Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

A Member of the Law Professor Blogs Network

Tuesday, December 16, 2014

Safely Spending In Retirement

Money money money

According to researchers at Texas Tech University’s Personal Finance Planning Department, retirees are withdrawing money from their retirement accounts at staggeringly slow rates or not at all.  By doing this, retirees are foregoing a standard of living they could afford on long-standing economic principles. 

Retirees with median wealth have a “consumption gap” of about 8 percent on average, which is a gap between what they are spending and what they could spend.  Retirees with higher levels of wealth have a consumption gap as high as 45 percent.  “This is an example of what economists call ‘precautionary saving.’  People feel a need to hold on to wealth to deal with uncertainty about future spending needs.  The problem is that it comes at a real cost in terms of foregone consumption.”

So, what can retirees do to make themselves more comfortable spending down their assets?  First, retirees could withdraw more by waiting to claim Social Security until age 70.  This would produce the highest possible monthly Social Security benefit. 

Secondly, long-term care insurance is an option to address fears of unexpected health and care costs in retirement.  “If people could be convinced to buy long-term care insurance, and secure enough guaranteed lifetime income in the form of optimized Social Security, pensions and purchasing single premium immediate annuities so that they would have enough income to cover basic living expenses, they would feel much more secure about spending more money in retirement.”

Finally, calculate a safe withdrawal rate.  Knowing how much you can safely withdraw from your retirement accounts will also give retirees more comfort. 

See Robert Powell, Six Ways to Safely Spend More in Retirement, USA Today, Dec. 13, 2014.

December 16, 2014 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Representing a Client With Diminished Capacity

ScaleA recent  Ethics Opinion from the Colorado BAR Association analysis the ethical issues and delicate balance between protecting a client and maintaining a normal lawyer-client relationship when an attorney is representing an adult client with diminished capacity when the representation is not in protective proceedings, such as guardianship and conservatorship. Provided below is the syllabus from the opinion:

There are times when a lawyer may need to consider whether the adult client's capacity to make adequately considered decisions relating to the representation is diminished. Should the lawyer reasonably conclude that the client's capacity is diminished in such a manner as to impair the client's ability to make adequately considered decisions regarding the representation or to give informed consent to a course of conduct by the lawyer when required, the lawyer must maintain a normal lawyer-client relationship with the client insofar as reasonably possible. If the lawyer reasonably believes that the client's diminished capacity places the client at risk of substantial physical, financial or other harm unless action is taken, and that the client cannot adequately act in the client's own interests, the lawyer should consider whether to take reasonable protective action necessary to protect the client's interests. In taking such protective action the lawyer should be guided by the wishes and values of the client and the client's best interests, and any protective actions taken should intrude into the client's decision making authority to the least extent feasible. In taking protective action the lawyer is impliedly authorized to disclose information relating to the representation which Colo.RPC Rule 1.6 would otherwise prohibit, but only to the extent reasonably necessary to protect the client's interests. Care should be taken to insure that information disclosed cannot be used against the interests of the client. Differences may arise between the lawyer and client regarding whether or to what extent the client’s capacity is diminished; whether the lawyer should reveal information regarding the client’s condition, or whether the lawyer should take any actions to protect the client. These differences may present conflicts between the interests of the client and those of the lawyer and the lawyer must assess whether representation of the client will be materially limited as a result.

Special thanks to Michael Kirtland (Attorney, Colorado Springs, CO) for bringing this opinion to my attention.

December 16, 2014 in Disability Planning - Health Care, Elder Law, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Sunday, December 14, 2014

Combating Elder Abuse

Elderly financial abuse

Elder abuse is not a commonly talked about topic, but is serious and demands attention. 

Resources such as wills, trusts, powers of attorney and guardians can be a helpful resource for individuals who have loved ones living in nursing homes or assisted living facilities.  However, these resources can also be used to hurt, abuse or neglect the very person they are intended to protect.  Fortunately, most states have laws and regulations that are designed for the protection of elderly or disabled adults.

North Carolina, for example, has established the Protection of the Abused, Neglected or Exploited Disabled Adult Act.  This act is designed to protect disabled adults.  Anyone who knows or has a reason to believe a disabled adult is being abused, neglected or exploited has a duty to report the information to the Department of Social of Services director.  Once the DSS director receives a report of possible abuse, the director performs an evaluation of the situation to determine if protective services are needed. 

Anyone involved in the abuse of an elderly or disabled person could face severe consequences.  In many states, such conduct results in that person facing felony charges.  The amount of money or property in the action typically determines the level or seriousness of the crime.  Moreover, any persons or workers in a facility who are responsible for providing care for a disabled or elderly person could be criminally charged or sued in civil court for certain actions of abuse or neglect.    

See Bellonora McCallum, Legal Corner: Protecting the Elderly From Abuse, Exploitation, Your Daily Journal, Dec. 12, 2014.

December 14, 2014 in Elder Law, Estate Planning - Generally, Guardianship, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Friday, December 12, 2014

The Cost of Alzheimer's

Medical expenses

Each year, more than 15 million people care for loved ones suffering from Alzheimer’s disease.  While caregiving can take an emotional toll, the caregiver may also be subject to financial loss.  According to a new survey by AgingCare.com, more than one quarter of Alzheimer’s caregivers spend more than $4,000 each month on their loved one’s needs.

The same survey showed that 61 percent of caregivers stated their loved ones had failed to plan for future care.  Unfortunately, caregivers would spend substantially less money if there had been proper planning.  Although uncomfortable, planning early for the possibility of Alzheimer’s is critical, as it saves substantial assets and avoids untold stress on loved ones.

The best way to protect assets from nursing home costs is to purchase long-term care insurance.  If you do not have this, the next best plan is the Medicaid Asset Protection Trust, which protects assets form long-term care costs after five years. 

Medicaid is the largest payer of nursing home costs in the U.S.  In order to qualify for Medicaid to pay these costs, you may only have a limited amount of assets.  By placing some of your assets in the MAPT for five years, they are protected from being used for nursing home costs. 

See Bonnie Kraham, Cost of Caregiving For Those With Alzheimer’s, Times Herald Record, Dec. 10, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 12, 2014 in Disability Planning - Health Care, Elder Law, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, December 5, 2014

Revamped Health Care Power of Attorney in Illinois


On August 26, 2014 Governor Quinn of Illinois signed Senate Bill 3228, which amended the Illinois Power of Attorney for Health Care statute. 

The form has been renamed “My Power of Attorney for Health Care” and reformatted in a Q&A style to look less like a legal document.  This change came from the urge of the Illinois State Medical Society (ISMS), arguing the existing for “is confusing and uses too much technical language and requires college-level English proficiency to understand.”  The new form is written at 8th and 10th grade levels.  Below are some of the key provisions in the new law:

  • Existing Power of Attorney for Health Care’s (PAH) are grandfathered as valid. The statute includes a savings clause, provided that the changes do not invalidate any PAH created prior to 2015.
  • Statutory Form Qualification. The revised law says that “no specific format is required for the statutory health care power of attorney other than the notice must precede the form.”  This is to ensure that PAH’s are not rejected due to for errors or minor edits.
  • Witness Restrictions. The existing PAH requires one witness signature, but no notary.  The amended statute expands the categories of persons prohibited from signing as witness to include certain licensed professionals from providing services to the principal. 
  • Who Can(not) Act as “Health Care Agent.” The Health Care Agent must be at least 18 years old and cannot be a health care provider or any “health care professional” who is administering health care to the patient.
  • Life Sustaining Treatment. The existing law includes references and definitions for “incurable or irreversible condition,” “permanent unconsciousness” and “terminal condition.”  The new law deletes these three definitions.  Instead, the agent is instructed to weigh the burdens versus benefits of proposed treatments. 

See Jeffrey R. Gottileb, Illinois Power of Attorney for Health Care Gets Makeover in 2015, Law Offices of Robert H. Glorch, Dec. 2, 2014. 

December 5, 2014 in Disability Planning - Health Care, Elder Law, Estate Planning - Generally, New Legislation | Permalink | Comments (0) | TrackBack (0)

Out of State Retirement


During the cold winter months, retirees flock to the sun in states such as Florida and Arizona.  Despite year-round sunshine and golf, these are not the best states to spend the golden years. 

Surprisingly, the best destination for retirement is South Dakota according to a 2014 Bankrate report.  The report’s findings were derived by assessing the average number of sunny days, cost of living, residents’ sense of well-being, quality of health care, crime and humidity. 

“As this report correctly suggests, pre-retirees need to consider a lot more than snow days and tradition.  Different states have different tax laws and other regulations that can have a major impact on your retirement funds.  You need to be aware of these as you plan for where you want to live and how you want to live.”

If you are considering retiring in another state, it is important to familiarize yourself with the tax laws.  If you are married, know if you are moving to a community property state.  There are nine community property states and moving to one may affect your estate.  Finally, it is important to have a lawyer review your estate planning documents as statutes differ on the types of documents required and the powers bestowed upon each.  “For that, it’s essential to consider not only the cost of living but the state laws that affect your accumulated wealth and income.”

See Rodger Friedman, 3 Tips for Retiring Out of State, Investor Ideas, Dec. 3, 2014. 

December 5, 2014 in Elder Law, Estate Planning - Generally, Income Tax | Permalink | Comments (0) | TrackBack (0)

Pictures of Injured Mickey Rooney May Evidence Elder Abuse

Mickey RooneyAs I have previously discussed, prior to his death earlier this year Mickey Rooney spoke out against elder abuse and his own experiences. Recently released pictures of Rooney with physical injuries may be evidence of elder abuse. In the pictures taken December 2011 and January 2012 he is shown receiving treatment for a large head gash and with a missing tooth and injuries to his face.

See Julian Robinson, Are These Astonishing Pictures Proof That Mickey Rooney DID Suffer Elder Abuse?, Daily Mail, Dec. 3, 2014.

December 5, 2014 in Elder Law | Permalink | Comments (0) | TrackBack (0)

Thursday, December 4, 2014

Advance Care Planning

Healthcare proxy

Many people create their advance directives younger in life, outlining the medical interventions they would want or refuse in situations when they cannot speak for themselves.  Yet, after an unfortunate medical diagnosis or in old age, those directives do not always match the wishes of the people who wrote them.  “Advance care planning is not a moment in time.  It’s a process.” 

The process begins by creating an advance directive, usually including a living will and a medical power of attorney.  A living will outlines what kind of medical care a person would want if he or she cannot communicate.  The medical power of attorney, or health care proxy, designates a person to make medical decisions for the person who can no longer make them. 

Once the directive is made, people should revisit it periodically, especially after any serious medical diagnosis, to ensure the document represents their best thinking.  If you find your current wishes are not provided for, update your directives.  It is also important for individuals to designate a health care proxy who knows them well and will have their best interests at heart.

People’s preferences for medical interventions can change for a variety of reasons.  Moreover, medical situations are often more complicated in real life than they are on paper. 

See Elizabeth O’Brien, Your ‘Living Will’: What Happens If You Change Your Mind? Market Watch, Dec. 4, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 4, 2014 in Disability Planning - Health Care, Elder Law, Estate Planning - Generally, Wills | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 3, 2014

Finding Joy at the End of Life


Consider how much time you put into planning for a vacation, wedding, and retirement compared to planning for a funeral or death.  Although we will think about issues such as wills and estate planning or cremation and burial, how often do we communicate and document our lives, and what happens to that information when we die?

In reality, we do not do this often.  When faced with the death of a loved one, we are shocked by how little one knows about what is wanted for final arrangements.  We can be unprepared to deal with the details that go beyond one’s last will and testament. 

In the wake of terminal cancer, one woman came to the realization that her life would be cut short.  Though she intended to fight the disease, she planned for her death.  She made a bucket list and set out to check off items on the list she intended to enjoy while she still could.  She also planned her own funeral, where guests shed both tears of sorrow and joy as they remembered their dear friend.

See Barbara Sedoric, How to find Joy At the End of Life, Even While Planning A Funeral, The Huffington Post, Dec. 2, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

December 3, 2014 in Elder Law, Estate Planning - Generally, Wills | Permalink | Comments (0) | TrackBack (0)

Twists and Turns of Spending Retirement Cash


Even though you may have wisely invested in a 401(k) plan or other retirement account, some of your toughest money decisions lie ahead.  Unfortunately, you will not receive much help in making these decisions.  For retirees, choices about how to spend a life’s worth of savings are fraught with tricky calculations about financial risk, taxes, and death. 

Baby boomers across the nation worry that they may outlive their life savings.  The government helps workers save money in tax-deferred accounts, but offers little guidance on when it should be spent.  The requirement for annual distributions from tax-advantaged accounts simply depletes the money.  “There’s sort of a money illusion when you have a big lump sum of money sitting in your 401(k) account.  You think you’re rich.”  For a 65-year-old man, $100,000 buys an annuity that pays $572 a month for life.  However, this is not what people see, and sometimes forget to think about the income taxes they will owe. 

The government has taken limited steps to ease the spending-down phase of retirement; a “clear direction is lacking.”  President Obama has proposed eliminating the required distribution for people with account balances of less than $100,000 to simplify the system and save taxpayers millions.  This proposal has been stalled. 

Another problem is that minimum distribution tables have not been updated since 2002.  Since then, average life expectancy has increased by ten percent for men and seven percent for women.  Yet for an individual, the right decision on how much to withdraw depends on lifestyle, risk tolerance, and life expectancy.

See Richard Rubin, Spending Retirement Cash Can Be Fraught With Tricky Calculations, The Boston Globe, Oct. 15, 2014. 

December 3, 2014 in Elder Law, Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)