Elder Law Update
North Carolina Edition |
Vol 2 Issue Three
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August 2008
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PLEASE VISIT MASON LAW
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I WANT TO KNOW
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Greetings!
Hope you are having a good summer. For us at Mason Law, it has been a busy one.
I'll hold my comments down, because this edition of Elder Law Update is a big issue. In fact, it is our biggest issue yet.
I welcome Penny Louis to Elder Law Update. Penny has an interesting article below on how seniors most often get into financial trouble. She should know! Penny is a financial manager for seniors who have difficulty managing their own financial affairs. I've seen her in action in Savannah. She can do everything from "help straighten out some things" to complete financial management.
Trusts and FDIC Insurance
A client recently joked that I could change the name of Mason Law, PC to "Trusts-R-Us" because we so often use planning techniques that involve trusts. Lately, I have been receiving many questions about the FDIC insurance program and how it applies to trusts. Finally, I promised the last client who asked that I would devote an article to the topic . . . which appears below.
Brittle Bones and Running From Hurricanes
Dr. Beth Hodges gives us some advice regarding a very serious topic: bone fractures in seniors. It is well worth reading . . . and even takes a dig at lawyers. Beth and I are friends, so she was worried I would be offended. I told her not to worry, because she is actually down on personal injury lawyers (as are most doctors), and I am not a personal injury lawyer as you all know. In fact, have you EVER heard an Elder Lawyer joke? I am sure NOT. We aren't funny. On the other hand, if anyone knows any good doctor jokes, please do send them my way and I'll forward them to Dr. Beth.
Part III of Barbara Dunn's series on emergency preparedness runs below. Hurricane season is headed into the busiest three months, so the article is timely.
Finally, Warren Coble shows us how spousal Social Security benefits are calculated. I haven't told Warren this, but I was gratified to hear that at least one reader has bookmarked the Elder Law Update Boneyard (Archives) and regularly goes back to look at Warren's articles for a Social Security "refresher". So there ya go, Warren!
Bob Mason
Certified Elder Law Attorney
Certified by the
National Elder Law Foundation, recognized by the American Bar Association as
the certifying entity for specialization in Elder Law.
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FDIC INSURANCE AND TRUSTS
Bob Mason
Recent
bank failures have rattled a few clients lately. It would be easy to dismiss
these concerns because the rate of failures is extraordinarily low and bank
deposits generally are quite safe. On the other hand, when it is your money involved . . . . well . . . .
As many
know, I use a variety of trusts in the many techniques used to help clients.
Naturally, many clients are concerned about FDIC insurance coverage with
respect to those trusts.
In a
couple of earlier columns contributor Rose DeVries wrote about FDIC coverage generally.
It may be helpful to go back and reread her columns to get a general
orientation. Click HERE for the first; click HERE for the second.
. . . .
At this
point, either you've refreshed your memory or you know the basic FDIC rules. I
will assume that is the case. Now that you're oriented, here is a general
description of FDIC rules applicable to trusts. Keep in mind the limits apply
at each bank . . . in other words if a trust has coverage limited to $100,000
only because of one of the rules below, the limit applies at each bank in which
the trust has an investment.
First,
the FDIC has different rules that apply to Revocable Trusts and to Irrevocable
Trusts. As a starting point, determine which type of trust you are analyzing.
Revocable Trusts
Revocable
trusts, of course, are trusts over which the settlor or grantor (a/k/a "The
Person Who Set The Trust Up") retains the right to freely add or remove assets,
make amendments and even terminate the trust. Mason Law uses these often for a
variety of purposes.
To make
things really confusing, the FDIC classifies Pay On Death, or POD, accounts as
one of two types of revocable trusts, which is ludicrous because a POD account
isn't a trust at all. Read Rose's article on POD trusts by clicking HERE.
In
summary, FDIC will insure a POD account up to $100,000 for each "qualifying
beneficiary" listed to be paid upon the death of the primary account holder. A
"qualifying beneficiary" is a spouse, a child, a grandchild, a parent, or a
sibling. The beneficiary must be clearly listed on the books and records of the
bank.
The POD
rules, of course, caused much confusion when applied to the sort of living
trusts attorneys use. Sort of like pounding a square regulatory peg into a
round hole.
As a
result of the confusion and in order to "spread around" FDIC coverage, many
people were setting up accounts owned by revocable trusts as POD accounts with
the children listed. Others were setting up trust accounts as joint
survivorship accounts with children. Because POD and most survivorship accounts
pay automatically to the listed beneficiary, the arrangement might completely
frustrate the careful plans laid out in the trust.
In 2004,
FDIC published new regs that added some clarity.
A "living
trust account", to use the new regulation's term, is entitled to up to $100,000
FDIC coverage for each "named qualifying beneficiary", which means the
beneficiary must be related to the Grantor/Settlor and it must be possible to
determine from the trust document who the beneficiaries are (no need to list
them at the bank, although most banks want to retain a copy of the trust
agreement). It doesn't matter at all that the Grantor/Settlor has retained
complete authority to terminate the trust.
If Mom
and Dad have set up a joint revocable trust (which we at Mason Law often do),
each qualified beneficiary will be entitled to FDIC coverage of up to $100,000
with respect to each of Mom and Dad (i.e., $200,000).
If the
bank goes under, the FDIC will look at the trust document and pay up to
$100,000 for each beneficiary who would be entitled to a trust distribution if the Grantor
died on the day the bank went down. That is in addition to other accounts Mom
and Dad had in her or his own name.
Irrevocable Trusts
We also
assist clients with irrevocable trusts. Of course, an irrevocable trust is a
trust over which the Grantor/Settlor has surrendered ALL right to amend or
revoke the trust.
Some
Grantors completely surrender any right to receive any sort of distribution
whatsoever. Others retain the right to receive all of the income, but nothing
else. This is an important distinction to keep in mind.
If the
Grantor has not retained any income interest and if it is not possible for the
trustee to later shift benefits between various beneficiaries, then each
beneficiary is entitled to up to $100,000 FDIC coverage. Again, it must be
possible to identify the beneficiaries from the trust instrument. It is not necessary for a beneficiary to be
related . . . any person, or even a charity, will do.
On the other
hand, if the Grantor has retained an income interest, and if the trustee or
others have the discretion to allow unequal distributions to others (for
example, the Grantor's children), then the trust is limited to $100,000
coverage (separate, by the way from insurance the Grantor may have under her
own name).
That is
important to understand. Many trusts designed by Mason Law feature an income
stream to the Grantor, and many allow the trustee (perhaps with others'
cooperation) to make distributions to one or more people (other than the
Grantor). If that is the case, the trust will be limited to $100,000 coverage
at each institution.
Final
important point. The features that might limit an irrevocable trust to $100,000
very likely are worth retaining (they were put in the trust because they were
valuable features). If FDIC coverage is a concern, then the trustee simply
needs to make sure to "spread around" the investments between a number of
different banks.
Confused?
Send me an email!
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BRITTLE BONES
Beth Hodges, MD
I try with
each article to write about issues that are current, and since five of my
patients have fallen and suffered hip fractures this month, osteoporosis wins.
Osteoporosis,
or abnormal thinning of the bones, is actually
the third leading cause of mortality (death) in our elderly population
and is an even higher cause of morbidity (decline in function.)
Yes, I did
say death. It happens like this: Aunt Suzy falls outside Walmart and after the
personal injury lawyers descend and take down all the pertinent information an ambulance is called and
transfers her to the local hospital, where an overworked emergency room
physician determines she has a broken hip.
The orthopedist marches in to the rescue and whisks Aunt Suzy off to
surgery, where he does a simply splendid job fixing her hip. However, postoperatively, Aunt Suzy develops
a) severe anemia leading to a heart attack from the stress on the cardiovascular
system, or b) pneumonia, or c) kidney failure, or d) some severe
hospital-acquired infection, or e) just doesn't do well in rehab, falls and
breaks the other hip, and starts the whole process over. We in the medical community do all we can to
watch over Aunt Suzy in the perioperative period, but a better solution is to
keep Aunt Suzy's bones strong, so she bounces off that curb like an Olympic
gymnast.
How, you
ask? First, check the status of Aunt
Suzy's bones with a test called bone densitometry. Guidelines call for screening every two years
in women 65 or over OR postmenopausal
with risk factors (Caucasian race, slight of build, history of smoking, family
history of osteoporosis, sedentary lifestyle, chronic use of corticosteroids,
history of broken bones with minimal trauma.)
Men also can be prey to osteoporosis and are overlooked for screening
purposes.
Next, all
women and some men over age 50 need at least 1500mg calcium with Vitamin D
daily. That is the MINIMUM DAILY
REQUIREMENT, so getting extra calcium in the diet is generally not a
problem.
Then, make
sure Aunt Suzy's doing some daily weight-bearing exercise, like walking. If she can handle some light hand weights,
too, all the better. Mild stress on the bones makes them stronger.
If
osteoporosis is present, treat it. There
are oral medications that can be given once weekly or monthly. They work very well, but have to be taken
correctly to be safe, so if Aunt Suzy's faculties went to lunch in the 90's and
never came back, pick something else.
That same medication can be given intravenously in the doctor's office
once yearly, which is a good option for some people. Alternatively, there is a medication called a
selective estrogen receptor modulater, which has to be taken daily, but is
effective. It is not a good choice for
someone at risk for blood clots, as it does thicken the blood. Also, the most common side effect is hot
flashes, so Aunt Suzy might be hunting you down for that one. Lastly, there is a nasal spray that pushes
calcium back into the bones, but it has the least impressive data, so I usually
reserve it for patients who cannot tolerate any of the other options.
I hope this
has shed some light on a poorly recognized issue and its prevention. Osteoporosis generally isn't painful but it is
serious. Take your Aunt Suzy to see her
doctor today.
Beth Hodges, MD, is a principal in Hodges Family Practice, with offices in
Asheboro and Ramseur, North Carolina.
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Evacuation Planning for Older Adults - Part III
Barbara
J. Dunn, RN, MSN
 Editor's note: This is the third (and final) installment in a three part series telling you how to begin devising an emergency evacuation plan for the elderly.
We are in the middle of hurricane season. Often the
victims of an evacuation fiasco are unprepared older adults. In the previous
two issues of Elder Law Update I stressed the need to work with your older
loved ones to draft a written evacuation plan, and I discussed a number of
critical areas. In this last installment, I'll address one last usually
overlooked (but very important) issue, and give you a few summary pointers.
Pet Needs
Don't laugh! We all know how elders feel about leaving
pets behind. A cherished pet. It is imperative to have proof of the pet's rabies
shot. Other pet health records are important too. Is there a pet carrier for
the pet? A carrier is required in order to transport a pet on public
transportation and to enter a shelter. Is a supply of pet food listed in the
evacuation plan? Talk with your vet about your pet's evacuation needs.
And Finally . . .
Share your evacuation plan with all who need to know it.
If your loved one lives in a senior living facility, be sure to provide the
administrator in charge with a copy. Make an appointment with the administrator
to discuss the plan. Senior living facilities have their own evacuation plan
and it may not be consistent with your wishes or with the needs of your loved
one.
If your loved one lives alone, and at a distance,
communicate with local emergency management authorities about the best
approach. Many communities maintain a list of older adults who will need help
evacuating. Contact James Drinnon at Chatham Emergency Management Agency (CEMA)
at (912) 201-4500 for information on assisting older adults with evacuation.
CEMA's web site is full of up to date preparedness info. Check it out by clicking HERE.
We've skimmed the surface of a vast topic. For further
help with planning, call you local chapter of the American Red Cross with your
planning questions and for two excellent publications: #A4499 and #A4497. Publication A4497 deals
with planning for people with disabilities and other special needs. YOU MAY
REACH THE SAVANNAH CHAPTER OF THE AMERICAN RED CROSS BY CALLING 912-651-5371 or
stop by 906 Drayton, Savannah, GA
31412. Both CEMA and the Savannah Chapter of the American Red Cross offer
speakers on all emergency preparedness topics.
Barbara Dunn, MSN, is owner of Elder Care of Coastal Georgia, as
well as Chair of the Disaster Services Committee of the Savannah Chapter of the
American Red Cross. You may email comments and questions to Barbara by clicking
HERE.
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SOCIAL SECURITY BENEFITS FOR THE FAMILY
-Warren Coble
 Previously,
we discussed the categories of Social Security benefits payable to family
members of retired, disabled, or deceased workers who have earned enough
credits to be "insured" for benefits. This month we will address how
spouse benefits are computed.
Benefit
computations under Social Security always derive from a computation formula
(Primary Insurance Amount, or PIA) which is determined from average annual
earnings of the worker on the record. It should be noted that any
benefits payable on the record always go to the retired or disabled worker
first. Any family benefits payable are in addition to the benefits of the
worker. The family maximum limit on a record is usually 150 - 180 per
cent of the worker's benefit. If the total benefits due to the spouse and
children are more than this limit, their benefits will be reduced. Again,
the worker's own benefit will not be affected.
A
spouse who has not worked or who has low earnings can be entitled to as much as
one-half of the retired worker's full benefit. If you are eligible for
both your own retirement benefits and for benefits as a spouse, SSA always pays
your own benefits first. If your benefits as a spouse are higher than the
retirement benefits, you will get a combination of benefits equaling the higher
spouse benefit.
If
you file for spouse benefits prior to full retirement age (currently age 66),
you are also considered to have filed for reduced retirement benefits.
The amount of the benefits will be reduced permanently. However, if you
have reached your full retirement age, and are eligible for a spouse's or
ex-spouse's benefit and your own retirement benefit, you may choose to receive
only the spouse's benefits and continue accruing delayed retirement credits on
your own Social Security record. You may then file for benefits at a
later date and receive a higher monthly benefit based on the effect of delayed
retirement credits.
An
example: Jane Doe is eligible for a reduced retirement
benefit of $300.00 per month based on a Primary Insurance Amount of $400.00 per
month. Her husband, John Doe files for retirement and his Primary
Insurance Amount is $1500.00 per month, with a family maximum amount of
$2400.00 per month. The potential full spouse's benefit (at Jane's full
retirement age, 66) for Jane would be $750.00 (50% of Jack's full benefit).
From
the $750.00 full unreduced spouse's benefit, Social Security would deduct
Jane's own full Primary Insurance Amount of $400.00, leaving $350.00 payable to
her as a spouse. If Jane files for the $350.00 prior to age 66, the
benefit would be reduced proportionately. Jane's eligibility for the
spouse's benefits has no effect on John's benefits.
Next
month, we'll consider divorced spouse and widow's benefits.
Social Security expert Warren Coble welcomes your
questions regarding Medicare, Social Security and
Senior Life in general! Email Warren by clicking
HERE.
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Money Management 101: Top 8 Reasons Why Seniors Get Into Money Trouble and How to Avoid the Pitfalls
- Penny Louis, MPA
 I provide personal financial management services for seniors. Often I am called upon to clean up a financial mess and to put a client's affairs on a more orderly basis. Here are the most common causes of the financial woes I often encounter.
1. Clutter!
Are you an "accumulator"?
Can't throw anything away? This
results in piles of papers with no system to keep track of the important papers
you really need. Develop a simple filing
system for these, check current guidelines on retaining financial records and
shred excess documents you don't need.
2. Paying late
Create a system to keep track of
bills and when they are due. Open mail
every day and mark due dates on bills and file in order of when they are
due. Schedule at least 2 days a month to
pay bills. Late payments result in
higher interest rates on credit cards and negatively affect your credit score
limiting your ability to borrow money.
3. Failure
to reconcile accounts
Get familiar with your bank
statement and use it to balance each month.
Accurately record all transactions, particularly ATM and check card
transctions which are easy to lose track of if you don't record them as they happen. Don't get caught paying overdraft
charges. It's just throwing money away.
4. Double
payment of bills or paying bills you don't owe
Look back in your checkbook to
make sure the bill you are paying is a new charge and not one already
paid-sometimes payments cross in the mail and are not posted when the new bill
is issued. Medical bills and Medicare
and supplemental insurance explanation of benefits forms often are not bills at
all but have been billed to insurance.
5. Responding
to Telemarketers and phone solicitations
Seniors are especially vulnerable
to phone solicitations either to purchase or contribute to something. Don't feel obligated to say yes to everyone
who calls, or even to listen to their pitch.
If you're not interested, say so politely and hang up. If you are interested, never give your
personal information over the phone. Ask
them to mail you the offer in writing to give you time to review it. If it is a legitimate organization they will
do this. If they say they can't send you
anything, don't commit over the phone.
They probably aren't "legit".
6. QVC,
Internet and Catalog shopping-Your Enemy!
Many Seniors watch QVC and other infomercials out of boredom or
loneliness. They buy merchandise
impulsively that they don't necessarily need and probably can't afford. If you must watch, establish a "waiting
period" before "pulling the trigger".
Often what seems like a good deal on TV actually carries hidden charges
in the form of "Shipping and Handling" which are not advertised and can cost as
much or more than the merchandise itself!
Get off catalog mailing lists to avoid the temptation of impulse
buying. Contact the Direct Marketing
Association's Mail Preference Service at abacusoptout@epsilon.com or by
writing to Abacus, Inc., P.O. Box
1478, Broomfield, CO 80038.
7. Failure
to make and adhere to a budget.
Most people don't have a budget of
what they can afford and don't keep track of what they spend. Credit card use and abuse is rampant. It's easy to get deep into debt if you use a
credit card and don't pay it off each month.
Further, fixed expenses go up periodically and such increases in
utilities, phone, rent, food and gas need to be factored into your budget
periodically. It may mean less money for
discretionary spending, especially for those, who like most Seniors, are on
fixed incomes.
8. Failure
to protect your credit rating and protect yourself from identity theft.
Refrain from giving personal
information, especially your social security number, out over the phone or
internet. Elder abuse is rampant and can
be abuse by "outsiders" (phone solicitors that prey on the elderly) or
"insiders" (caregivers or unqualified advisors-can even be family members!). You are entitled to a free credit report from
the 3 major credit bureaus, Equifax, Experian and TransUnion once a year. This enables you to check your credit score,
dispute inaccuracies, and monitor your credit for suspicious activity. For access to your free credit report visit www.annualcreditreport.com or
call 877-322-8228.
Penny Louis, MPA is the Managing
Partner of Financial Care for Elders, LLC which provides personal business
assistance to clients who have difficulty managing their personal monetary
affairs. She is a member of the American
Association of Daily Money Managers. You may email Penny by clicking HERE.
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The Usual Disclaimer: This newsletter is for general information only. Please do not rely on anything you read in this email as definitive legal advice applicable to you. All situations are different, including yours. Nothing you read in this newsletter is a suitable substitute for professional advice you may receive from your attorney, your accountant, or your tax advisor.
All contents copyrighted 2008 by Mason Law, PC. Contents may be republished with written permission of Mason Law, PC (which permission will usually be given!). |
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