Choosing Your Final Resting Place

From time to time, a client will ask me to write a funeral instruction into his last will and testament.  Whatever the directive may be, the client is concerned that family members might be unaware of his wishes with regard to his funeral or that the family may not obey his wishes.

My advice to the client—Your Will may not be the best location to place a funeral instruction.  If it makes the client feel better, I will draft the instruction into the Will, but I also tell the client my thoughts on the issue and provide, what I believe to be, good advice.

A Will cannot be admitted to probate until ten days after a person has died.  Many people don’t probate the Will until weeks, or even months, after the person’s death.

Typically, after a person dies, the family is shocked and profoundly saddened.  Most people—or so I would like to believe—don’t begin a scavenger hunt for the decedent’s Will in the days immediately following a family member’s death.

At the very least, let’s say that your Will isn’t found until five days after your death.  How valuable will your funeral instructions contained in the Will be?  Chances are quite high that after five days, either your funeral is a fiat accompli or that the plans have already been made and, at least in part, paid for.

There is a statute in New Jersey’s Probate Code—the series of laws governing estates—that permits the person named as the executor in the decedent’s Will to carry out the decedent’s funeral instructions prior to the Surrogate’s Office appointing the executor.  But once again, that assumes that your executor finds your Will prior to your funeral.  (A person names an executor in his Will; however, that person does not officially assume the role as executor until the Surrogate has admitted the Will to probate and issued “letters testamentary” to the person named as the executor.)

I provide my clients with a “letter of instruction.”  This letter, in part, permits the client to provide funeral instructions.  I advise the client to complete the letter of instruction and to provide the letter to family members, particularly the person he has named as the executor.

In this way, the person you have named as the executor will know your wishes before your die, so he won’t have to find your Will to know what he’s suppose to do.  If you wish, you could then include the instructions in your Will, but in my opinion, the letter of instruction should suffice.

As for family members not obeying your wishes—for instance, perhaps you want to be cremated, but your family wants you to be buried in a family plot—that’s a tougher issue.  After all, when it comes time to carry out your funeral instructions, you’re dead, so you can’t really fight for your rights.

Once again, I think providing your instructions in the “letter of instruction” is very helpful.  If you believe that some of your family might not obey your wishes, you might consider providing the letter of instruction to multiple family members, so all of your “important people” are knowledgeable of your wishes.

You might consider naming a person as executor who you believe will carry out your instructions.

Finally, you might consider prepaying for your funeral.  If you spend thousands of dollars on your funeral wishes, your family might be reluctant to make different arrangements that will cost more money.

In sum, in my opinion, funeral instructions in your Will is like putting a spare key to your house under the area rug on the inside of your front door.  While you might know where the key is, it’s not going to help you very much when you need it.

The Power of Love

Almost every day a client requests that I draft a power of attorney for them.  In most cases, the client chooses a family member (their spouse or a child) to be their power of attorney agent.  Rarely does the client ask me about the liability or responsibility that the power of attorney agent is assuming.

The fact of the matter is, if power of attorney agents understood the potential liability and tremendous responsibility they were assuming by serving as a power of attorney agent, few people would be willing to serve.  The same, however, could be said about being a parent.  If people knew all the responsibility and potential liability there was to being a parent, the world would be a much lonelier place.

A power of attorney is a document that permits one person, called an “agent” or “attorney in fact,” to make financial decisions for another person, called the “principal.”  A power of attorney is only effective when the principal is alive.  Upon the death of the principal, the power of attorney document ceases to be effective.  At that point, the executor of the person’s estate would be in charge of their finances.

An agent owes the duty of utmost duty of care to the principal with respect to financial matters.  In other words, if the agent makes a poor decision with regard to the finances of the principal, the agent can be held liable for that poor decision.

Absent such a poor decision, the agent bears no personal liability for the debts of the principal.  Stated differently, an agent is not liable for the principal’s debts.

With that said, some creditors may sue the agent for the principal’s debts.  For instance, in recent years, I have seen nursing facilities sue the agent for the principal’s nursing home bill.

Typically, when a person enters a nursing home, the nursing home provides an admissions agreement to the potential resident.  Since the potential resident is frequently in poor health, the nursing home provides this agreement to the resident’s representative, the power of attorney agent.

The agent then signs the admissions agreement, including the inevitable sections entitled “responsible party” or some similar designation, and if the resident is unable to pay and if Medicaid refuses to pay for the resident for any number of reasons, the nursing home will sue the resident and the power of attorney agent under the “responsible party” language of the admissions agreement.

Will the nursing home prevail in the end?  Though I have no direct knowledge, I’m sure the lawsuit alone may lead to a settlement with the nursing home, so in that sense, the nursing home won.

Another issue for a power of attorney agent concerns other family members or friends of the principal.  In many cases, other family members or friends of the principal will be suspicious of the actions of the agent.  Is the agent taking money for himself?  Why did mom pick son A to be her agent over me, son B?

Handling a principal’s financial affairs can bring a tremendous amount of scrutiny to the agent.  Interested parties, such as family members, can request the agent to produce an accounting of the principal’s finances if the principal is mentally incapacitated.

All of this is aside from the fact that being an agent is a lot of work.  It’s a lot of work to handle another person’s financial affairs and to handle those affairs with the utmost care.

Furthermore, in most cases, the agent does all this work for free.  Unless a power of attorney specifically says that the agent can be compensated for his time, he cannot be compensated, unless the agent goes to court to obtain an order that says he can be compensated.  Most powers of attorney documents fail to address the compensation issue, so the agent serves without compensation.

So, why would anyone serve as an agent?  Why would anyone serve as a parent?  Because they love the person.  In most cases, it is a lot of unpaid hard work that only exposes the agent to accusations of abuse (often false), but most agents serve because they are helping a frail family member or friend whom they love.

Yet Another Victory for Annuities

I’m getting to sound like a broken record, but I am going to write about a recent victory in federal court involving the use of annuities for purposes of Medicaid planning.

Medicaid is a federal-state health insurance program for needy individuals.  In order to qualify for Medicaid, an individual must have a very limited amount of assets and must have income insufficient to pay for the cost of his care.

When one member of a married couple seeks to qualify for Medicaid, the law pools the assets of the couple; accordingly, it is wholly irrelevant which member of the couple owns the assets.  Whatever assets the wife owns, the husband owns, and whatever assets the husband owns, the wife owns.

For instance, assume that all of the couple’s assets are in the wife’s name.  Perhaps it is a second marriage and the wife brought all of the assets into the marriage.  Even if the wife inherited the assets that she brought into the marriage, the result would be the same.  While the wife would get all of the assets in a divorce—because the assets are pre-marital and an inheritance—the laws governing the Medicaid program are without sympathy.  As far as the Medicaid program is concerned, whatever assets the wife owns, the husband owns.

Income is treated differently.  Income, unlike assets, is not pooled.  The wife’s income is the wife’s income, and the husband’s income is the husband’s income.  If the wife has $1,000 in Social Security income, that is her income.  If the husband has $1,500 in Social Security income and $500 in pension income, that is his income.

If the husband enters a nursing home, the wife may be entitled to retain a portion of her husband’s income under a spousal income allowance provision of the law, but that does not change the fact that the Medicaid program does not pool income.

This income allowance is part of the spousal impoverishment provisions of the Medicaid law.  The law has a provision governing income, which permits the wife to retain a certain amount of the husband’s income once he qualifies for Medicaid.  The law also has a provision that permits the wife to retain a certain amount of the couple’s resources.

The wife can retain all of the non-countable resources, such as the house, a car, and personal effects.  The wife can also retain up to $115,000 in countable resources, such as cash, stocks, bonds, etc.  Anything over the $115,000 maximum must be spent down before the husband can qualify for Medicaid; at least, that’s what the Medicaid Office will tell you.

My job as an elder care lawyer is to help preserve assets for the wife, so she can have a sufficient amount of assets on which to live after her husband qualifies for Medicaid.  For instance, the house, a car, and $115,000 in assets may prove insufficient for a wife who is used to having $300,000 in savings.  This is compounded by the fact that the wife may not be able to retain all of her husband’s income under the spousal income provision, so she may have the same amount of expenses with far less fixed income to pay those expenses.

One technique for preserving extra money for the wife involves the purchase of an annuity in her name.  If structured correctly, the annuity can convert excess assets, which are pooled, into a stream of income that belongs to the wife, not the husband.

The extra income will probably eliminate the wife’s entitlement to any income from the husband, because her monthly income, with the annuity payments, will be fairly high, but the annuity also gives the wife much more money than the Medicaid program would permit her to retain.  For instance, if the couple has $300,000 in countable resources, Medicaid will permit the wife to retain $115,000, and with the purchase of an annuity, the wife can retain the remaining $185,000 in assets.

A recent New Jersey federal district court decision reaffirms the use of annuities in this manner.  This is probably the tenth federal court case of which I am aware that affirms this technique, so I’m feeling pretty good about it.

Revoking a Power of Attorney

Sometimes a client wants to revoke a power of attorney that he signed.  A power of attorney is a document that permits one person to make decisions for another person.

The person who makes the power of attorney document is called the “principal.”  The person whom the principal appoints to make decisions for him is called the “agent.”  For instance, a father might sign a power of attorney document in favor of his son, so his son can make financial decisions for him.

Most people sign a power of attorney document with the idea that the document will not be used at the time it is signed.  In fact, most people sign a power of attorney document hoping it will never have to be used.  Typically, an agent will use a power of attorney document when the principal can no longer make decisions for himself.

For example, a father suffers a stroke and is unable to handle his affairs.  The power of attorney will permit his son, whom he named as his agent, to make financial decisions for the father in the father’s time of need.  With the power of attorney, the son will be able to access the father’s bank accounts in order to pay the father’s bills.  The son will be able to sell the father’s house if the father is moving to a nursing home on a full time basis.  The power of attorney will permit the son to sign any contracts that he may need to sign on behalf of the father, such as an admission agreement to a nursing home or assisted living residence.

But sometimes, the principal may wish to revoke his power of attorney document for one reason or another.  Perhaps the father who suffered the stroke recovers after a period of rehabilitation and believes that his son, whom he named as his agent, has been making poor decisions for him.

Many people do not put too much thought into whom they choose as their agent because, as stated, most people don’t believe they’ll ever need their agent to act on their behalf.  Many people simply pick their oldest child as their agent, because they believe they won’t hurt their other children’s feelings by picking the oldest child; however, being the oldest doesn’t make a person the best choice as the power of attorney agent.

So, the question then becomes, how does the principal effectively revoke the power of attorney document that he signed?

The signing of a new power of attorney does not revoke a prior power of attorney unless the subsequently signed power of attorney specifically revokes the prior power of attorney.  For this reason, signing a new power of attorney can be very dangerous if the new power of attorney fails to revoke the prior power of attorney.  The
father will end up with two powers of attorney, one naming the agent he no longer wants and one naming his new agent.

If the new power of attorney document specifically revokes the prior power of attorney, then the prior power of attorney is revoked.

A principal can revoke a power of attorney by destroying all of the original power of attorney documents.  For instance, if the father signed two originals of the power of attorney, he revokes his power of attorney by destroying those two original documents.

A principal can revoke a power of attorney by signing a document that specifically revokes the power of attorney.  For instance, if the father signs a document that says “I hereby revoke any power of attorney that I have signed prior to this date,” then the prior power of attorney document is revoked.  The principal must sign the revocation and the principal’s signature must be notarized if the principal is not hand-delivering the revocation to the agent.

Finally, a principal can revoke a power of attorney document by hand-delivering a revocation document to the agent.  This form of revocation does not have to contain the notarized signature of the principal.