Are Your Powers of Attorney ‘Hot’ Enough?

Many states, including Texas, allow people to give the agent named in their financial power of attorney what are referred to as “hot” powers, if they wish. This requires careful decision making, says the Glen Rose Reporter in an article that poses a question: “Should you add hot powers to your power of attorney?”

The “hot” powers are well-named, since they give a financial power of attorney considerable power. They allow the agent to create, amend, revoke or terminate a trust during the principal’s lifetime. The agent may also make a gift. In Texas, this is subject to the limitations under Texas Estates Code §751.032 and any special instructions, to create or change rights of survivorship, create or change a beneficiary designation and to authorize another person to exercise the authority granted under the power of attorney.

That is considerable leeway for an agent to be given during one’s lifetime.

In one case, a man decided that he wanted to give some of these “hot” powers to a power of attorney, but not all of them. Unless he made specific directions, he would be giving someone the ability to make gifts outright to individuals, to a trust, an UGMA (Uniform Gift to Minors Act) account or a qualified tuition program that meets the requirements of §529.

The attorney in this case advised the client that the gifts an agent can make, are limited to the dollar limits of the federal gift tax exclusion, or twice that, if the spouse agrees to a gift split as allowed under the Internal Revenue Code.

The gifts the agent can make are further limited to being consistent with the principal’s objectives, if the agent knows what those objectives are. However, if the agent does not know what those objectives are, he or she must still make sure the gift is aligned with the principal’s best interest, based on the value and nature of the principal’s property, foreseeable obligation and the need for maintenance.

The power of attorney in all cases needs to know what their responsibilities are, and if they are given “hot” powers, they need to be informed what those specific powers are. If the agent is someone other than a spouse or descendant, that agent may not make gifts to themselves. A spouse or descendant, however, could make gifts to themselves.

The man in this example wisely decided that while his son was very trustworthy and was going to be named his financial power of attorney, it would not be a good idea to place so much temptation in the young man’s path. Therefore, he instructed his attorney to modify the statutory form of the power of attorney, so his son is not permitted to make any gifts to himself.

Reference: Glen Rose Reporter (Jan. 3, 2019) “Should you add hot powers to your power of attorney?”

Is There an ADU in Your Future?

The idea of aging in place is something we’d all like to do. However, homes with many stairs or that are located in cold climates don’t always make this possible. One way that some families are addressing this wish to age in place: the Accessory Dwelling Unit, or ADU, according to Next Avenue in the article“Could an Accessory Dwelling Unit Help Your Aging Parent?” The flexibility—a home for mom for a few years, then used as an income-producing apartment—makes this an attractive option.

Sometimes referred to as a “granny pod,” the ADU is usually a small structure in a backyard, with little more than a bathroom, sleeping quarters and a kitchen. They are basically “tiny homes,” the very small living quarters that some people are opting for, in place of sprawling homes.

A survey by AARP found a third of adults 50 and older would be open to living in an ADU. Why not? It’s a great way to have some degree of privacy, while living near, but not with, children and grandchildren.

Communities are starting to update their zoning laws to permit the construction of ADUs, especially where housing costs are high. In Los Angeles, ADUs have been legal since 2017, when new laws about their use went into effect and the increase of ADU construction permits increased by 1,000%. Housing codes changes are being examined in many other cities, including Boston, Denver, Chicago, Denver, Seattle and Washington DC, say industry experts.

Some barriers still exist, and they may not go away quickly. One is that ADUs are not cheap, even thought they are small. Many cost $150,000 or more. Much of the cost is to hook the little house up to local utilities, as well as the cost of construction. Most lenders don’t offer ADU mortgages, so payment tends to be with cash or with a home equity line of credit. This restricts the number of people who can afford an ADU.

Local communities not behind the concept of an ADU, may be concerned about the little houses being less like a tiny home and more like a shack, having a negative impact on neighborhood looks and values. Zoning codes, even those that are changing, are strict about maintaining the structures.

If your family would benefit from an ADU, start by checking with your town’s planning or building department. If the community permits the use of ADUs, you’ll want to find local builders who have constructed ADUs before. Some builders may not be interested in what they perceive as a very small project.

As boomers grow and strive to maintain their independence, expect to see more communities embrace the use of ADUs.

Reference: Next Avenue (Jan. 2, 2019) “Could an Accessory Dwelling Unit Help Your Aging Parent?”

Who Will Pay for Your Nursing Home Care?

It’s hard for everyone in the family, when a beloved parent or grandparent must enter a nursing home, because they can no longer live on their own. Often the result of a physical or mental decline, the difficultly is compounded by worries about how to pay for the care, reports The Ledger in the article “The Law: Are you eligible for Medicaid nursing home coverage?”

Once health insurance coverage ends, the cost of care becomes enormous, with the monthly cost for a private-pay resident at nursing homes often exceeding $10,000 a month. What usually happens? Residents can’t afford the care and only have two options: qualify for Medicaid Nursing Home coverage, or sell every asset they can, impoverish the spouse, and ask adult children or other family members for help. Most people contact an elder law attorney and explore becoming eligible for Medicaid Nursing Home coverage.

Let’s use the state of Florida for an example of how to qualify for this coverage. A person must pass a three-part test that examines their assets, income and health, at the time the application is filed.

Income. As of Jan. 1, 2019, you could have a maximum of $2,313 per month in income (before deductions) to be eligible for Medicaid Nursing Home coverage. If your income was above that number, then legal planning is necessary to create a qualified income trust. Timing is extremely important, because if the trust is not set up correctly or in a timely fashion, you will not qualify for Medicaid.

There is a common mistake made about a spouse’s income being too high. It’s happily not true: a spouse’s income can be unlimited, and it does not impact a Medicaid applicant’s eligibility for benefits.

Assets. As of Jan. 1, 2019, you may have a maximum of $2,000 of countable assets and be eligible for Medicaid Nursing Home coverage. If the assets are above that threshold, there are a number of acceptable legal options to help the individual become eligible. There are two types of asset classes to consider when applying for Medicaid Nursing Home coverage: countable and non-countable.

Some non-countable assets are as follows: In Florida, homestead property up to $585,000 in value, one automobile, a prepaid burial contract and term life insurance without a cash value. Countable assets include bank accounts, investment accounts, life insurance with cash value, CDs and annuities.

As of Jan. 1, 2019, a spouse may have a maximum of $126,420 of countable assets, without having an impact on their spouses’ Medicaid eligibility.

An elder law attorney should be consulted to help the family understand the income and asset tests and create a strategy to help the individual qualify, if they anticipate needing Medicaid Nursing Home coverage. It’s best to do this well in advance, if possible.

ReferenceThe Ledger (Jan. 9, 2019) “The Law: Are you eligible for Medicaid nursing home coverage?”

Here’s Why You Need an Estate Plan in 2019

The New Year sees young adult clients calling estate planning attorney’s offices. They are ready to get their estate plans done because this year they are going to take care of their adult responsibilities. That’s from the article “Estate Planning Resolutions for 2019: How To Be A Grown-Up in The New Year” in Above The Law. It’s a good thing, especially for parents with small children. Here’s a look at what every adult should address in the New Year:

Last Will and Testament: Talk with a local attorney about distributing your assets and the guardianship of your young children. If you’re over age 18, you need a will. If you die without one, the laws in your state will determine what happens to your assets, and a judge, who has never met you or your children, will decide who gets custody. Having a last will and testament prevents a lot of problems, including costs, for those you love.

Power of Attorney. This is the document used to name a trusted person to make financial decisions if something should happen and you are unable to act on your own behalf. It could include the ability to handle your banking, file taxes and even buy and sell real estate.

Health Care Proxy. Having a health care agent named through this document gives another person the power to make decisions about your care. Make sure the person you name knows your wishes. Do you want to be kept alive at all costs, or do you want to be unplugged? Having these conversations is not pleasant, but important.

Life Insurance. Here’s when you know you’ve really become an adult. If you pass away, your family will have the proceeds to pay bills, including making mortgage payments. Make sure you have the correct insurance in place and make sure it’s enough.

Beneficiary Designations. Ask your employer for copies of your beneficiary designations for retirement accounts. If you have any other accounts with beneficiary designations, like investment accounts and life insurance policies, review the documents. Make sure a person and a secondary or successor person has been named. These designated people will receive the assets. Whatever you put in your will about these documents will not matter.

Long-Term Care and Disability Insurance. You may have these policies in place through your employer, but are they enough? Review the policies to make sure there’s enough coverage, and if there is not, consider purchasing private policies to supplement the employment benefits package.

Talk with your parents and grandparents about their estate plans. Almost everyone goes through this period of role reversal, when the child takes the lead and becomes the responsible party. Do they have an estate plan, and where are the documents located? If they have done no planning, including planning for Medicaid, now would be a good time.

Burial Plans. This may sound grim, but if you can let your loved ones know what you want in the way of a funeral, burial, memorial service, etc., you are eliminating considerable stress for them. You might want to purchase a small life insurance policy, just to pay for the cost of your burial. For your parents and grandparents, find out what their wishes are, and if they have made any plans or purchases.

Inventory Possessions. What do you own? That includes financial accounts, jewelry, artwork, real estate, retirement accounts and may include boats, collectible cars or other assets. If there are any questions about the title or ownership of your property, resolve to address it while you are living and not leave it behind for your heirs. If you’ve got any unfinished business, such as a pending divorce or lawsuit, this would be a good year to wrap it up.

The overall goal of these tasks is to take care of your personal business. Therefore, should something happen to you, your heirs are not left to clean up the mess. Talk with an estate planning attorney about having a will, power of attorney and health care proxy created. They can help with the other items as well.

Reference: Above The Law (Jan. 8, 2019) “Estate Planning Resolutions for 2019: How To Be A Grown-Up in The New Year”