Medicaid Advice by non lawyer is Illegal

 

 

The Florida Supreme Court has recently ruled that advice from nonlawyers as to Medicaid planning is the unauthorized practice of law.  When the non bar person or non lawyer renders advice as to “the initial determination that the particular legal document or Medicaid planning strategy is appropriate for the client given the client’s particular factual circumstances” this is the unauthorized practice of Law. Florida Bar News 3/1/2015; The Florida Bar RE: advisory opinion-Medicaid Planning Activities by Nonlawyers, case number SC 14 – 211.

Joint Accounts and Avoiding Probate

Everyone wants to avoid probate.  However, some of the ways to avoid probate do not always achieve the desired results.  Two ways to avoid probate are “joint account ownership” and “transfer on death”.  Joint ownership, if it is a joint tenants with rights of survivorship, simply provides that the surviving owner on the death of the first owner assumes complete ownership at that time.  But that comes about in the case of a financial institution as a result of a statute that provide for that outcome as a rebuttable presumption.  That means if you have evidence that the creator of the account, who is now the decedent, did not want the survivor to have sole ownership of the account at his death, then the accounts would pass through probate of the deceased owner’s estate.  See F.S.§655.78

A transfer on death account is governed by a different statute.  It does not provide for rebutting of a presumption that it goes to the named survivor, rather it provides that the transfer to the surviving named account owner is final.  It does not provide for presentation of another intent.  F.S.§655.82.  A new case confirms this, to wit, Brown v. Brown, 1d13-4452 (Fla 1st DCA, 2014).

In that case the joint ownership accounts because of other evidence went to the beneficiaries of the deceased account holder's probate estate, while the transfer on death accounts went to the named beneficiary on the account.

If a spouse dies, how much of the deceased spouse's property does the surviving spouse receive?

There is a relatively recent change in Florida Law dealing with families and the disposition of the estate when the first of two spouses dies, and there is no Last Will & Testament.  Such a condition is known as “Intestacy.”  In that situation where there is no Will, the laws of the State of Florida, the intestacy laws, dictate to whom the decedent’s property will pass at the death of a person. The following discussion does not apply to the homestead of a deceased spouse, if it is owned solely by the deceased spouse.  Laws dealing with Homestead control that piece of property as opposed to the following which governs all other individually owned property.

In a classic family situation of a husband and wife, and only children of that union, and where there is no Last Will & Testament, on the death of the first spouse any property solely owned by the deceased spouse is governed and distributed under the intestacy laws.  For years, in that situation, the first $60,000.00, went to the surviving spouse, along with one half of the balance.  The remaining part of the estate was split equally between the couple’s children.

This was contrary to the thinking of most people, as usually it was assumed that the surviving spouse would receive all of the decedent’s solely owned property.  Also, it was contrary to the situation where there was intestacy and the husband and wife owned all of their property jointly or as tenancy by the entirety, where the surviving spouse receives that property on the death of the first spouse.

Effective October 1, 2011, F.S.§732.102 was amended to provide that in the above situation, at the death of the first spouse, all of a decedent’s individually owned property at the time of the decedent’s death, passes to the surviving spouse and is not divided, as provided above, among the children of that union.  Note, however, if either spouse had children that were not the product of that union, the individually owned property of the deceased spouse passes as follows: the surviving spouse receives one half of the deceased spouse’s individually owned property and the remaining one half went to the children of the deceased spouse.

How are assets of a deceased person distributed and what about taxes on that property?

When a person dies how is the estate distributed and settled and what are the taxes:



In Florida there are no inheritance taxes. Further if the total estate is less than $5,250,000 there will be no federal estate taxes.

When a person dies and he/she has a Living Trust or a Last Will & Testament, how are the assets distributed? That depends on what the instrument, the Trust or Will says. If the instrument directs the distribution of specific property then those instructions are followed. However, if the instrument says, as most do, to divide into shares or percentages then the property can be distributed in kind (that is, the property is re-titled in the names of the beneficiaries according to their percentage or interest and the property is then owned in jointly by the beneficiaries) or the property is sold and the proceeds distributed. On the other hand, the properties could be appraised and the beneficiaries could receive properties of equal value.

How are properties of a deceased person valued for purposes of sale or distribution? Properties need to be valued by an appropriate appraiser. Real estate should be valued by a licensed real estate appraiser. Personal property should also be appraised by a licensed appraiser but this may require the services of more than one person as jewelry may be involved as well as furs, paintings or valuable furnishings, including antiques.

Other than for distribution purposes and valuing an article to be distributed to a beneficiary, are there any other benefits to an appraisal? Yes. Whenever a piece of personal or real property is sold federal income taxes are payable on the gain. Gain is normally measured as the difference between what it cost and what it sold for. However, if an article or piece of property is inherited, you no longer use the cost of the article, but rather, what was its value at the time of the death of the decedent who transferred the property and subtract that value from what it sold for. Many times if property is sold close to the date of death there will be no gain and thus, no taxes.

Gift to Minors

In advising clients, we are often confronted with the conundrum of what we don't know, and what happens if what we are trying to achieve, is thwarted by subsequent events. Gifts to minors under the Uniform Gift to Minors Act can have unintended consequences and large expense to the grandparent, if the gift is done without the advice of someone who knows the laws of Medicaid and Elder Law consequences. In this regard, many times clients come to us professionals and say I want to do this, a gift to grandchildren for their college or other education expenses when they reach 21. As professionals, it is incumbent on us to know and to advise them of the wisdom of what they want to do, but also what are the consequences of what the client wants to do in the event of circumstances that we as professionals know might very well happen, e.g., long term ill health or declining health of elderly clients. A simple example is a grand parent wants to set funds for college for a grandchild, but does not want a lot of formality or the advice of an "expensive" lawyer who will only make things difficult for the grandparent and the stock broker. Many times the answer that is unknowingly suggested is the Uniform Gift to Minors Act.
Under that act and the Federal Gift Tax Laws, a grandparent can create a tax free ($13,000.00 per year in 2011) account for each grandchild that pays to that grandchild the funds gifted plus the appreciation and income in that account when the minor reaches age 21 (F.S.§710.105). BUT the downside is that if the grandparent needs to go into a nursing home within 5 years of that gift, the well meaning gift can prevent the grandparent from being eligible for Medicaid. Recently, I had a case where the grandparent gave $30,000.00, $10,000,00 each, to three (3) grandkids. The problem is that such a transfer may not be amenable to normal reversing techniques. As a result, three years later, even though we could otherwise make the grandparent eligible for Medicaid, we might experience a 6 month penalty of ineligibility, that resulted in the grandparent's loss of 6 months nursing home payments at $8,500.00, per month or $51,000.00 loss of assets. With proper advice this would not have happened. Unthinking use of the Uniform Gift to Minors Act can be disastrous especially when the client says, "Why didn't you tell me of this?"
MORAL of the story is that gifts under the UGMA act of Florida are not a good idea if the donor is over 55 years old. Call Mark R. Lewis, PA and we can tell you a better way.

Changes to Florida Laws dealing Powers of Attorney

Florida’s New Power of Attorney Laws

 

Recently, on June 21, 2011, the Florida legislature enacted a sweeping overhaul and major change of the statutes of the State of Florida dealing with powers of attorney in Florida, effective October 1, 2011. The net effect is that if you have a power of attorney as part of your estate planning documents, you should consider executing a new power of attorney. The statutory overhaul does provide that "A power of attorney executed before October 1, 2011, is valid if its execution complied with the law of this state at the time of execution." F.S.§709.2106(2). However, the new laws dealing with powers of attorney provides that third parties are required to accept the new powers of attorney and if they do not, a refusing third party can be held liable to the person who gave the power of attorney for damages and attorneys fees. F.S.§709.2116 and F.S.§709.2120. It also provides that the third party refusing to accept the power of attorney must give reasons in writing why they have refused to accept the power of attorney. F.S.§709.2120.

© 2011 Mark R. Lewis, Sr.

This ability to force third parties to honor the new powers of attorney is strong reason to execute a new power of attorney and ensures that the creator of the power of attorney will have his wishes and desires effectuated. Another fundamental change is that a new section F.S.§709.2105 has been added, and in that section, it is provided that powers of attorney must be in writing, witnessed by 2 people and notarized. Prior to that new section there was no such requirement, albeit, many powers of attorney met those requirements, since a power of attorney that was to be effective for the execution of a deed by an agent had to have been executed with the same formalities (2 witnesses) as a deed. A notary was required if you were going to record the power of attorney. As a result, practicality dictated that many old powers of attorney were in fact in writing, witnessed by 2 people and notarized.

Prior to the 2011 law change, some powers of attorney have been contingent on the incapacity of the person granting the power of attorney. The means of establishing that incapacity was set out by the old statute and required a reference to another statute dealing with incapacity, to wit F.S.§744.102(12)(a). As a result, under the old law the doctor making the affidavit had to state that the Principal ‘lacks the capacity to manage property, including taking those actions necessary to obtain, administer, and dispose of real and personal property, intangible property, business property, benefits, and income." Under the new law, the physician merely needs to state that the Principal "lacks the capacity to manage property." F.S.§709.2108, provides that such incapacity must be established by an affidavit of the grantor’s primary physician. However under the new law, any power of attorney can not be conditioned upon the principal being incapacitated.  A new section has now prohibited other contingencies for the efficacy of a power of attorney other than military deployment. Accordingly, a contingency in a power of attorney of say marital status of the grantor would not now be allowed under the new statute, F.S.§709.2108(3). The only contingency allowed now is military deployment and incapacity of the Principal if the power of attorney was executed prior to October 1, 2011.

The new statutes also deal with compensation that can be paid to the agent or attorney in fact. Unless the attorney in fact or agent is a "qualified agent" he is not entitled to compensation, F.S.§709.2112(3), even if the power of attorney allows a non qualified agent to receive compensation. A qualified agent is an agent who is either the spouse of the principal, an heir of the principal as defined by F.S.§732.103, which is basically family of the principal, a financial institution, a Florida licensed attorney or CPA, or a resident of this state who has never been an agent for more than three principals at the same time. F.S.§709.2112(2) On the other hand, any agent is entitled to the reimbursement of "expenses reasonably incurred on behalf of the principal." F.S.§709.2112(1).

The statutes codify the obligations of an agent and the level of care that the agent must exercise while acting on behalf of the principal, F.S.§709.2114, and require that the agent "keep a record of all receipts, disbursements, and transactions made on behalf of the principal." F.S.§709.2114(4).

Another new section provides specifically for the revocation of a power of attorney, F.S.§709.2110, and it merely requires that the principal do the revocation in a subsequent executed power of attorney or another writing. Previous statutes talked about releases and notices of revocation. F.S.§709.08(5) (2010). Releases being when the agent did not want to serve anymore and revocation when the principal wants to terminate the power of attorney. Specifically F.S.§709.08(5) (2010) provided that a revocation had to be served on the agent or anyone who was relying on the power of attorney(served by personal service or certified mail). The new law does not require service on the agent, but provides that the principal may give notice to the agent who has accepted the power. F.S.§709.2110(1).

The amendment to the power of attorney laws requires that a third party who is presented with a power of attorney must accept or reject the power of attorney within a reasonable amount of time, F.S.§709.2120, and if it is rejected, the reason for the rejection must be in writing, F.S.§709.2120. There are two provisions allowing for an agent to enforce his power of attorney F.S.§709.2116 and F.S.§709.2120. The former section allows for the recovery of Attorneys fees by the prevailing party, but the latter section only allows for the recovery of Attorneys Fees by the agent.

Another game changing provision in the new power of attorney law is that some powers must be specifically enumerated and initialed in order to grant those powers to the Agent. Specifically, F.S.§709.2202(1) provides that following powers must be enumerated and initialed: creation of an inter vivos trust; revocation of a trust of the principal or amendment, modification, revocation or termination of the trust; making a gift; create or change rights of survivorship; create or change a beneficiary designation; waive the principles right be a beneficiary of a joint and survivor annuity, including the survivor benefit under retirement plan; or disclaim property or powers of appointment. Further, if those powers are contained in the power of attorney and they are initialed they can only be exercised an agent who is an "ancestor, spouse, or descendent of the principal if the exercise of the power creates authority to create in the agent or an individual to whom the agent owes a legal obligation of support,"... "an interest in the principal’s property, whether by gift, right of survivorship, beneficiary designation, disclaimer or otherwise," F.S.§709.2202(2), unless the power of attorney specifically allows any agent to exercise those powers. In this author’s opinion, that may sound reasonable but it sets up the problem of establishing the negative by the agent, and thus, making the power of attorney potentially unusable if a well versed third party is being asked to accept the power of attorney.

In the gifting area, the new statutes allow a power of attorney to grant the power to make gifts, but there is a prohibition against gifts in excess of the Federal Gift Tax per donee exclusion, F.S.§709.2202(3), but the draftsmen can include a specific provision that gifts may exceed such a prohibition. This may present drafting problems so the wording of the gifting power has to be carefully worded.

The new law addresses what has been a long standing question by lay people of the necessity of a detailed enumeration of powers in a power of attorney. Specifically, many lay people have often said, "Why can’t I just say the agent can do anything I can do?" Whenever you try to answer that lay people seem to gloss over and think "damn lawyers, just justifying a fee." In the new law at F.S.§709.2201(1), general powers of attorney purporting to allow the agent to do anything the principal can do are not going to be effective.

On the other hand, that section also provides clarification in that it provides that powers of attorney are also effective with respect to property acquired after the execution of the power of attorney, F.S.§709.2201(5).

There are other technical changes or additions explaining what banking powers are included and whether the utilization of those powers is authorized to change property that is owned with a right of survivorship, but those powers are probably best enumerated and spelled out in a new power of attorney rather than relying on the provisions of the new statutes. F.S.§709.2202(4). That is to say, if the power of attorney allows the agent to make deposits and withdrawals to bank accounts or investment accounts, it is probably a good idea to include a specific statement that this includes accounts that are in joint tenants with rights of survivorship, F.S.§709.2202 and they should be initialed by the Principal.

People utilizing powers of attorney after this change in the law should specifically ask their attorney if he has made changes to his power of attorney forms based on this updated provision for powers of attorney in the state of Florida.

Inherited IRA's

IRA’s and Death of the Account Holder:


The ability to minimize taxes that need to be paid on the death of an IRA holder is a difficult area of the law and requires the advice of a professional as you will only do it once or twice, each time will be different and the results will be different because so many factors are involved. This blog is meant for informational purposes only and you should consult the advice of your advisor when you are named a beneficiary of an IRA holder who passes away.

In a traditional IRA, any money taken out is fully taxable as ordinary income, because it was a deduction when it was put in and any gains in the amount have never been taxed. Accordingly many people think that they must take all of the IRA that is left to them and pay taxes on that amount in the year that they take it, i.e., a lump sum distribution.

In 2007 the law changed and there is greater flexibility in how you can take the money out of an inherited IRA or an employer-provided retirement plan.

The first thing to be aware of is a couple of terms: Designation Date and Required Minimum Distribution. Designation Date is September 30 in the year following the year in which the deceased IRA holder died. It is the date by when the type of the distribution, lump sum, extended distribution time, five year distribution or roll over must be designated. The Required Minimum Distribution is the amount that the Federal government requires to be distributed from an IRA each year. Once the owner of an IRA reaches the age of 70 ½ the government requires that a minimum amount must be taken out each year and that amount is determined by a math formula which calculates that amount on the basis that if the RMD is taken out each year then when the account owner dies all of the money will have been taken out.

The first thing to do is to make sure that the deceased IRA owner had taken out his RMD for the year of his death, for if he hasn’t there is a 50% penalty. By the Designation Date the beneficiaries need to decide how they will take their distributions.

A surviving spouse can elect to roll the IRA into her/his own IRA; take the funds over 5 years or take the distribution of the funds over the life expectancy of the surviving spouse.

A non spouse beneficiary (who is qualified) can take over 5 years or over the beneficiary’s life expectancy. If the beneficiary is not qualified (not a natural person) then the distribution must be taken over the 5 year period if owner was younger than 70 ½ or the life expectancy of the deceased IRA owner if the owner was over 70 ½. If there are multiple beneficiaries then multiple accounts must be set up.