Happy Veterans Day to all of our veterans and their families. Today and every day let us never take for granted the sacrifices they have made to secure our freedoms. Thanks to them, we live in the greatest country of the world.
Sometimes we grow concerned that a friend, family member (including spouse) or service professional may be taking advantage of an elderly family member to access their finances while they are living or through inheritance. Undue influence occurs when a person abuses their relationship to an elder in order to have access to their finances and/or become a beneficiary of their will or other estate planning instruments.
Certain elders are more vulnerable than others, and it can be difficult to identify if the situation involves someone with dementia who needs help with decisions versus someone who is being taken advantage of. Below are some questions to ask yourself about the elder as well as the potential suspect to help identify what is occurring.
Questions to ask about the elder
~ Health Factors
Has the potential victim recently had a new medical diagnosis? Do they drink too much or abuse other substances?
~ Personal Factors
Has the person recently been widowed? How isolated are they? Do they have neighbors nearby? Any friends or family? How educated/sophisticated are they about decision making? Do they have access to their own lawyer or other professional who gives them objective advice? Have they recently announced they have a new best friend?
~ Financial Behavior
Have recent financial decisions been out of character? Have these decisions been made since the elder made a 'new friend'? Have there been recent financial losses?
Questions to ask about the potential suspect
~ Financial situation
Can this person survive financially without the elder's assets?
~ Access to elder
When you phone or go to the door, are you always told the elder is sleeping or otherwise unavailable? If this is occurring, please be aware this is considered the single strongest indicator of elder abuse and undue influence.
~ Knowledge of elder's limitations
How much information does this person have about any mental limitations the elder may have?
~ Decision Making
What, if any, financial decisions, does the potential suspect make for the elder?
Does this person treat the elder with respect? What is the nature of their interactions? Is there much about the relationship that you do not know, does it seem secretive? Is this suspect the sort of person the elder would ordinarily interact with?
If you believe an elder may be subject to abuse and undue influence, please be aware that the elder may not recognize the abuse. It can be similar to a situation where a husband is mentally or physically abusing his wife but she says everything is fine. Persistent verbal, emotional and mental abuse can convince the elder that their family doesn't care about them because the suspect typically lies and says the family doesn't call or try to visit. It is common for the elder to become so dependent on the suspect as a caretaker that they will defend the suspect against accusations.
It can be best to remedy undue influence through the legal system, by removing the suspect as guardian, conservator, and/or power of attorney, and/or by changing financial plans, deeds and wills back to what they were before the undue influence occurred.
Most people know that probate is a legal process for distributing someone's probate after their death, but may not understand why it's necessary to go to court to disburse property among the family of the deceased.
The probate process typically includes:
-- Filing the person's will with the local probate court
-- Inventorying and appraising the value of the person's property
-- Paying debts, if any
-- Paying estate tax, if any
-- Establishing the validity of the will
-- Distributing property according to the will
Going through probate is costly as there are many fees to be paid; attorneys fees, court fees, appraisers fees and other costs.
What if the person who died left very few assets?
In Massachusetts if the person who has died owns only one motor vehicle and has $15,000 or less in assets, an informal process called Voluntary Administration can be used. Voluntary Administration is less expensive and faster than the formal probate process.
What if there isn't a will?
Where the deceased person did not leave a will or any other formal legal means of transferring property (such as a trust) the property is distributed according to Massachusetts statute. In legalese, the person is said to have died "intestate" (e.g., without a will) and the Massachusetts intestate statute will control the property distribution.
How long does the probate process take?
It typically takes one year. One reason for the length of the process is to permit creditors to make claims against the deceased person's estate. After one year the probate process closes, the estate is settled, and creditors are prohibited from making any further claim against the estate.
Can I avoid probate?
There are other ways to transfer your assets, such as trusts, which bypass the probate process. In some cases, depending on the value of your assets or your family situation, it may be desirable to avoid probate by taking advantage of these non-will legal instruments. The probate court filing and the details of your will are public, whereas if you desire privacy trusts are preferable because unlike wills, a trust need not be filed in court.
When is probate a good idea?
If you expect a legal challenge to your property distribution probate is an efficient way to resolve the challenge and is less time-consuming and expensive that defending a lawsuit. Likewise if you have difficulties with creditors probate can be the easiest way to reach resolution of the creditors claims, as normal lawsuits can take years.
What if someone challenges my will?
This will create a headache for your family, but it is really quite difficult to prove a will is invalid. The challenger has to prove that your will was not created as you would have intended it, that it was executed through fraud, duress, or undue influence, or that you were mentally incompetent at the time you signed it. The legal standards for proving a will to be invalid are very high. It's easy for someone to file a will challenge but not so easy for them to win.
A health care proxy is a legal document whereby you grant authority to the person of your choice to act as your healthcare agent.
The agent need not have a medical background. It is common for spouses to name each other as health care agent and another person as backup agent. Some people name an adult child, sibling or friend. It's helpful to check with this person in advance to ensure they are comfortable taking on this responsibility.
After a doctor has found that you are unable to make or communicate medical decisions about your care, your healthcare agent will make medical decisions for you in the event you are unable to make those decisions for yourself. Typically the authority granted to your agent is quite broad and includes decisions pertaining to mental health as well as physical health. A doctor must comply with the decisions of the health care proxy or refer the patient to another doctor who will comply.
The reason to name a health care proxy is to ensure that you receive the type of care you would desire, as well as not receiving care that you would wish to decline, in the event you are unable to communicate your wishes yourself. Though not legally binding, many clients opt to create a nonbinding document - a living will or advance directive - which specifies their wishes in detail. A living will or advance directive provides information to your health care proxy to help guide their decisions about your care.
Often a living will or advance directive states your desire that your life not be artificially prolonged if you are dying. It can be helpful to your health care proxy to have this guidance on a very sensitive issue. Even though it isn't legally binding, it can provide valuable information about your wishes regarding end-of-life care, and can be especially helpful if there is disagreement among your family about what to do.
This is a legal document which permits your health care agent access to your medical records. Patient privacy laws make it critical to have a HIPAA Release. Without it your agent may be blocked from accessing information about your condition which they will need to make decisions for you.
In the event that you are temporarily unable to care for your children for any reason - something none of us would like to anticipate - you can still ensure some stability for your children. You can do this by choosing in advance who you would like to care for your children in case you can't. You may already have godparents, family members or friends who you've spoken to about taking on this role. But to ensure their legal authority to care for your kids won't be challenged it's important to have an Emergency Guardianship Proxy.
An Emergency Guardianship Proxy lets you select a temporary guardian, as well as an alternate temporary guardian, to care fo your children in case you can't and if you have a spouse, in case they can't either. It provides for the Emergency Guardian to make all decisions about the welfare and day-to-day care of your children.
Massachusetts has a homestead law that allows homeowners who live in the home to protect their principal residence from certain creditors. On March 16, 2011, significant changes to the Massachusetts Homestead law went into effect, completely revising Massachusetts General Laws Chapter 188, sections 1-10. Homes held in trust, mobile homes, and manufactured homes are now eligible for homestead protection.
The new law provides you an automatic homestead protection of $125,000, no action on your part is required to obtain this protection. However it is to your advantage to file a declaration of homestead if you have not done so previously as this increases your protection to $500,000. All owners can sign the declaration of homestead, so that equity in the home will not be vulnerable to creditors of any owners.
If you have previously filed a declaration of homestead you are not required to file a new one to receive the benefits of the new law. However, if you have refinanced your home in recent years or if there is a risk of a lien being placed on your home it may be advantageous to you to re-record your declaration of homestead.
You are now protected against debts you accrued prior to filing the declaration of homestead. This is good news for homeowners who previously might have needed to file for bankruptcy in order to protect their home. You can now can protect your home up to $500,000 without filing for bankruptcy. However, if you will be filing for bankruptcy it is important to file a declaration of homestead if you haven't filed one previously.
If you sell your home, the proceeds of the sale are now protected from creditors for one year. Likewise if you lose your home due to some casualty, the insurance proceeds are protected for two years so you can purchase a new home or repair the damaged one.
Protection is available up to an aggregate of $500,000, per residence, per family. If you are age 62 or older, or if you are disabled according to the Social Security Administration, the new law affords you special protections. If both members of a couple file for either an elderly or a disabled homestead, their equity protection may be increased up to one milion dollars ($1,000,000).
A homestead declaration does not provide protection against all creditors. For example, it does not from claims relating to taxes, your mortgage, an equity line of credit, child support or alimony, or a lien placed on your home prior to your filing.
None of us likes to consider the possibility of our becoming ill or disabled. It's not pleasant to think about our mortality but we tend to be more amenable to the need to plan for our families than the need to perhaps plan for ourselves. But if we don't plan ahead and something bad happens to us and we become incapacitated, the probate court will get involved in deciding who should take care of us and our affairs during our period of disability. We can spare our family members the hassle of going to court and getting a guardian or conservator appointed, and we can spare ourselves the displeasure of having a guardian or conservator appointed that is not someone we would have chosen ourselves. The appointed guardian or conservator will typically be a family member, but may not be the family member we would have wanted in that role.
Who would you like to have make medical decisions for you if you are unable to make them for yourself? Using a simple legal form you can appoint this person as your Health Care Proxy. This person has the authority to make medical decisions for you after a doctor has authorized that you are unable to make decisions for yourself. However, they will need access to your medical records in order to make informed decisions. Because of patient privacy laws, it's also important to have a legal document called a HIPAA Release so your "proxy" can see your medical records. (HIPAA, a federal patient privacy law, stands for the Health Insurance Portability and Accountability Act). Otherwise they may be denied access to your records.
What about your financial affairs? Who would you trust to have access to your money and pay your bills for you, and make other financial decisions, during a potential period of disability? You can appoint a person to handle your finances in case of disability rather than letting the probate court do so. This requires a legal document called a Durable Power of Attorney. The person you designate to act on your behalf is called you "attorney-in-fact". You can choose how little or how much power you give to your attorney-in-fact in regards to managing your finances.
Another financial factor to consider is the risk of losing your assets to soaring medical bills while disabled. If you create a trust the assets you put into it will be protected from creditors and can be used to provide for you as needed. Despite popular belief trusts serve many purposes and are not just for the wealthy.
These are just a few examples of the legal documents you may wish to have to protect your interests. Your legal needs may vary based upon your circumstances.
A durable power of attorney (DPOA) is a legal document that lets you appoint another person to handle financial matters for you if you are unable to do so on your own. The person you appoint as your DPOA is known as your "attorney-in-fact". This doesn't mean they're an attorney - typically they are a family member - this is just a title given to the person you select to manage your financial affairs.
Having a DPOA means that, should the need arise, your spouse or family member will likely not need to go to court to be appointed as your conservator or guardian. Typically, your named "attorney-in-fact" can immediately begin keeping your financial affairs in order. If you are concerned about the DPOA being misused while you are healthy there are some safeguards you can put in place to ensure it is only used if necessary.
It's important to consider the specific powers you would like to give to your attorney-in fact. A DPOA can grant broad authority to your attorney-in-fact, but the courts frown on the exercise of some powers unless they are specially laid out in the DPOA.
Here are some examples of powers you can grant to your attorney-in fact:
1) Sign your checks and pay your bills
2) Maintain property, make repairs, rent property
3) Deposit and withdraw funds from your bank accounts
4) Take title to your car, motorcycle or boat
5) Manage the financial affairs of your business
6) File your income tax return, file for social security or unemployment insurance
7) Access your safe deposit box
8) Manage your life insurance
In addition to naming your first choice for an attorney-in-fact, it's important to consider who your second choice would be. This second person will be named your "successor attorney-in-fact" which means they will serve if for any reason your first choice is unavailable.
You can set up your DPOA so it is immediately active, or alternately you can set it up so it is not valid unless a doctor determines you are incapacitated. There are pros and cons of each which are important to discuss with your attorney.
Whether you will need legal documents in addition to a will is dependent on what your goals are. A will leaves instructions for distributing your assets, property and personal belongings after your death and designates a guardian for minor children. There are other legal protections available to you and your family that you may also want to consider.
1) Provide Quick Access to Resources
It typically takes a year for a will to pass through probate court. Will this waiting period create any uncertainty or instability for your loved ones? If you feel your family will need access to your assets immediately then it can be helpful to set up a trust. Trusts serve many purposes and despite popular belief aren't just for the wealthy. Assets or property you put in trust are available to your family according to a timeframe you select, because unlike a will, a trust does not have to pass through probate.
2) Protect Children's Financial Interests
Some parents desire to protect young adult children from their financial inexperience. Anything you leave to a child in a will is distributed to them outright after the probate process is complete. By using a trust, you allot certain portions of your assets to be distributed to you child as they reach certain ages. For example you can distribute half to the child at age 25 and the remaining half at age 30. Another benefit to a trust is that assets are protected in case your child gets into difficulty with creditors or goes through a divorce. Likewise a trustee can withhold funds from a child who may be struggling with alcohol and druge abuse, so these funds can be available when the child is back on their feet.
3) Protect Special Needs Family Members
You may have a relative or child with special needs. To qualify for disability benefits requires that the recipient have very few assets. If you leave money outright to a person with special needs, even if it isn't a huge amount of money it can potentially disqualify the recipient from benefits programs. Placing assets in trust can allow a family member to benefit from your provision while remaining eligible for government benefits.
4) Preserve Your Privacy
A will becomes a public record, so if there are provisions in your will that you prefer to keep quiet a trust can be a useful alternative. Maybe you don't want people to know the value of your business, the names of people you've disinherited, or other personal financial information. A trust, since it need not go through probate court, is a private document.
5) Ensure Your Wishes Will be Carried Out
If you provide in your will for your home or vacation home to go to your children, your children may disagree about how they will share the property. They may argue about sharing the use of the property or about how much ownership interest each is entitled to. If so, any one them can petition the probate court to challenge your will. Not only is this costly, it can cause painful family rifts, and the outcome may conflict with your wishes. To help prevent this you can leave real estate in trust to your children. You could state, for example, that your three children each hold one-third interest in the property, or that the child who moved in with you and took care of you is to receive a larger interest. To prevent in-fighting, you can also make provisions that say Mary may use the vacation home in August, Peter in July and Emily in June. They may not like it, but they'll have less recourse.
6) Tax Benefits
In some cases (depending on the total value of your estate) there can be significant tax benefits to leaving assets in trust rather than distributing them outright through a will.
You need a will to protect your family from legal headaches and to make sure your property is distributed according to your wishes.
If you die before executing a will, then Massachusetts probate law will automatically determine what happens to your estate. The law decides who will get your property and how much each person will receive without any input from you or the people you care about. Your surviving family may not receive what they expect or what you would have wanted them to receive, and they will not be able to challenge the distribution.
Not all of your assets will go to your spouse. Half will go to your surviving spouse and half to your children. If there are assets with both your name and your spouse's name on them this can get pretty complicated. For example, if you have a family business that you co-own with your spouse, half of your ownership will go to your spouse and half to your children. A legal guardian will have to be appointed to manage your children's interest in the business until they are 18. Your spouse can be that guardian, but will have to deal wtih the cost and hassle of going to court to get appointed as guardian. Also your spouse may have to post a bond to the probate court and provide detailed accounting to the court for all business transactions.
If you are survived only by a spouse, most of your estate will go to your spouse but part of it will go to your parents. Again, this may not be what you would have chosen.
If you are survived by your children only, then your whole estate will pass to them. If they are under 18, a guardian will have to be appointed to manage assets for them. This may create an unintended burden on surviving family members who will have to navigate the probate system to appoint a guardian.
Think of all the headaches, frustration and legal expenses you can spare your family by putting a will in place. Then, if you predecease them, they will at least have the comfort of your affairs having been left in order.
Attorney Margaret Wadsworth