Written by Jill Roamer J.D.
As a senior ages, they may no longer be able to look after their own affairs. This could be their medical affairs, financial affairs, or both. Hopefully, the senior planned early and had the appropriate powers of attorney in place. These documents allow another to act on the senior’s behalf in the event they are unable to do so.
If a senior did not plan and have the appropriate documents in place, then a guardianship or conservatorship may be necessary. Both entail a court process. In a guardianship, the court would grant someone, termed a guardian, to be in charge of the senior’s person. This means monitoring their day-to-day health, making doctor’s appointments, administering medication, and ensuring the senior has proper hygiene. A conservatorship means the court appoints a conservator to be in charge of the senior’s finances. In both cases, the senior would be termed a ward. A guardian and conservator must act in the ward’s best interests.
Oftentimes, a court might name the same person, say, a family member, as both guardian and conservator. In other cases, the guardian and conservator may be different people. And if there are no appropriate friends or family to be appointed, a professional may be appointed. While the professional must still act in the senior’s best interests, can a lawsuit be brought against the professional if they were acting in accordance with their duties as guardian?
This issue was recently litigated in Massachusetts. In this case, we have Kathleen who had dementia and became unable to take care of herself. Her son, Francis, lived with her and was supposed to be caring for her. After reports surfaced that Kathleen was being neglected and financially exploited by Francis, a court got involved. The court appointed attorney Cherilyn to act as Kathleen’s conservator. Kathleen’s other son, Kevin, was named as her guardian.
Kathleen owned a three-family home but was residing in a nursing home. Kevin came up with a plan to rent out the second and third floors of Kathleen’s home and to have Kathleen reside on the bottom level and receive around-the-clock care via Medicaid. Before that could happen, Francis must leave the premises due to his misconduct towards Kathleen.
Cherilyn attempted to evict Francis from Kathleen’s home, to no avail. Cherilyn motioned the court to get permission to evict Francis and sell the home. Both motions were granted and both tasks were eventually accomplished. Kathleen died a few years later, and her estate was required to reimburse Medicaid for any expenditures made for Kathleen’s care.
Kevin filed a Complaint against Cherilyn for breach of fiduciary duty, malpractice, conversion, and fraud. The trial court ruled in favor of Cherilyn, stating that the claims alleged were “paper-thin” and that Cherilyn, as a court-appointed conservator, had quasi-judicial immunity if she was acting within the scope of her duties. Kevin appealed and the Judicial Supreme Court took on the case.
In analyzing judicial immunity, the court quoted several cases as stating “A judge is entitled to judicial immunity and therefore is exempt from liability to an action for any judgment or decision rendered in the exercise of jurisdiction vested in him [or her] by law." Immunity would only be denied if the judge acted in “clear absence of all jurisdiction”. The court went on to explain that such immunity was not only limited to judges, but also extends to folks who perform quasi-judicial functions. For example, immunity could be extended to court-appointed psychiatrists, court clerks, guardians ad litem, and personal representatives of an estate.
In deciding if one is entitled to quasi-judicial immunity, the court looks to the function of that person and how close their actions are associated with the judicial process. However, immunity does not apply if the person is acting outside the scope of their duties. In this case, the court ruled that Cherilyn, as conservator and acting under a court order, was entitled to quasi-judicial immunity. The court stated that a conservator was like an arm of the court and was integral to the judicial process.
Importantly, the opinion clarified that if a conservator is acting in accordance with a judge’s order, then the conservator has quasi-judicial immunity as to those actions. However, if the conservator’s actions are not sanctioned by a court order, then those actions are being taken as a fiduciary of the ward and the conservator may be personally liable.
Our goal at the Nickerson Law Office is to ensure that trusted family or friends can be named conservators rather then the court. Contact our office today to learn more about how we can help for your families future.
Written by Jill Roamer J.D.
Federal law prohibits a nursing home from requiring that past-due expenses be paid as a condition for a resident to be admitted to or continue to stay at a facility. But what if someone volunteers such payment?
This issue was recently litigated in the Commonwealth of Kentucky Court of Appeals. In this case, Erma was in a nursing home and filed for Medicaid benefits about 6 months after her arrival. Erma’s application was approved and Medicaid paid 3-months retroactive benefits to the nursing home. During her private-pay tenure, Erma had accrued a balance of about $35,000.
Erma’s daughter, Christy, executed a promissory note to the nursing home that promised to pay for this balance. Christy made one payment under the note and then defaulted. The nursing home filed suit against her for payment. Christy argued that the nursing home could have sought payment from Medicaid.
The trial court ruled in favor of the nursing home and Christy appealed. We now have this case out of the appeals court. In her appellate brief, Christy raised new arguments. The appeals court allowed the introduction of new arguments, under the palpable error review rule. “A palpable error which affects the substantial rights of a party may be considered by the court on motion for a new trial or by an appellate court on appeal, even though insufficiently raised or preserved for review, and appropriate relief may be granted upon a determination that manifest injustice has resulted from the error.”
Christy’s new argument was that the promissory note was illegal under the Nursing Home Reform Act and other federal regulations. Such laws state that a nursing home cannot require a third-party guarantee of payment as a condition for a resident to be admitted to or continue to reside in a nursing home. Christy claimed that the nursing home’s bookkeeping department brought her in to sign the promissory note but she testified that she signed it voluntarily.
Interestingly, while other states have precedent that allows a voluntary payment of the past due amounts owed without incurring a violation of federal statutes, Kentucky had no precedent on the matter before the instant ruling. Other states’ precedents ruled that if the federal government had intended on forbidding third-party guarantee payments, they would have explicitly done so. However, the federal laws do not ban the payments in their entirety, but only if the payments are a condition on the resident staying at the nursing home. The Kentucky appeals court here jumped on the bandwagon with other states and ruled in favor of the nursing home. Christy executed the promissory note voluntarily so it wasn’t predicated as a condition before Erma was allowed to stay at the facility. As a result, Christy was on the hook for the amount of the note.
It's unfortunate that a lot of families have had to deal with red tape situations like these. Our law office has been able to help families navigate an estate plan around medicare and medicaid. If you want to learn more, don't be afraid to contact our office for more information.
Written by Robert T. Nickerson
October marks two occasions. First is national estate planning awareness month (we know it’s not the most recognized of celebrations). Second, October means it’s Halloween!
Some people are spending their time watching scary movies. Some are helping out their children getting their costumes ready for trick or treating. Some are just enjoying the autumn colors that really bloom in October. But we can’t deny that there’s a little bit of Halloween fright hanging in the air. But it’s also time to bring up another scary thought; that you may have not gotten around to having your family ready when your gone.
I would hope that you’ve taken the steps to have your estate plan all created and ready to go when the time comes. Afterall, there are a number of things that could happen so that you wouldn’t be able to act on your own behalf, mentally or physically. And when your dead, how is your family going to be able to go forward without proper instructions?
While it’s not a pleasant thought, the chances of us suffering from a dilemma, accident, illness, or something else that ends up making us disabled are higher then you think. In fact to quote from the Social Security Administration, a young person starting a career today has a one in three chance of dying or qualifying for Social Security Disability Income before reaching Social Security’s full retirement age. So the next time your out with two of your buddies, one of you has a good chance of being taken out of a normal life.
Our law office has received many phone calls over the years from people who say they’ve been named as an executor of someone’s estate or have suddenly found themselves in charge of a loved one. This is usually a result of the family not communicating enough about their future plans, thus creating more confusion then comfort. It’s a situation that’s really scary to see, especially since whatever decisions that person makes, the loved one will be the bearer of that consequence.
Most of the time, that person has a hard time finding all the necessary documents in order to proceed with the next step, whether it’s following one’s estate plan or the even tougher circumstance of having to go to probate to settle things. So how can we make sure we can streamline things better for our new executor of an estate plan? By creating a go to folder where they can find most of the information they need.
What we’re talking about is both a physical folder that can be placed in a safe and an electronic one that can be accessed. So what’s going to be in this folder? Here’s a comprehensive list of what should be included:
This is a lot of information and we’re aware of that. We told you that we were going to scare you this Halloween. We also hope this compels you to start some work on a folder so that your future won’t be as scary.
Click on the link below for more information on how we can help ensure this kind of this is set up to prepare for your families' future.
Written by Robert T. Nickerson
Have you ever seen an ad for estate planning and thought, “There’s no way I could ever afford something like that”? You’ve probably seen a lot of stories about the wealthy that’ve spent a lot on lawyers in order to have their assets prepared for their family. I’ll tell you immediately that you don’t need to be Jeff Bezos or Elon Musk to plan for your future. Estate planning is not just for the wealthy. What is important is having the right documents prepared so that your family will be ready when your gone. Not to sound downbeat, but at some point, we will die and we do need to make sure our loved ones don’t face problems with the court or government with what you’ve left behind. I’ve helped a lot of families navigate over what to do with properties, financial assets, and even the guardianships of their children. But rather then give you an entire course on the technical aspects of estate planning, I thought I would go through six essential documents every adult should have in order to help their loved ones get an idea with what you would want. While some don’t need to be touched until death, some of these could come in handy for medical emergencies.
Durable power of attorney
Here’s something that can be used for a lot of circumstances when your still alive. Should you become incapacitated for any reason, a durable power of attorney allows you to select someone you trust to make all legal and financial decisions in your name. They can pay bills. They can setup lawsuits. There’s a lot they can do to save a lot of time.
More importantly, they prevent families from arguing over who should be your voice. Without it, this would force families to go to court to have a conservator appointed, which along with being a very expensive and time consuming process, may not have your best interest. That’s not to say their all bad, but they go off from an idea of probably what you would want. These are the kind of decisions that are better suited for trusted love ones.
This is similar to a power of attorney, except this is in the case for potential medical decisions. Let’s say you’ve gotten into a bad accident are in a coma. You have no way to let the medical team of what you want to happen in any scenario. This document ensures that someone you trust will make those choices. It can even say whether or not you wanted your life to continue should something awful really happen.
Without this document, no one in the family may be allowed to step in, and in some states, may even require a guardian which is just as time consuming as acquiring a conservator.
There’s a lot of confusion with a lot of people assuming that a will can do whatever you want. While it’s sort of true, let’s clear some things and explain what it really is. A will actually dictates what is to happen with your owned assets. It doesn’t have anything to do with guardianship or special trusts.
With a will, you’ll need an executor that’ll take charge on how your assets are divided within the people you’ve selected. This person is also responsible for paying any bills, preparing a tax return and even preparing an estate plan return.
So you want to avoid probate court? Then a revocable trust is going to be key to do so. This does the same thing a will does, but with a lot more advantages. First, it remains a private document (while a legal will is publicly available). Second, if you own any out of state property, then a revocable trust would let you avoid the probate process in that state. Third, this would allow for an easier process for guardianship. This gives the subject more power on how their assets would be distributed to their children.
A revocable trust also makes things easier for a successor to step in to manage the trust rather then waiting for a financial institution to do so.
This is something that comes with a will or a revocable trust. A beneficiary designation is how a retirement account and life insurance is distributed. This is also something that needs to be reviewed at least once a year as a lot of circumstances can change this. Death, marriage and divorce are just some of the things that can cause course to change. There have been horror stories of ex-spouses that have sued, claiming an entitlement to ones assets.
Under the SECURE act, a beneficiary designations have changed. It varies, but in most cases, it’s no longer possible to distribute a retirement account asset over a lifetime.
Guidance Letter to Family
Though this isn’t necessarily a legal document, if you wanted to add a personal touch, a guidance letter is a great way to first give an idea of what you would want to happen. You can use the legal documents to fully iron out the details of your wishes, but a letter is a nice way to give out some guidance in your own language, giving your family more comfort in the way they remember.
Written by Jill Roamer J.D.
Undue Influence is when someone pressures another in such a way that the person being influenced is not acting by their own free will; they are being coerced into taking a certain action. The person being influenced does not understand the repercussions of their actions.
Recognizing undue influence is a job for many – lawyers, financial advisors, notaries, bankers, and family members. Due to the nature of undue influence, it is often carried out by loved ones and kept hidden from others. Undue influence often happens in the case of illness, where there is a deterioration in physical and mental abilities. The bad actor will take advantage of the ill person, and unduly influence them into taking actions to benefit the bad actor.
The issue of undue influence was recently litigated in Malousek v. Meyer. Here, we have Molly and Greg who began cohabitating in 2009. In 2015, Molly was diagnosed with cancer and began treatments. By 2017, her health had drastically deteriorated. In mid-October of 2017, the pair added Greg as a joint owner on Molly’s bank accounts, changed beneficiary designations in Greg’s favor, got married, and executed a quitclaim deed in order to have the home transfer to Greg upon Molly’s death. In addition, Molly executed a power of attorney naming Greg’s son, Mark, as agent.
By October 23, Molly passed away. Her adult children, A.J. and Courtney, filed a declaratory judgment action seeking to have all the property interest changes reversed and the marriage annulled. Their reasoning was that Molly lacked capacity to make these decisions, she had previously indicated that she did not want to get married and did not want Greg or Mark as beneficiaries, and thus was the victim of undue influence. The district court found in favor of A.J. and Courtney, declaring that the marriage was annulled and ordered that the property be conveyed to Molly’s estate. Greg and Mark appealed.
The instant case is out of the Nebraska Supreme Court. The court reviewed the evidence in the case. Plaintiffs’ arguments and evidence were as follows:
The Defendants’ arguments and evidence were as follows:
The court quoted Miller v Westwood and gave the elements of proving a claim of undue influence: “(1) that the person who executed the instrument was subject to undue influence, (2) that there was opportunity to exercise undue influence, (3) that there was a disposition to exercise undue influence for an improper purpose, and (4) that the result was clearly the effect of such undue influence.” The court further went on to state that undue influence is sometimes difficult to prove with direct evidence and other factors may need to be inferred.
In the end, the Supreme Court ruled for Molly’s children. The court stated that as Molly’s health deteriorated, there was a sequence of events carried out to transfer her property to Greg, it was done in secret, contact with Molly’s friend and family was controlled, and the effect of the transactions was contrary to her prior stated wishes. Importantly, the Supreme Court noted that witness credibility is an issue for the trier of fact, giving the district court deference since that court had the opportunity to observe and question the witnesses. The district court obviously found the Plaintiffs’ witnesses to be more credible than those called by the Defendants.
There are a few lessons from this case. The first is to plan early, while still healthy. This way, the likelihood of an argument for undue influence can be decreased. The second lesson is that practitioners need to be aware of undue influence and have a procedure to analyze each case for its presence. Talk to clients and their families about undue influence and the warning signs. Finally, it might be best to encourage clients to talk on their friends and family about their estate plan, so everyone is aware and on the same page before the client’s death.
Nickerson Law will spot out any cases of undue influence within one's estate plan and help you determine what needs to be done to fox that. Click on the button before to contact us for more information with no obligation.
Written by Robert T. Nickerson
Whenever a family completes or updates their estate plan, the immediately feel a sense of accomplishment. Happiness and security are other thoughts and emotions that probably come with it too. The whole point of an estate plan is to give families ease of mind by having their assets, property and potential trust funds all set up legally on paper so that complications don’t arise later on. Does that mean once you sign that last signature, your out of the woods? That depends on how another question is answer; does your estate plan pass the multigenerational test?
You’d be shocked to learn that many estate plans wouldn’t pass that test. That’s because of one thing; a lack of communication. I’ve seen this happen a lot because no matter how big or small a family is, each generation tends to have their own plans created. Your parents may have had one created years ago or maybe you have an offspring that talks about having a plan created without talking to you first. On top of that, it only takes a few years for many estate plans to become dated. One thing that can never be fully planned is life. Things happen. New Children are born. Potential successors may not be as reliable as before. A divorce might have happened. This is why communication between your family is very important. You need to stay on top of what going on in everyone’s lives. Parents, grandparents, children, grandchildren and even great-grandchildren all have things could alter an estate plan.
Let’s look into one thing that could call for big changes to an estate plan; new children or grandchildren born.
When families expand and bring new children in the mix, there’s a lot of joy and excitement. The parents have probably received tons of gifts for the new baby, but what about gifts in the form of money? Because parents are concerned about their child’s future college education, they know they want to accept money, but their also aware of the tax and even legal consequences. So what are more suitable options then just handing a check over?
A UTMA or a UGMA savings account is a very simple to open up and many banks offer this option. The downside is that these account types aren’t the most optimal if family wealth continues to expand.
But what if the child gets a scholarship or even decides not to attend college? These are possible scenarios that can also raise questions about a larger family estate.
Another good solution is a gift trust. As long as the writing is solid, the grantor can create a gift trust and pay the taxes on their behalf.
A good multigenerational estate plan can help answer those questions and set it in stone. Of course the real answer in how to have a better understanding in a large family is communication. There’s plenty of excuses that people will come up with including feeling like they’ll offend if they ask a parent how much money they make. One thing that people don’t have on their side is time. It only takes ten years for generations to change and the amount of wealth were passing on is only increasing.
Nickerson Law has built years of experience in helping various families and creating estate plans that are transparent and easy to understand. We also note specific time frames when they need to be reexamined. We even look at old plans to see if their still valid. Contact us below to learn more about what can be done for your families future with no obligation.
Written by Jill Roamer, J.D.
Last month, California legislatures passed AB 133, which is creating quite the stir in the elder law community. In particular, section 364 therein is especially surprising. It states, in its entirety:
“SEC. 364. Section 14005.62 is added to the Welfare and Institutions Code, to read:
14005.62. (a) (1) Notwithstanding any other law, for an applicant or beneficiary whose eligibility is not determined using the modified adjusted gross income (MAGI)-based financial methods, as specified in Section 1396a(e)(14) of Title 42 of the United States Code, the department shall seek federal approval to implement a disregard of one hundred thirty thousand dollars ($130,000) in nonexempt property for a case with one member and sixty five thousand dollars ($65,000) for each additional household member, up to a maximum of ten members.
(2) This subdivision shall be implemented only after the director determines that systems have been programmed for the disregards specified in paragraph (1) and they communicate that determination in writing to the Department of Finance, and no sooner than July 1, 2022.
(b) (1) Notwithstanding any other law, for an applicant or beneficiary described in subdivision (a), resources, including property or other assets, shall not be used to determine eligibility under the Medi-Cal program to the extent permitted by federal law. The department shall seek federal authority to disregard all resources as authorized by the flexibilities provided under Section 1396a(r)(2) of Title 42 of the United States Code or other available authorities.
(2) This subdivision shall be implemented only after the director determines that systems have been programmed for these disregards and they communicate that determination in writing to the Department of Finance, and no sooner than January 1, 2024.
(c) (1) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this section by means of county letters, provider bulletins or notices, policy letters, or other similar instructions, without taking regulatory action.
(2) Within two years of implementing the requirements set forth in subdivision (b), the department shall do both of the following:
(A) Adopt, amend, or repeal regulations in accordance with the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code and this section.
(B) Update its notices and forms to delete any reference to limitations on resources or assets.
(d) This section shall only be implemented to the extent consistent with federal law, upon the department obtaining any necessary federal approvals, and to the extent federal financial participation under the Medi-Cal program is available and not otherwise jeopardized.” (Emphasis added.)
This new bill is the first of its kind in the country; all states currently have an asset threshold for long-term care Medicaid eligibility. The bill purports to raise the resource cap substantially by mid-2022 and to eliminate the resource cap altogether by the beginning of 2024. Of course, as noted in the Bill, the implementation of this new law will depend on how the federal government reacts. Will the feds play ball? The Social Security Act states that 1115 waivers can be approved if the purpose thereof is to assist in promoting the overall objectives of the Medicaid program. Is the purpose of the Medicaid program to provide medical coverage to indigent individuals or individuals with means? As California’s new Bill doesn’t align with the current requirements of federal law, it will be interesting to see how this plays out in the coming months.
Written by Robert T. Nickerson
A lot of people do have an idea that they should have some kind of general last will and testament in the worst-case scenario. But you’d be surprised by how many people will ask “how” their supposed to be used. Do will begin use before or after someone is deceased? When does Probate need to come in? By breaking down all of this, this can be used to create a more constructed estate plan.
A living will is a document that legally sets an individuals decisions for end-of-life choices. A last will and testament is a document that legally sets the wishes of an individual for how their assets (physical and financial) are to be used and/or divided among beneficiaries (the people that’ll inherit from the individual).
A last will and testament can (and should!) also have arrangements in relations to children the individual may have, disabled loved ones that individuals were previously responsible for and even an individuals pets. Yes, you can leave out instructions for your beloved Fido knowing they’ll be taken care of.
Does a last will and testament play any part while one is still alive? The short answer is no with a but. What is the but? The but refers to, “…but it can help the rest of the family and even your attorney gain a better idea on what goals an individual had in mind for their property but are not able to communicate”.
There are also a variety of parts that people play in a will, so lets go over those roles. A testator is the person creating the will. The beneficiaries is a person or a group of people that’ll receive one’s assets after death. The executor is the person responsible for the deceased’s estate until the assets are distributed or court action is closed.
So what happens when someone passes away without a will or an estate plan? That’s when the court will come in and manage that person’s assets. Instead of an executor, the court appoints an administrator.
Typically, a will is filed after one’s death. The laws vary from state to state, though the person that’s named the executor will be the one to go to the county clerks office (it has to be the one in the state and county where the individual had the will or estate plan created) and open a case.
The case to determine the distribution of assets is called a probate case. Additional probate cases may need to be filed if they had property in other states, but again, the rules apply depending on the state. Once a probate case is open, it’s recorded with the county clerk and it becomes public record.
Does everything a testator owned all end up distribute within probate? You’d be surprised, but no. Accounts under definite beneficiaries will typically transfer without trouble. Property that’s held jointly with another person may have a stipulation that’ll allow the other party to be the sole owner.
Any property that was in the original name without a named survivorship will ultimately end up as a part of a probate case.
This happens because once a person dies, without a designated beneficiary, there is no living person that has any legal right to transfer any assets. Therefore, the court must determine and make a ruling on who the rightful owners are. Creditors can even step in and make a claim of money the individual had owned them before. If the court sees them as valid, the estate may have to pay them before beneficiaries can receive assets.
If no will was created for an individual, then a probate case still needs to be filed. The difference is that the court will be following default laws of that state in relation to who receives the property and how. An administrator or an executor isn’t able to act until the probate case has been opened.
Understanding what wills do and how probate can affect ones assets and beneficiaries is a proper step in establishing a full estate plan. The next step is to talk to an attorney into drafting those documents. The Law Offices of Jeffery C. Nickerson is committed to helping families and guiding through the process in a simple way. Contact us by clicking on the button below for more information.
Written by Jill Roamer , J.D.
Each year, the Internal Revenue Service (IRS) puts out their “dirty dozen” list. This is a list of scams that are prevalent that the IRS wants everyone to watch out for. Let’s see what’s going on in scammer-town this year.
The scams fall into four main categories: pandemic-related scams; scams relating to personal information; schemes focusing on certain victims; and scams that persuade taxpayers into taking crooked actions.
Due to the pandemic, the government passed legislation that provided financial help to individuals and businesses. A scam can focus on stealing these payments. The IRS alerts taxpayers to watch out for mailbox theft of stimulus checks. The IRS reiterates that an IRS employee will not initiate contact via phone, email, or text asking for your social security number or other information in order to process stimulus checks.
Scammers have stolen identities and filed unemployment claims, the IRS says. These scammers have benefited from the bolstered unemployment benefits but the legitimate taxpayer is the one who may receive a Form 1099-G to report on their income tax return. If you received this form and you didn’t actually receive those unemployment benefits, you should contact the appropriate state agency for a corrected form.
Scams Related to Personal Information
Personal information (PI) is information that is used to identify you and thus could lead to a scammer impersonating you. PI includes your social security number, driver’s license number, banking information, passwords, and more.
The first scam related to PI that the IRS warns against is phishing. This involves the scammer sending you a communication that looks like it is from a legitimate source, like a government agency. You think you are dealing with the IRS but you are instead dealing with a ne’er-do-well. The scammer collects your PI and then is able to perpetrate fraud on your accounts. Or the scammer has a virus embedded in the communication that compromises the security of your computer or phone.
There are also scams related to social media. The scammer may open a social media account and pretend to be friend or family member in order to extract PI from you. Or the con artist could ask you for money due to an “emergency” or for a fake charity contribution.
Schemes Focusing on Certain Victims
With the pandemic, fraudsters have set up fake charities or disaster relief companies. Or they create bogus stories on social media about a fake family that has had it particularly rough due to COVID-19. These stories or charities pull at your heart strings. Before you give to a cause, do your research to make sure it is legitimate, and your funds will be used as you intend. Be wary of a charity asking for a donation via gift card or money wire.
Immigrants are the targets of some scammers. The con artist will impersonate a government employee and threaten deportation or jail if a sum is not paid. The IRS states that a legitimate IRS agent will not make these threats. Similarly, those with limited English-speaking capability are susceptible to phone scams. The Schedule LEP let’s a taxpayer request a change in their language preference so that they can more easily understand official IRS communications.
Scams that Persuade Taxpayers into Taking Crooked Actions
Scammers may offer big discounts for a “settlement” with the IRS, or say that they will file for certain relief programs, such as an Offer in Compromise. While relief programs do exist with the IRS and can prove very helpful for some taxpayers with IRS debt, you need to make sure you are dealing with a reputable company who will actually do legitimate work on your behalf. Look out for misleading advertising or deals that seem too good to be trust. It might be worth contacting the IRS yourself first to see what options you have. There are many resources on the IRS’ website, including a questionnaire to see if you qualify for an Offer in Compromise. And, of course, the IRS offers its forms online.
Scammers are out there waiting to prey on the vulnerable and unsuspecting. The IRS warns to look out for any scam that requests payment via gift cards. Also, be aware that in most circumstances, the IRS will first communicate with you via mail. If the first contact is a phone call, be cautious. And the IRS will almost never send out communications to you via email.
As an elder law attorney, It's important to keep my clients informed. If someone contacts your clients purporting to be from the IRS, they should call the IRS at 800-829-1040 to see what the facts are before proceeding.
Written by Jill Roamer J.D.
When an agent steps into the shoes of a principal, does that require the agent to ensure every cent belonging to the principal go towards the principal’s care? What if the agent instead gifts that money to family? Is that fraudulent? This issue was explored in a recent case out of the United States Bankruptcy Court, District of Massachusetts, Eastern Division.
Doris named her son, Jonathan, as agent under a financial power of attorney. Doris’ health was failing and she entered into a nursing home, Pleasant Bay. The private pay rate for Pleasant Bay was nearly $8,000 per month. Doris did not have enough income to pay for her stay at Pleasant Bay, so Jonathan sold her condominium.
With the proceeds, Jonathan paid some of the outstanding debt to Pleasant Bay but also engaged in gifting to himself and other family members. Jonathan applied for Medicaid benefits for Doris, but was denied due to the gifting. After accruing more debt with Pleasant Bay, Doris moved to another facility.
Pleasant Bay sued Jonathan for Doris’ balance owed; he agreed to a judgment against him. Jonathan proceeded to file bankruptcy, and listed the Pleasant Bay debt on his bankruptcy schedules. Pleasant Bay gave two arguments as to why the debt should not be dischargeable. The first argument was that Jonathan incurred the debt by false representations and he should have used all of his mother’s assets to pay for her care. The second argument was that Jonathan breached his fiduciary duty by spending his mother’s assets on something other than her care. As a third-party beneficiary of that fiduciary relationship, Pleasant Bay argues that they have standing and suffered a financial loss. Jonathan, in turn, argued that he did not agree to spend all of Doris’ money on her care. He said that he spent the proceeds of the home sale in accordance with what Doris’ would have wished.
Pleasant Bay’s first argument hinges on 11 U.S.C. § 523(a)(2)(A), which states that a debt cannot be discharged in bankruptcy if it was obtained by “false pretenses, a false representation, or actual fraud…”. In the opinion, the court lays out the elements to meet this standard. In order to prevail, the plaintiff must prove that the debtor “1) made a knowingly false representation or made one in reckless disregard for the truth, or made an implied misrepresentation or created a false impression by his conduct, 2) intended to deceive, 3) intended to induce the creditor’s reliance; and the creditor 4) actually relied upon the misrepresentation or false pretense, 5) relied justifiably, and 6) suffered damage as a result.”
Pleasant Bay’s second argument hinges on 11 U.S.C. § 523(a)(4), which states that a debt cannot be discharged in bankruptcy if it was “for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny”. The court notes defalcation is akin to extreme recklessness and that “not every breach of fiduciary duty amounts to defalcation.” Notably, to meet this requirement, the fiduciary must have had culpable intent or knowledge of the improper conduct.
The court here first looked to the terms of the contract that Jonathan had signed with Pleasant Bay. The terms of the agreement did not justify a reading that said that every cent of Doris’ would be given to Pleasant Bay. Instead, the court found that Jonathan had intended that Pleasant Bay would be paid by Medicaid. Jonathan did not understand prior to his gifting that Doris’ Medicaid application would be adversely affected by his actions and ultimately denied.
The court did state that after Jonathan received notice that Doris’ Medicaid application was denied, he should have then given Doris’ monthly income to Pleasant Bay. But not doing so did not rise to the level of fraud, misrepresentation, or false pretenses. However, the court said, if Jonathan’s conduct had resulted in Doris not being able to get care, then an argument might be made that Jonathan’s spending of his mother’s funds rose to the level of defalcation. But that did not happen in this case.
As for the § 523(a)(4) claim, the court quoted Follett Higher Educ. Grp., Inc. v. Berman (In re Berman), 629 F.3d 761, 767 (7th Cir. 2011), which stated “Not all persons treated as fiduciaries under state law are considered to act in a fiduciary capacity for purposes of federal bankruptcy law.” Instead, what matters is if the debtor is acting as a fiduciary under federal law, which would require an express or technical trust. This is an elevated level of duty and creates a Trustee relationship. The court here examined the power of attorney document and did not see where this elevated duty was created. As such, Pleasant Bay’s claim failed on this count.
In the end, Pleasant Bay lost their case and Jonathan was able to discharge the debt in bankruptcy. However, Jonathan could have likely prevented the whole situation and obtained a better outcome had he sought legal advice from an elder law attorney when it was clear his mother needed long-term care. An elder law attorney could have planned properly so that Doris received the needed care, Jonathan fulfilled his obligations as agent, and Doris’ assets were best preserved for her loved ones. Instead, Jonathan spent his time, energy, and money on the back-end, defending his actions in bankruptcy court.
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Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!