Using a Power of Attorney for a Parent

power of attorney
A Power of Attorney is the most important estate planning document your parent should have.

Does your parent have a Power of Attorney? Do you have a copy?

Imagine that your perfectly fine, aging-well parent has had a minor stroke and is no longer able to manage her financial or legal affairs. Your parent has been living independently, waving off offers of help or even having someone come in to clean for years. It seemed as if it would go on that way forever. What happens, asks the Daily Times, when you are confronted with this scenario in the aptly-titled article “Senior Life: What a nightmare! Untangling a loved one’s finances”?

After the health crisis is over, it’s time to get busy. Open the door to the home and start looking. Where’s the original Will? Where are the bank statements and where’s the information about Social Security benefits? When you start making calls or going online, you may run into a bigger problem than figuring out where the papers are kept – no one will talk with you. You are not legally authorized, even though you are a direct descendant.

This happens all the time.

Statistically speaking, it is extremely likely that your parent will end up, at some point, in a nursing home or a rehabilitation center for an extended period of time. Most people have no idea what their parent’s financial situation is. They don’t know where and how Dad keeps his financial and legal records or what they would need to do to help him in an emergency.

It’s not that difficult to fix, but you and your healthy parent or parents need to start by planning for the future. That means sitting down with an estate planning attorney and making sure to have some key documents executed – especially a Power of Attorney.

A Power of Attorney (POA) is a legal document that gives you permission to act on another person’s behalf as their agent, if they are unable to do so. It must be properly prepared in accordance with your state’s laws.  It allows you to pay bills and make decisions on behalf of a loved one while they are alive. Without it, you’ll need to go to court to be appointed as legal guardian. That takes time and is much more expensive than having a POA created and properly executed.

If you’ve downloaded a Power of Attorney and are hoping it works, be warned: chances are good it won’t. Many financial institutions are very picky about the POAs they’ll accept, and most generic forms won’t have many of the special provisions estate planning and elder law attorneys know need to be included to allow you to have certain powers in place to help your parent.

If your parent has a POA in place, and you have to step in, then it’s time to get organized. You’ll need to go through your parent’s important papers, setting up a system so you’ll be able to see what bills need to be paid and how many bank accounts or investment accounts exist.

Next, it’s time to consolidate. If your parent was a child of the Depression, chances are she has money in many different places. This gave her a sense of security but it’ll give you a headache! Consolidate multiple CDs, bank accounts, and investment accounts into one institution. Have Social Security and any pension checks deposited into one account.

If you need help, don’t hesitate to ask for it. The stress of organizing a loved one’s home, caring for him or her, and managing the winding down of a home can be overwhelming. Your estate planning attorney will be able to connect you with a number of resources in your area.

Reference: Daily Times (April 9, 2019) “Senior Life: What a nightmare! Untangling a loved one’s finances”

IRS Scams: What You Need to Know

IRS scams
IRS scams are carried out by con artists who prey on the elderly.

IRS scams seem to be getting more common. The other day I spoke with a sweet elderly client who had received a voicemail message from a man who claimed he was from the IRS. He told her they’d be issuing a warrant for her arrest if she didn’t call them back immediately. Of course, that frightened her and she called the number he left. Luckily, she was a bit wary and when the person on the other end told her to buy some Google Play gift cards as payment, she was pretty sure it was a scam and hung up. But she called me for reassurance that she’d done the right thing (she had).

The creepy thing is that while I was on the phone reassuring my client, my paralegal received a recorded IRS scam message on her cell phone! And I seem to get at least one recorded voicemail per month claiming there’s a warrant out for my arrest due to nonpayment of taxes.

It’s almost an epidemic. You get a phone call or robotic-sounding message from someone who says he is from the Internal Revenue Service (IRS). He says that you owe money for taxes and that the authorities will come and arrest you unless you wire money or buy prepaid debit cards, Google Play gift cards, or iTunes gift cards immediately. Of course, the caller isn’t with the IRS. He’s a thief.

These IRS scam artists target older Americans  – even those in nursing homes – and bilk them out of millions of dollars a year. Here’s what you need to know about these IRS scams…

The government has hard numbers only for the people who reported the theft to the Treasury Inspector General for Tax Administration (TIGTA), so the total scope of the crimes is likely much larger than the numbers make it appear. Since late 2013, more than 15,000 people have reported losses totaling nearly $75,000,000 to these illegal IRS scams. The average amount stolen is nearly $5,000 per victim, but at least one person lost more than $500,000, and at least one other person committed suicide after realizing he had been conned.

Thankfully, the word is getting out about these IRS scams, and would-be victims are reporting the impersonators. More than 2,500,000 people have contacted TIGTA to report suspicious calls from people claiming to be with the IRS.

What to Do If You Get a Suspicious Phone Call

If you get a phone call from someone who claims to be an IRS employee, just hang up. TIGTA agents advise that you not engage with the person at all. Don’t try to pull a prank on him or blow an air horn into the phone. Just get off the phone immediately.

Why just hang up? Apparently there have been several instances where the IRS scammers got angry at the people they were trying to victimize and took revenge. They called the police and gave false reports of violent criminal activity, such as reporting an armed home invasion happening at the person’s house. This dangerous, illegal act is known as “swatting,” named for the SWAT teams that respond to the alleged threat, sometimes with deadly force.

So, hang up immediately and report the IRS scam. If you didn’t fall for the scheme, report the call on the TIGTA website: www.tigta.gov. If you did fall prey to the con artists, then call the TIGTA hotline (800-366-4484).

What to Do If You Might Owe Back Taxes

The IRS contacts people by mail about delinquent taxes. They do not start the process by telephoning taxpayers and threatening them with arrest, jail, or forfeiture of their homes. If you are worried about whether you really do owe any taxes, the best thing to do is to go to the IRS website, www.irs.gov, and see if you owe any back taxes. If you do, the IRS will work with you and set up a payment plan. They won’t tell you to go to Walmart to buy prepaid debit cards.

Keep yourself safe from financial predators, including IRS scam artists, by using some common sense. Don’t anger them, but also don’t ignore the situation if you actually do owe taxes. Interest and penalties can add up quickly. You’ll sleep much better at night if you get a payment plan in place and know what to expect.

Your state’s regulations might be different from the general law of this article, so it would be a good idea to talk with an elder law attorney in your area.

References:

AARP. “Meet the Lawman Who Went After IRS Imposters.” (accessed April 11, 2019) https://www.aarp.org/money/scams-fraud/info-2019/timothy-camus-interview.html

 

Special Needs, Special Trusts: SNT FAQs

special needs trusts for special people
A special needs trust (SNT) allows a loved one to keep needed benefits without living in poverty.

People who have loved ones with special needs have heard horror stories about a well-meaning grandparent who left a modest inheritance to a disabled grandchild. The grandchild promptly loses her government benefits and has to struggle to regain them again once the money runs out. The disabled person didn’t really benefit – she ended up in the same near-poverty situation she was in before the gift.

Or, what about the loving single father who intentionally disinherits his disabled son to preserve his benefits – leaving everything to his daughter who promises to care for her brother. Two years after Dad dies, daughter has spent most of “her” inheritance. In many cases, a special needs trust could have prevent these types of scenarios.

What is a special needs trust?

A special needs or supplemental needs trust (SNT) is a legal document that allows a trusted individual or institution to distribute the trust’s funds in a way that improves and enhances the life of a special needs individual while preserving eligibility for means-tested government programs, such as SSI and Medicaid.

Why would I consider creating an SNT?

A disabled person might receive money from an inheritance or a personal injury award, and may need help managing that money. Or he could be disqualified from receiving certain means-tested government benefits because of the windfall. Or a family member may want to help a disabled person now, but doesn’t want to run afoul of government rules. A properly drafted SNT can help in these situations.

I’ve heard people talk about self-settled SNTs, first-party SNTs, and third-party SNTs. What are those?

A self-settled SNT and a first-party SNT are different terms for the same thing. I prefer the term “first-party SNT.” A first-party SNT is funded with the disabled person’s own money and can be created by the disabled person himself or by somebody else on behalf of the disabled person. A first-party SNT must be created before the disabled beneficiary turns age 65 and must be irrevocable (cannot be changed). Also, any assets remaining in a first-party SNT at death must be used to reimburse Medicaid.

A third-party SNT is funded with other people’s money. The money might belong to a parent, grandparent, friends, or even a stranger. A third-party SNT can be set up even if the disabled person is over age 65, and can be revocable or irrevocable. When the disabled person dies, there is no Medicaid payback requirement – the money can go to any beneficiaries the trust creator named in the trust document.

Okay. So what is a pooled trust?

Many people prefer to have a lawyer create a SNT specifically for their own family situation. But lawyers aren’t inexpensive, and sometimes the amount of the funds potentially being put into the trust may not seem to justify the expense of a creating a customized SNT. Plus, then the trustee has to decide how to invest the money, how and when to distribute it, etc.

So some non-profit institutions came up with an easier and less expensive alternative to customized SNTs – a pooled SNT. Every person in the pool uses the exact same master SNT, so no custom trust needs to be created. This allows the institution to administer all the trusts efficiently. The institution then pools all the money for investment purposes (which keeps those costs low) but keeps separate accounting statements for each individual disabled beneficiary – kind of like how your employer handles your 401(k)!

Pooled SNTs are first-party trusts, but they can be created even if the beneficiary is over age 65. When the disabled beneficiary dies, the remaining funds will either remain in the pool to help other disabled beneficiaries or will be used to pay back Medicaid.

Who should be the trustee of a special needs trust?

In many cases, people creating SNTs name themselves or other family members as the trustees. Sometimes this is fine. Other times … not so much. The laws regarding means means-tested government programs are complex and ever-changing. Generally, it may be better to name a professional trustee – someone who has experience administering SNTs. Alternatively, naming a family member and a professional trustee as co-trustees may provide the best of both worlds: The professional trustee can handle the administrative details while the family member provides the personal care and compassion.

So if a grandparent leaves money directly to her disabled grandchild in her Will, what happens?

If the Will named the disabled grandchild individually and did not name that disabled person’s SNT, then the only way to protect the disabled person would be to set up a first-party SNT – which would be subject to the Medicaid payback requirement. It has to be a first-party SNT rather than a third-party SNT because the grandparent left it to the child directly. If the grandparent named the actual SNT instead, the money could have been deposited directly to a third-party SNT – which would have no Medicaid pay back requirement.

So, how do I create a special needs trust for a disabled loved one?

Just sit down with an estate planning or elder law attorney. Make sure to bring all necessary documents such as any existing state planning documents, guardianship documents, and proof of where the disabled person’s income is coming from. Together, you’ll craft a plan that’s just right for you.