home, with your kid’s doctor and at the student health service, you may not be able to help your child get critical care in the event of a medical emergency.

Similarly, your child needs a durable power of attorney giving you legal authority to access her bank and credit card accounts and to make legal decisions. For example, if your child is seriously injured in an accident, you don’t want to have to go to court for a conservatorship just to sue the idiot who ran the ran the red light! The DPOA will allow you to help when help is needed most.

Steve McNair — a likely estate administration mess.

Most readers know by now that Steve McNair, the former Tennessee Titans QB, was killed in a murder-suicide by a woman who was not his wife. McNair left no will. Hoo boy….Now his widow has mess that could make the Michael Jackson estate look like a piece of cake to administer by comparison.

During his football career, McNair earned over $75 million in NFL salary alone — never mind the millions earned from endorsements, licenses for the use of his name and likeness, personal appearance fees, etc. He and his wife had two children. There are also two older (minor) children who may or may not be his, but for whom he was paying support.

According to The Tennesseean, since there was no will, under Tennessee law, 1/3d of the estate will go to his wife and the remaining share will be divided among his children. Mrs. McNair has stated that she does not know whether the two older children are McNair’s biological children. You can bet that those boys’ legal guardians have hired lawyers by now to protect their claims. You can also bet that Mrs. McNair’s lawyers will demand proof of paternity before these children see a dime.

Then there’s that pesky matter of failing to plan for federal estate taxation. That 2/3ds of the estate which doesn’t go to the wife will be subject to a maximum 45% federal estate tax, since the value of the estate is over $3.5 million. If we assume that the estate was worth $50 million, and if 1/3d passes tax-free to the surviving spouse under TN law, then that’s $33.34 million. Subtract the $3.5 million exemption for deaths in 2009, multiply by 45% for the tax bracket– or $13.49 million in possible estate tax!

This could have all been avoided.

A good estate planning attorney would probably have set up the estate to postpone a significant portion of the estate taxes until after the death of the second spouse. There probably would have been an irrevocable life insurance trusts established so that an insurance policy would pay the millions of dollars which will be owed to the Federal government in estate taxes. He might have set up a charitable remainder trust, which would have created an annuity for the widow and then left the remaining funds to charity without any estate tax.

I can safely predict that a number of Tennessee lawyers and the IRS will make a lot of money off of this case because of a lack of any estate planning. I also expect that the court may order trusts created for the benefit of the children (once it determines how the 2/3ds of the estate get divided), as a judge will not like the idea of young children receiving millions of dollars without any professional supervision over the funds’ use. Saddest of all, there are two (or four) children who will have to grow up without their father’s love while almost certainly overhearing other family members arguing over his money.

Bankruptcy and your Social Security check

Did you know that federal law protects your Social Security check from creditors — but only if you make an effort to protect it? Massachusetts bankruptcy guru Walter Oney alerted me to an important decision from the bankruptcy court [Carpenter v. Ries (In re Carpenter), 2009 Bankr. LEXIS 1776 (B.A.P. 8th Cir. July 13, 2009)] which emphasizes this point.

In Carpenter, a Chapter 7 debtor was holding a cashier’s check for a lump-sum retroactive award of SSDI benefits at the time he filed his petition. The BAP ruled that these funds did not become part of the bankruptcy estate at all because of section 407 of the Social Security Act (42 U.S.C. 407). This law states:

§ 407. Assignment; amendment of section

(a) The right of any person to any future payment under this title [42 USCS §§ 401 et seq.] shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title [42 USCS §§ 401 et seq.] shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

(b) No other provision of law, enacted before, on, or after the date of the enactment of this section [enacted April 20, 1983], may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.

(c) Nothing in this section shall be construed to prohibit withholding taxes from any benefit under this title, if such withholding is done pursuant to a request made in accordance with section 3402(p)(1) of the Internal Revenue Code of 1986 [26 USCS § 3402(p)(1)] by the person entitled to such benefit or such person’s representative payee.

Walter’s note to one of my e-mail lists notes that

BAP decisions are not binding precedent, even within the circuit where they’re rendered. However, this panel’s analysis seems to me likely to be followed elsewhere.

The moral of this story … is that clients should ALWAYS be advised to segregate social security benefits in dedicated bank accounts so they can easily trace them, and they should use other resources (to the extent possible) to pay expenses. These steps will minimize the client’s exposure to debt collectors and bankruptcy trustees.

So — if you receive payments from Social Security, whether they are for retirement or disability benefits or SSI, have those funds directly deposited into a checking or savings account. (If you’re married or live with to another Social Security recipient, have your spouse or partner deposit his or her payment into a separate bank account). Put the rest of your money in other accounts. Make one of those accounts your “operating account” for household expenses. Then transfer funds from your dedicated Social Security account into your operating account as needed. (Setting up your accounts so that you can make the transfers on-line will make your life easier.) While these steps will mean some additional bookkeeping, it can save a lot of money down the road if you run into problems paying your bills and either face suit from a creditor or need to file bankruptcy.

Surviving spouses and inherited debt

Please check out the link to an interview with me by Sally Herigstad, CPA, a columnist at about the rights and responsibilities of surviving spouses concerning the debts of the deceased spouse.

These responsibilities are dictated both by the terms of the contract and by assorted state and federal laws. For example, under Massachusetts law, the only debts which are solely in the name of the deceased spouse that the surviving spouse must cover are medical bills — all the other debts are presumed to be the responsibility of the decedent’s estate. This surprised Sally, a resident of the state of Washington, who told me that under her state’s community property law, the survivor inherits all debts. I also noted that if the mortgage is solely in the dead spouse’s name, a particular federal law called the Garn-St. Germain Act allows the surviving spouse to assume the mortgage if she inherits the house. Of course, debts which the couple entered into together live on, as do debts which the survivor voluntarily assumes.

Thus, it’s important for surviving spouses to meet with an experienced probate attorney to review the decedent’s bills — at least in Massachusetts, there may be some debts that the survivor may not need to pay.

Problems with DIY Estate Planning, Part 1

Plenty of folks think that a will is just a form — you can buy a piece of software for less than $100, plug in names and addresses and — poof! — out comes a document that will take care of your loved ones after you’re gone. I will be exploring why this kind of thinking is a gift to probate lawyers over the next few weeks.

First, all the language in a will means something. Sometimes the language that’s missing means even more. If the will is a generic document which is missing language that’s required under Massachusetts law to allow the executor to do or not do something, then there’s usually not much which can be done to change the situation after the creator of the will dies. Massachusetts law doesn’t allow wills to be “reformed,” or corrected, after death, so everyone is stuck with a document that may have a big problem. So, a good estate planning lawyer makes sure that the will complies with state-specific procedural requirements.

Unfortunately, a will that you get off a piece of software which was drafted somewhere else and does not properly reflect Massachusetts law and our Probate Court rules can have unintended consequences. For example, the failure of a do-it-yourself will to specifically “waive sureties on the bond” — something mentioned in nearly every Massachusetts will — means that the executor may need to spend hundreds, sometimes thousands, of dollars buying an insurance policy as a condition of being appointed. Similarly, a will that doesn’t waive the requirement to get a license to sell real estate adds more time and cost to estate administration. So, whatever money you might think you saved drafting your own will can easily be lost — and then some — after your death, because some lawyer in some other state who drafted the document didn’t know Massachusetts law and practice. Not much of a bargain there.

Changes in Medicare regulations to help nursing home residents

Every year, federal law requires nursing homes be inspected and graded on the standard of care they provide residents — cleanliness, record keeping, food, etc., etc. However, until last month, there were no grades for actually making a nursing home feel more like, well, a home. These new standards are intended to force nursing homes to focus on reducing the institutionalization of residents. It will be a while before these changes in the survey requirements result in real change, but it’s a step in the right direction.

To quote the press release —

The new guidance also calls on nursing homes to de-institutionalize their physical environments. The guidance highlights institutional practices that facilities should strive to eliminate including meals served on institutional trays and noise from overhead paging systems, alarms and large nursing stations.

A homelike environment is not achieved simply through enhancements to the physical environment, according to the new guidance. It concerns striving for person-centered care that emphasizes individualization, relationships, and a psychological environment that welcomes each resident and offers comfort….

The guidance also makes clear that residents have the right to choices concerning their schedules -consistent with their interests, assessments, and plans of care. Choice over schedules includes, but is not limited to, those matters that are important to the resident, such as daily waking, eating, bathing, and going to bed at night. The facility should gather this information in order to be proactive in assisting residents to fulfill their choices.