Serving Indiana Since 1975

January 2025 Newsletter

On Behalf of | Jan 21, 2025 | Firm News

JANUARY 2025
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.

Notice To Clients. For those clients for whom we have obtained Medicaid eligibility and who have active Medicaid cases, be sure to provide us with a copy of your Social Security notices that you should have received during December of 2024 specifying what your Social Security income will be beginning in January of 2025. Be sure to retain those letters for possible future use.

What Is A Trust Protector? A trust protector is frequently designated to oversee a trust and may be given the power to remove and replace trustees, especially if the trust creator is concerned that a beneficiary might abuse the trust or the trustee might not act in the way contemplated by the terms of the trust. A trust protector might also be used if it is felt that a particular beneficiary needs extra protection. A trust protector’s role can be expanded to include monitoring many acts and decisions of the trustee. This could be very important after the death of the creator of the trust or if the creator of the trust is incapacitated. The trust protector could even be given the power to authorize or approve discretionary distributions, modify the trust terms under certain conditions, and even terminate the trust under particular circumstances. The longer the term of a trust, the more important a trust protector role might be. In Indiana, all people who have input and oversight over a trust are referred to as “trust directors.”

Including Specific Powers In A Power Of Attorney. In Indiana and in other states, all of the powers allowed under a particular state’s law can be incorporated by reference without a specific delineation. Most powers of attorney do include specific acts that the agent will be allowed to perform. This is a good idea since dealing with third parties, such as banks and insurance companies, means that there could be many interpretations of what an attorney-in-fact under a power of attorney is allowed to do, and by including those specific powers, many questions and disagreements can be avoided. It is always a good idea to incorporate specific estate planning powers, as well as specific asset protection powers, making it very clear that the attorney-in-fact under the power of attorney is allowed to transfer assets, set up trusts, etc., in order to protect the assets and qualify the principal under the power of attorney for Medicaid. It is very common for powers of attorney to refer to safe deposit box opening and drilling, signing tax returns, paying the attorney-in-fact or reimbursing the attorney-in-fact for expenses, payment of home care or assisted living care costs even though institutional care might be less expensive, arranging for the care of pets, providing access to online bank accounts or other “digital assets”, and similar matters. In my practice, in general, when I authorize gifting or establishing trusts, I make it very clear that the attorney-in-fact must act consistently with the principal’s estate plan, and that the attorney-in-fact cannot be benefitted disproportionately compared to other beneficiaries. Powers of attorney should be tailored and be specific to each individual planning situation. Besides naming the agent, also known as the attorney-in-fact, to act under the power of attorney, there should also be at least one designated successor. In general, health care provisions should be included in a separate advance directive document.

Power Of Attorney Delegation. What do you do when a person signs a power of attorney that does not designate a successor, and the designated agent is unable to act, but the person who grants the power of attorney is no longer able to sign a new document? One thing that can be done is to have the designated attorney-in-fact sign a delegation document which will delegate the named attorney-in-fact’s authority to a successor. The delegation can be immediate, so that the person can act immediately, or it can be effective only if the initially named attorney-in-fact is not able to act due to death, incapacity, or another reason. Delegations can be used in other ways as well. Powers of attorney are extremely important documents, and when signed, in addition to the person initially named, there should always be a designated successor or successors.

Client Capacity. Although we have addressed this issue in this newsletter in the past, it bears repeating that we frequently encounter clients who appear to have some limited or marginal competence or who has what we prefer to refer to now as limited “legal capacity.” A person may have legal capacity to perform or engage in certain acts and transactions, but not others. There has been recognition of the importance of individual autonomy for years. The Rules of Professional Conduct governing the practice of law require an attorney to “…as far as reasonably possible, maintain a normal client-lawyer relationship with the client…”. However, an attorney may seek the appointment of a guardian or take other protective action if the attorney reasonably believes that the client cannot adequately act in the client’s own interest. In the area of wills or trusts, “sound mind” is a sensitive issue. In some cases it may be necessary to recommend that tests be taken, such as the Folstein Mini Mental State Exam (MMSE) or other types of tests designed to indicate whether or not a person may be suffering from diminished capacity. In general, an attorney should not actually conduct such a test, which should be administered by those with proper training and experience. Limited capacity is a conundrum that attorneys, particularly those who practice elder law, have to deal with on a regular and recurring basis. Even people with limited capacity are entitled to retain their autonomy and dignity and to engage in acts and transactions to the maximum extent that their legal capacity permits.

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.

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