MARCH 2024
CURRENT ISSUES IN THE AREAS OF ESTATE, TAX AND PERSONAL AND BUSINESS PLANNING
The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.
Indiana Senior Consumer Protection Act. The SCPA allows a senior consumer to sue a person who knowingly and by deception or intimidation obtains control over the consumer’s property. However, it does not apply to deception, intimidation, or other exploitation of a senior consumer in relation to insurance coverage or an insurance product regulated by the Indiana Department of Insurance, or to the exploitation of a senior consumer in relation to securities fraud regulated by the Indiana Secretary of State’s Office. In such cases assistance would need to be sought through the Indiana Department of Insurance or the Indiana Secretary of State’s Office which would in most instances only act against the covered perpetrator for violations of laws or regulations enforced by those agencies and would not necessarily result in restitution for the benefit of the injured consumer. In an Indiana case, McIntosch v. McIntosch, a Court of Appeals decision decided in October of 2023, the court found that there was sufficient evidence that a son and his wife had violated the SCPA by obtaining control over his mother’s property who was 92 years old and suffered from dementia. The son and his wife had threatened to put her in a nursing home if she did not sign over the property to them. The court held that a person commits financial exploitation of a senior consumer when a person knowingly and by deception or intimidation obtains control over the property of a senior consumer or illegally uses the assets or resources of a senior consumer. It should be noted that an attorney-in-fact under a power of attorney has a confidential relationship with the principal and undue influence can be presumed because of the fiduciary relationship which exists.
Access To Safe Deposit Box. Suppose a person is incapacitated and no one has authority to access his or her safe deposit box that might hold a power of attorney or health care advance directive. Speaking generally, it is a good idea for people who own a safe deposit box to include a person on the applicable agreement who could have access to the box if needed during life or after death. In the case of a husband and wife, the spouse would normally have access, but it might also be a good idea to designate a trusted child or other person. It is also a good idea for instructions to be available to trusted people to facilitate finding the key and giving the location of the box. If no one has access, then the safe deposit box agreement should be reviewed to see if there is a procedure contemplated by the agreement. If there is not, then it would be necessary to file a petition under the Indiana Code, IC 29-3-4-1, to obtain an order from the court finding that an individual is incapacitated and that access to the box is necessary to see if it contains a power of attorney or advance directive for health care. If access to a health care advance directive is not immediately available, but there is a person who has power to consent to health care for a family member under Indiana law (as long as there is not another person who has a higher priority), then that person can make decisions in the absence of a health care advance directive. In the event of the death of a person, if there is no one with access to a safe deposit box, IC 29-1-13-1.5 allows an affidavit to be presented providing the necessary information, including a statement as to whether the person died testate or intestate, and stating that no application or petition for the appointment of a personal representative has been granted or is pending, and that the person submitting the application is qualified to obtain access to the safe deposit box. The person granted access to the safe deposit box may exercise the right to open the safe deposit box and remove the contents and cancel the lease, and if a will is found, deliver the will to the court which has jurisdiction of the administration of the decedent’s estate. If a financial institution fails to grant access to the safe deposit box within the required time frame, the individual making the request for access may file a petition with the court to compel the financial institution to accept the authority of the person requesting access or for damages arising from the financial institution’s failure to grant the requested access. In light of these complications, wouldn’t it be much easier to be sure that a trusted person will have access to your safety deposit box?
Common Asset Protection Planning Errors – Continued. When a person becomes qualified for Medicaid, and in certain circumstances has excess resources, it is possible to set up a certain form of promissory note and to loan the excess resources pursuant to that note, in effect making those resources disappear. As an example, in the case of a husband and wife, if the husband is qualified for Medicaid, and there are more resources than the community spouse is allowed to keep, that excess may be set up in the form of a loan to be paid back over a period of time as long as the loan includes the proper terms. The particular type of note is called a “non- negotiable promissory note”. It calls for the payment of a specific sum paid monthly over a specific period of time, and it cannot be sold or accelerated, meaning the community spouse will receive fixed payments which are not treated as income and which are not treated as assets. A common problem is utilizing an unnecessarily long term for the note, which increases the risk that the community spouse may die during the note term, or that the payor of the note may die, making it difficult to access the funds for any future note payments. If the community spouse should die, then unless proper planning was put in place, future note payments would comprise a part of the community spouse’s estate and may result in the funds coming back to the Medicaid recipient and affecting his Medicaid eligibility. The community spouse should always have a will in place which establishes a testamentary special needs trust (TSNT) for the benefit of the Medicaid eligible spouse. In that way those assets would not pass to the Medicaid recipient, but instead to a special form of trust for the benefit of the Medicaid recipient if it is structured in a way that will not affect the Medicaid recipient’s eligibility. The TSNT would come into existence only if the community spouse predeceases the Medicaid spouse. Future note payments would then be paid into the TSNT. In spousal cases I often use a three-month term. I want the money to be paid back as quickly as possible, but I want to include more than two monthly payments. I also try to set up the loan so that there is more than one obligor (i.e, if the loan is made to a child, then I would use the child and the child’s spouse, or possibly two children, but generally not all of the children). This will help to assure access should something happen to one of the obligors. Allowing the community spouse to receive the funds sooner will allow the community spouse to protect assets for his or her own benefit should the community spouse later require long term care. If the payment term is too long, the community spouse will not have access to those payments as quickly, which will make it more difficult to implement an appropriate asset protection plan for the community spouse.
Additional Information. Future issues of this newsletter will address other issues of current interest. Please contact my office with any questions that you might have.