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Am I liable for losses in my parents’ accounts during the COVID crisis?

April 27, 2020 / drussellcfp

If you manage your parents’ investment accounts because they are not capable, you may have watched helplessly the past several weeks as their stocks fell by thirty percent or more from the S&P 500 index highs in mid-February to its low point so far on March 23rd.

They say blood is thicker than water, but money is thicker than blood in my experience, so if you are managing your parents’ accounts, you may have concerns that either they or some extended family members may feel you should have done something to prevent the declines in your parents’ accounts.

In this video, I offer three tips to lessen your exposure to liability.

The Financial Impact of Dementia

April 23, 2020 / drussellcfp

In the video below, Robert Powell, editor of The Street’s Retirement Daily, and Angie O’Leary, head of wealth management with RBC Wealth Management, talked about the need to plan ahead for the possibility of dementia and the type of plans to put in place.

According to O’Leary, the plan should include having key legal documents – a power of attorney, healthcare directive, and will – in place as well as having assets properly titled and beneficiary designations current. Consider too, she said, the benefits of a trust and professional executor services, as well as supplemental insurance, including long-term care options.

O’Leary also noted the need to understand early warning signs and, after a diagnosis, acting swiftly to protect the family from financial missteps, abuse and liability.

Having a plan is essential, and key legal documents—a power of attorney, healthcare directive, and will—should be in place.

Source: The Financial Impact of Dementia – TheStreet

If you are struggling through the financial transitions of aging, Wealth and Honor is here to provide you with resources to help you and your family through it.

Do you really want to be an executor?

March 5, 2020 / drussellcfp

You may find that you have been named as executor (executrix if you are female) of your parents’ will. After reading the duties below, you may not want the job. It is a tiring, time-consuming, and frequently a thankless responsibility that you may want to resign from– and certainly have the right to do so.

Some of the more important duties and responsibilities of being an executor include:

Find the latest will and read it.
File a petition with the court to probate the will.
Assemble all the decedent’s assets.
Take possession of safe deposit box contents.
Consult with banks and savings and loans in the area to find all accounts of the deceased. Also check for cash and other valuables hidden around the home.
Transfer all securities to your name (as executor) and continue to collect dividends and interest on behalf of the heirs of the deceased.
Find, inventory and protect household and personal effects and other personal property.
Collect all life insurance proceeds payable to the estate.
Find and inventory all real estate deeds, mortgages, leases and tax information. Provide immediate management for rental properties.
Arrange ancillary administration for out-of-state property.
Collect monies owed the deceased and check interests in estates of other deceased persons.
Find and safeguard business interests, valuables, personal property, important papers, the residence, etc.
Inventory all assets and arrange for appraisal of those for which it is appropriate.
Determine liquidity needs. Assemble bookkeeping records. Review investment portfolio. Sell appropriate assets.
Pay valid claims against the estate. Reject improper claims and defend the estate, if necessary.
Pay state and federal taxes due.
File income tax returns for the decedent and the estate.
Determine whether the estate qualifies for special use valuation under IRC Sec. 2032A, the qualified family-owned business interest deduction under IRC Sec. 2057 or deferral of estate taxes under IRC Sees. 6161 or 6166.
If the surviving spouse is not a U.S. citizen, consider a qualified domestic trust to defer the payment of federal estate taxes.
File federal estate tax return and state death and/or inheritance tax return.
Prepare statement of all receipts and disbursements. Pay attorney’s fees and executor’s commissions. Assist the attorney in defending the estate, if necessary.
Distribute specific bequests and the residue; obtain tax releases and receipts as directed by the court.
Establish a testamentary trust (or pour over into a living trust), where appropriate.

If you find the task to be too over-whelming, talk to your parents about it if you can. Examine their wills to see if anyone is named as an alternate and discuss these duties with that person. You may even find that the person(s) named as executor are no longer living; or they may have named a bank trust department with which they no longer do business. If you feel it is a duty that you can and want to do, be sure to contact a qualified lawyer in your parents’ state of residence to help you in the process.

5 Reasons I Regret Filing A Will Contest

February 27, 2020 / drussellcfp

When a family member has died, it can add insult to injury to learn that you were cut out of the will. Contesting the will is likely an initial thought. We talked to people who have filed will contests, and came up with the top 5 reasons I regret filing a will contest. The reasons are:

I was not honest about my relationship with the decedent.
A will contest is more stressful than I realized.
I was not realistic about decedent’s mental and physical condition.
I did not have a clear idea of what I was fighting over.
I did not realize how much a will contest would cost.

For a breakdown of each of these five reasons, follow the source below.

Source: 5 Reasons I Regret Filing A Will Contest | Probate Stars

Deciding which sibling deals with “nursing home stuff.”

February 20, 2020 / drussellcfp

Very few of us want to intrude in our parents’ lives. It is only when we begin to notice certain “things” about Mom and Dad that we begin to consider stepping in. Problems such as memory loss, dementia, diminished sight or hearing, or irrational investment or spending decisions, are signs it’s time to intervene. Plus, none of us is immortal. As your parents reach their 80’s, it is time to make sure their financial house is in order. My observation is that loved ones who are quick to provide care and support for their aging parents are often hesitant to get involved with Mom and Dad’s financial affairs. You just don’t stick your nose into other people’s business, especially your parents’ business. The aging parent often contributes to this reluctance. Opening up this part of their life is difficult; an admission that maybe they aren’t as sharp as they used to be.

Once you’ve made the decision to get more involved, several questions must be answered:

What needs to be done? What is the appropriate level of care and/or type of living arrangement? The answer depends on both medical and financial considerations. Often this decision is made after consultation with your parent’s physician or a geriatric care manager.
Who will be in charge? Unless you are an only child, in which case the answer is you, this task frequently falls to the sibling who lives closest to the area where your parent resides. Sometimes, you and your siblings will decide to share the responsibilities. In other instances, the sibling with special skills or aptitudes may be chosen. Sometimes, the job goes to the sibling who feels the most obligated. It’s a tough, emotionally draining job, so whoever is in charge will need lots of support.

For one Lansing, Michigan family, the adult children of local couple Ron and Lydia Barnes stated Monday that it was pretty clear which sibling would be handling all the nursing home stuff. “When the day comes, Sarah is obviously the one who will explain to Mom and Dad that it’s time for them to pack up and move into a retirement facility,” said Andy Barnes, 35, referring to his older sister, whom he identified as the one who calls the most often and has “even driven them to the rheumatologist once or twice.”

“It’s a Sarah thing, for sure. She can handle those things easily enough: finding the right place, signing them up, dropping them off, stopping by regularly, making sure the bill gets paid on time. I actually think she’d kind of like doing it.” Sources confirmed that Ron and Lydia are hoping for Sarah as well, since the prospect of depending on one of their other children for care “absolutely terrifies [them].”

Source: Pretty Obvious Which Sibling Going To Have To Deal With All The Nursing Home Stuff

Not So Green Acres

February 17, 2020 / drussellcfp

In this episode of The Case Files, I profile a 2010 Texas case involving a daughter’s misappropriation of her deceased father’s trust funds as well as her aging mother’s personal assets. The characters from the 1960s sitcom Green Acres provide a little humor to an otherwise serious situation. Enjoy and learn!

https://youtu.be/cVZsNE85HbE

Sweethearts Forever. Then came Alzheimer’s and a tragic ending to their love story.

February 14, 2020 / drussellcfp

It’s a suitable Valentine story that is as saccharine sweet as it is painfully tragic. Richard and Alma Shaver were childhood friends and high school sweethearts who eloped at eighteen. They were described as soulmates who were madly in love with one another. Richard became an engineer, they raised three daughters, Alma led Girl Scout troops and became the go-to person in the neighborhood for emergency contact.

A few years back, Alma was diagnosed with Alzheimer’s disease and the silent thief lay siege to Alma’s mind. She went from forgetting recently completed tasks to not recognizing her children, and ultimately not recognizing Richard. It was more than he could take.

On a warm day last June, while Alma was sleeping, Richard went upstairs to their bedroom and shot his beloved wife dead. Then he lay down beside her and shot himself.

It was not the ending that his family had hoped for, but they console themselves that they are not having to endure a murder trial. They held a memorial service and celebrated the happier lives that they had known with their parents. Perhaps this family’s tragedy and other less-tragic but equally painful deaths caused by this disease will lead to more open discussions on death with dignity laws.

On this day for lovers, embrace your partner, and tell him or her that you will be there for them if they are visited by the silent thief, but that you will not participate in a tragic end to their life or yours. It only perpetuates the pain for those we may leave behind.

Source

Nytimes.com. (2020). Sweethearts Forever. Then Came Alzheimer’s, Murder and Suicide.. [online] Available at: https://www.nytimes.com/2019/12/29/nyregion/alzheimers-murder-suicide.html?smid=nytcore-ios-share.

Free Booklet on Understanding Annuities

February 10, 2020 / drussellcfp

Annuities were once simpler financial instruments than they are today. Issued by insurance companies, annuities offered savers a guaranteed interest that compounded tax free until the funds were needed at a later date. Now, they are highly complex financial instruments with a variety of features, interest options, charges, and penalties.

Many financial caregivers will discover that their parents own one or several annuity contracts and it will be incumbent on them to understand these complex financial contracts in order to best serve their parents in a fiduciary capacity. The flip-booklet below, Understanding Annuities, is one of several publications free to Wealth and Honor subscribers. It is written to help financial caregivers understand how annuities are structured, how they work, how they grow, and how they are taxed. Hopefully it will also foster a more constructive conversation with other professionals who are part of your team.

Immediate annuities
Deferred annuities
Index annuities
Variable annuities
How annuities are taxed and more.

Agency Care vs Private Employment

February 6, 2020 / drussellcfp

According to research from the AARP[1], a clear majority of people would like to stay in their own home as they age – even if they require day-to-day assistance with activities of daily living. With a rapidly increasing senior population, demand for quality in-home care is beginning to skyrocket.

Most at home care has traditionally been provided by care agencies that provide basic custodial care to individuals needing assistance with activities of daily living (ADL) or who have cognitive impairment. However, recent regulations are changing the cost structure for home care agencies, especially for certain types of cases where care is needed full-time such as with Alzheimer’s disease and other conditions involving cognitive decline.

It is not unusual for care to be provided 24/7 to people with these conditions and the expenses can quickly become unmanageable, especially due to new regulations that can trigger overtime pay requirements for home care agencies who employ the same caregiver for more than 40 hours a week. At the end of 2015, the Department of Labor (DOL) repealed two Wage & Hour Law exemptions that had been in place since 1974 – the Companion Care exemption and the Live-In exemption. The repeals impacted only third-party employers of direct care workers (i.e. staffing agencies), no longer allowing them to pay workers less than minimum wage and forcing them to adhere to overtime standards.

As a result, many home care agencies now handle high-hour cases differently. They either get the family to accept a rotation of many different caregivers or pay for the associated overtime with a major increase in their hourly rate. In most states, families are exempt from overtime requirements if the caregiver is a live-in employee or qualifies as a companion. This allows care recipients to get the care continuity they need without the additional cost. For 24/7 type care, this overtime exemption can reduce the cost by as much as 50%, or tens of thousands of dollars per year.

Household Employment Basics

Hiring a senior caregiver privately means the worker is now a household employee. And just like any other employment situation, payroll, tax and labor laws must be followed. There are three primary wage reporting responsibilities families have for their caregiver:

Withhold payroll taxes from the caregiver each pay period. Normally, this includes Social Security & Medicare (FICA) taxes, as well as federal and state income taxes. Some states are different and you can consult this state-by-state guide for more information.
Remit household employment taxes. These generally consist of FICA taxes as well as federal and state unemployment insurance taxes. Again, some states have additional taxes, so it’s important to consult the state-by-state guide beforehand.
File federal and state employment tax returns. These are due throughout the year – rather than just at tax time – and go to the IRS and state tax agencies.

In addition, there are several employment law matters that need to be considered at the time of hire. Depending on the state, a family may be responsible for providing things like a written employment agreement/contract, detailed pay stubs, paid time off/paid sick leave, workers’ comp insurance, etc. Be sure to consult with an employment law attorney in your state to learn what your state requires.

Even after adding in payroll taxes, insurance and all other employer-related expenses, the savings can be staggering. The figure below compares the cost of Agency Care vs Private Employment. Hourly agency costs start at $20/hour for less than full time but increase to $22/hour for full-time and $25/hour for high-hour care (80 hours or more per week) due to the pass-through of overtime wage costs.

privately employment vs staffing agency cost comparison — [2]

The good news is there are household employment specialists that take full accountability for all or most of the employer responsibilities so families are free of paperwork and risk – enabling them to focus on caring for their loved one. If funds for the care of a loved one are held in a trust, Argent can serve as trustee and handle these requirements as part of its role as trustee.

There is no one size fits all solution to caring for our older adult population. Home care agencies, assisted living facilities, independent living facilities and skilled nursing facilities all have a role to play. And, now with the recent regulatory changes, so does privately-employed in-home care – especially for those patients suffering from cognitive conditions who need many hours of consistent care.

Acknowledgment

Thanks to Tom Breedlove, Director of Care.com HomePay for this information. Tom brings more than 30 years of business experience, including more than a decade as Director at Breedlove & Associates – now known as Care.com HomePay – the nation’s leading household employment specialist. Co-author of The Household Employer’s Financial, Legal & HR Guide, Tom has led the firm’s education and outreach efforts on this complex topic. His work has helped HomePay become the featured expert on dozens of TV and radio shows as well as countless business, consumer and trade publications. Learn more at www.care.com/homepay.

[1] “The United States of Aging Survey” 2012, AARP.

[2] Source: “Cost of Care Survey 2016”

What is Undue Influence?

January 31, 2020 / drussellcfp

Ellis Hanson was once a brilliant engineer who was partially responsible for the development of computer typesetting that made him a wealthy man upon his retirement. He and his wife, Velta, purchased their retirement home in Naples Florida and he did well in the stock market, investing his money well. By the early 2000s, however, his cognitive abilities were declining, and the couple turned to a banker to handle their finances. On September 30^th2008, Hanson pulled a small piece of paper out of his pocket and stared at it blankly. Not understanding what it was, he asked his wife to look. It was a receipt for a $260 lunch in Naples.

Velta Hanson was surprised. Her then- 84-year-old husband, a brilliant engineer in the early stages of Alzheimer’s disease, had no recollection of eating there hours earlier. Velta Hanson hired a private investigator. But days before receiving his report, she found a letter revealing her husband had written a $10,000 check to a friend of two decades, Alma Teti. That was the day she asked her husband if she could take over their finances. It turned out that was just a fraction of what Ellis Hanson had given Teti. In addition to the lunch, there was also more than $1 million in checks from 2006 to 2008, nearly $85,000 in jewelry since 2005, including a $26,000 blue stone ring for her birthday, and thousands in expensive lunches, champagne and drinks.

In 2009, the couple sued Teti, alleging exploitation of a vulnerable adult and conversion of personal funds, illegally depriving the Hansons of their property. Florida law defines a vulnerable adult as someone 18 or older whose ability to perform the normal activities of daily living or provide his or her own care or protection is impaired due to a mental, emotional, long-term physical or developmental disability or dysfunction, brain damage or infirmities of aging. A three-day jury trial resulted in a judgment of over $2 Million against Teti.[1]

The means by which Alma Teti committed her offense is often referred to as Undue Influence. Undue Influence is the misuse of one’s role and power to exploit the trust, dependence, and fear of another to deceptively gain control over that person’s decision in a particular matter. Along with capacity and consent, Undue Influence is a key concept in elder law. Capacity and consent relate primarily to an individual’s abilities to understand and process information in order to take action or to make decisions. Undue Influence focuses more on the relationship between the individual and another person, coupled with that person’s opportunity and power to manipulate the vulnerable person’s thoughts and actions. An older person may be more vulnerable to Undue Influence because he or she has diminished capacity, or the person has become isolated from trustworthy family and friends.

The legal standard for Undue Influence has been defined as influence that amounts to deception, force or coercion that destroys a person’s free agency.[2] Undue Influence arises most predominantly in probate, trust and estates, power of attorney and guardianship matters. Undue Influence typically is not itself a crime, but it can be a means for committing a crime.

Undue Influence can take on other, more subtle behaviors as well. For example, the following may constitute Undue Influence if the resulting actions deprive an older person of their free agency in making a decision:

An adult child threatens to stop visiting her elderly mother unless she gives her the silver dinnerware that she had been promised.
A new companion convinces an older man to give her power of attorney because his children never come to see him and don’t care for him like she does.
A representative of a religious ministry regularly visits an elderly shut-in and convinces her to make a large donation to the ministry after he assures her that “God will bless her abundantly” if she makes a sacrificial gift.

What’s important to remember about Undue Influence are the position of power that one individual may hold over another because of the relationship between them, and the opportunity to misuse that power through manipulation. Here are a few tips to guard our elderly loved ones against Undue Influence.

Avoid social isolation. When an older person has an active social life around lots of family and friends, the influential power of someone wishing to manipulate them is minimized, and the opportunities to do so are less available.
Be aware of cognitive decline. Diminished capacity increases the vulnerability to Undue Influence. Maintain an attitude of honor and avoid patronizing language or tones such as baby-talk while honestly discussing any concerns you have with your older loved one.
Adopt a family code of honor. All of the world’s great wisdom traditions have honoring parents and the elderly as a core tenant. It’s time to practice it. What is your family’s honor code?

Undue Influence is a very complex legal concept and should not be lightly alleged. If you believe that a loved one is being unduly influenced, contact an attorney licensed in your state with expertise in elder law.

[1] NewsNaples.com; Judge rules family friend exploited, took $2 million from Naples man with dementia, By Aisling Swift, Saturday, July 23, 2011

[2] Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers

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