Wednesday, November 22, 2017

Repost of "The Anatomy of an Oregon Will"


The old estate planners used to say to me, "no matter how much the clients want it, there is no such thing as a simple will." I didn't believe it. I figured it was just one of those things people say to make what they do for a living seem a little harder and more complicated than it really is. Reluctantly, as the years go by, I am coming around to their point of view.

There may be no such thing as a simple will, but there is such a thing as a short will. My average will for a middle class older couple with adult children is two pages long. The will is written in English and has no clauses that a high school graduate couldn't understand. Nevertheless, it is not simple. Each sentence, each paragraph, has a distinct purpose. I explain these purposes over and over again in my office, so I thought I would do so here.

For whom is the will written?


This is widely misunderstood. Every written document, whether a newspaper of a business contract, is written for an audience. The audience for will is not the relatives of the deceased, it is the probate judge who will oversee the wills administration. A remarkable number of people do not understand that a will is not self-executing. The power to administer the will comes from the court. You may be nominated in the will to be the executor of your mother's estate. The nomination is a request that the court appoint you. The court will try to honor your mother's request, but it may also decline to do so. You have no power or authority until the nomination in the will is affirmed by a court order. The will may leave you your mother's collection of antique hockey sticks, but you don't get your grubby hands on them until a judge says it's okay.
Allow me to say this again. A will has no power or authority until it is filed with the court and a judge appoints an executor.
Once a will is filed with the court it becomes a public record and any person wandering into the probate department is entitled to look at it and copy it. Therefore, once the person who wrote the will has died, there is never any reason to keep the contents of the will secret. Often I see a relative or group of relatives hoarding a will--refusing to let the other relatives know what is in it. This is crazy. If the will is going to be effective, it is going to end up as a publicly available document. There is no reason to keep the contents secret.

The first sentence.

The first sentence of a will declares the document to be a will, says who is writing it, and revokes all previous wills.  The best practice is to have old superseded wills revoked by a written document that has just as many witnesses as the will itself. The first sentence of the will takes care of that.

The listing of family.


The next part of the will generally tells whether the writer is married and lists his or her immediate family. This part of the will helps the court and the lawyers understand who is related to who and who is entitled to notice that the will is being administered. All persons who receive something and all natural heirs of a dead person are entitled to notice when a will is being administered. Just because a person is listed in the family section doesn't mean that person gets something, but if the familial tie is close the person is probably entitled to written notice of the probate.

Appointment of a personal representative.


The next section of a will often appoints a personal representative. This is the person who--if she isn't a notorious embezzler--will be appointed to be the executor of the estate. A personal representative and executor are the same thing. No matter what he or she is called, the person who has to gather up all the dead person's property, pay all the bills, and eventually distribute the money to the people named in the will, all under the eagle-eye supervision of the court staff. Naming your favorite son as your personal representative is not doing him a favor. Being personal representative is an annoying and nasty job. Nobody likes doing it. If you get the urge to spread the pain by naming a couple of your children as co-personal representatives, don't. Judges hate it, lawyers hate it, and it costs twice as much when--as always happens--the co-personal representatives don't get along and each asks for his or her own lawyer.

The last sentence in the paragraph appointing a personal representative allows the person you chose to serve without bond. The bond protects the heirs from a personal representative who decides to abscond with the money in the estate. Waiving the bond safes the estate money, unless of course you chose an executor who steals all the estate property. In that case, waiving the bond was not such a good idea.

Specific Gifts


In this part of the will we get down to giving stuff away. Giving things away is done in two stages. The first stage is specific gifts. A specific gift is to say "I give my baseball card collection to my cousin, Homer." Then you hope that the baseball card collection is still there twenty-five years later when you die. The most common specific gift is to give all your personal property to your spouse or your children. This is a specific gift of your stuff--your couch and your plates and your bust of Elvis that you got on that trip to Graceland. Lawyers and judges want the family quietly to divide this stuff so everyone is happy. Nobody except the family cares about this crap. If you choose to get in a pissing match with your relatives about it, the legal professionals will make fun of you behind your back. You need to make enough peace with your family to divide the personal property without going to court.

Some people have long lists of who they want to get what. My advice is to give the stuff away when you are alive. Once you are dead, by the time someone responsible gets around to inventorying your personal things, most of it will be gone anyway. Safes will be empty and safe deposit boxes will be filled with scrap paper. It doesn't happen all the time, but it happens a lot. If you want to be sure, give it away when you are alive.

Gifts of cash are specific gifts. If you give cousin Homer $25,000 instead of the baseball cards, that amount comes off the top. These kinds of specific gifts can get you in trouble. To see how, continue reading.

The Residue


"Residue," is a legal word for "everything else." It is the part of the will where the money is -- or at least should be. The residue is a legal container that expands or contracts to hold whatever you own at the moment of your death. If you are an average Joe or Josephine, the container holds your house, that rental you bought a while back, your stock account at Edward Jones, and what's left in your bank account. If you sell your house and use up your stocks paying for long term care, the residue of your estate will be small. If you win the lottery or get a big inheritance two days before you die, your residue will be big. When lawyers look at a will the first thing they look at is the residue clause. There are two reasons for this. One, the recipients of the residue are normally the people who get the biggest chunk of the estate. Two, the residue contains the funds that will pay the lawyer.

A typical residue clause uses fractions or percentages. "I give the residue of my estate to my three children in equal shares." Each child gets one third. Fractions (or percentages) allow the legal container to get bigger or grow smaller without changing how the whole of it will be distributed. Whether it be big or small, the children each get a third.

The residue also pays the costs of administering the will. The lawyer and the personal representative get paid from the residue. Income taxes get paid from the residue. Costs of keeping and selling real estate come from the residue. If you are fortunate enough to have to pay estate taxes, payment may have to come from the residue. These costs come out of the residue, and what remains is distributed to the people named in the will to receive it.  

Your best bet is to leave all your major assets in the residue. If you are an average person and you give everything away as specific gifts--your house to Able, your stocks to Cain, and your bank accounts to Seth--you may well have given everything away. There will be no residue and your personal representative will have a lot harder time of it. It will get done, mind you, but it will be more complicated and more expensive.

The worst cases of emptying the residue with specific gifts come from giving gifts of set dollar amounts. More than one elder has dribbled out generous cash gifts to distant relatives--ten thousand here, twenty thousand there. The elder then spent most of her money on long term care so that when she finally dies, the distant relatives take it all and the children named to receive the residue, get little or nothing.

The residue is designed to hold the bulk of the estate. Wills work best when you use the residue clause for the purpose for which it was designed..

The other stuff.


After giving away what you own, most wills go on with a lot of other stuff. You might have a trust to hold money in case some of your estate goes to a child. You might make some tax provisions. You might set the rules for who gets the money if someone named in the will dies before you do. As you move farther and farther away from the clauses that give stuff away the smaller the chance that anybody will actually ever read what it says. Some lawyers will tell you that the other stuff is really important. They might be right. Others will admit its there because it has always been in the form they use, and if it is in the form, there must be a good reason..

The signing


The will must be signed by the person making it. The signature must be witnessed by two people, and the witnesses must sign as witnesses before the person making the will dies. You cannot get around this requirement by hand writing your will or any other way. If you don't have the signatures of two witnesses, the thing is no good.

Lawyers add a document called a self-proving affidavit that is not required but makes the getting the will admitted to probate a lot easier. If you go to a lawyer, let him or her take care of that. If you are trying this on your own, don't worry about it. You have enough to not screw up without worrying about the affidavit.

Friday, November 17, 2017

My one day a week retirement

When I turned sixty-six in August of this year the Social Security Administration sent me a letter offering to send me money every month. All I had to do was apply. I didn't take them up in it, but it did get me thinking about retirement, and, as of September, I have retired .... on Fridays.

Nellie, my legal assistant, and I will still practice probate and elder law Monday through Thursday. We will write wills and trusts. We will cause guardians and conservators to be appointed and we will probate wills. We will even file elder abuse cases and will contests. We will not, however, do any of that on Fridays.

I want to remind people that I have been writing this blog for a long time. If you want to find a particular subject you can use the search box on the right or click on the list of labels below the search box. You should be able to find what you want. If you want simple explanations of basic estate planning documents you can look at my posts by date and click on the earlier years of this blog for many of those answers.

If you like paper better than a blog, I give away my Oregon Elder Law to anyone who wants it. Call my office at 503-661-2540 or email me at oronken@orolaw.com



The book is an edited version of my early blog posts and covers all the basics. If you are shy about calling Nellie and having her send you a copy, you can get it on Amazon.


If you want to read my other books, which have nothing to do with law, you can get them here and here.

If you do want to call in for the book, be sure to do it between Monday and Thursday, because if you call on Friday we won't be there.

Thursday, October 26, 2017

Elder Abuse by Bureaucracy (and Strategies to Combat it) - Part 2

Employees in complex bureaucracies are also victims of the system they administer. So when organizational gatekeepers are invoking bureaucratic rules that prevent you from obtaining care, you may need to needle them with the bureaucratic structures governing them. In short, you complain to someone else in the organizational structure so that the pressure on the person or department you want to move to action comes from someone other than you.


The first step, as in any legal maneuver, is to establish an achievable goal. If you are seeking to talk to a doctor or obtain a certain treatment, be clear about what it is you want. Sometimes the bureaucracy can be so annoying that you want to inflict the kind of pain on the people within it that the system has inflicted on you. This is not an achievable legal goal. Working in a large bureaucracy is its own punishment and the people who work there already know that. Figure out exactly what you want, stick to it, and stop when you get it.


The next step is to use the grievance procedure established by the bureaucracy itself.


Most of the Americans who read this elder law blog receive Medicare. Providers who accept Medicare are governed by many of rules. One of those rules requires the hospitals to have a grievance procedure.  That procedure must include the following:
  • A contact person to receive a grievance
  • A grievance committee to resolve grievances
  • A clear procedure for submitting a grievance
  • Set time frames for review of a grievance
  • Written notice of the decision that contains the name of a contact person, the steps taken to investigate the grievance, the results of the process, and the date of completion.


Every medical provider that accepts Medicare must satisfy this rule.


My Medicare Advantage policy at Kaiser states:


As a plan member, you have the right to get appointments and covered services from our network of providers within a reasonable amount of time. This includes the right to get timely services from specialists when you need that care. You also have the right to get your prescriptions filled or refilled at any of our network pharmacies without long delays.


If I am denied timely service due to an overly complex and incomprehensible scheduling system, I am being denied timely services. My complaint would be that I am being denied timely services for whatever condition I can't seem to have addressed. Kaiser accepts complaints by phone, online or in writing. I would suggest writing. Bureaucracies love writing. Kaiser sends me so much mail, I have to assume that it prefers mail. The address is:


Member Services
Kaiser Foundation Health Plan of the Northwest
500 NE Multnomah St, Suite 100
Portland, Oregon 67232-2099


Kaiser's internal rules require that they must respond in thirty days (but they can get an extension of another fourteen days.) This is the process to use if you feel that you are being denied, through undue bureaucratic hurdles, care for conditions that are clearly covered. If the dispute is about whether your policy covers a certain treatment, the process is different and far more complex. I suggest wording the complaint in a form that suggests you are being denied timely care due to bureaucratic delay.


Providence Hospital has a long statement of rights, which includes  "The right to voice complaints about the care, and to have those complaints reviewed and when possible, resolved." The website further states that "a formal grievance may be filed at the hospital’s quality management department office."


Adventist Hospital take complaints ("grievances" if you like the legaleze) at


Adventist Health Compliance Hotline
Adventist Health
2100 Douglas Blvd.
Roseville, CA 95661
888-366-3833


It is unrealistic for me to give the contact information for each hospital, but the idea is the same. The hospital takes Medicare, thus it has to have a formal grievance procedure. Begin by using it. This sets in motion mandatory bureaucratic processes that take up time and energy. With a little luck someone will determine that giving you what you want is less work than doing all the procedural steps necessary to fully comply with the Medicare grievance procedures.


If this does not work, it may be time to make your complaint to outside agencies. My next post will provide a framework for how to do that.

Wednesday, October 18, 2017

Elder Abuse by Bureaucracy (and Some Strategies to Combat it) - Part 1

I have often told people that my job as an elder law lawyer is to maneuver within complex bureaucracies. The complex bureaucracy I deal with most often is the court system. However, I also work with with title companies, life insurance companies, Medicaid, Social Security, Veterans Administration, and stock transfer agents. Each of these worlds has its own rules and traditions.


To my mind, however, the deepest and most impenetrable bureaucracies surround healthcare. The rules and procedures that govern interactions with hospitals and large health care providers are some of the most frustrating of any I have ever encountered. I read complex legal documents for a living. Nevertheless, I am still today incapable of understanding a medical "explanation of benefits." I once got a bill from a dentist that was so cryptic that I had to write the office to ask how much I was supposed to pay. For my elderly clients, I have come to believe that the deep entrenched bureaucracies surrounding health care may have become so impenetrable as to constitute elder abuse.


With this in mind, I reviewed the Oregon elder abuse statutes. There wasn't much help. The statutes didn't clearly apply to abuse by red tape, but even if they did, health care facilities are exempt from Oregon's elder abuse statutes.


I am technologically skilled, educated, and generally considered a high functioning American. Nevertheless, I am regularly stymied when trying to obtain health care.


I will pick on Kaiser Permanente here because that is where I go. Last month I needed a refill for a prescription I have taken for years so I could take the medicine on vacation.  I began on Monday with a call the pharmacist. By Friday, many telephone calls later, I had the folks at Kaiser swearing they had delivered the renewal to the pharmacy. The pharmacy swore they had received no such thing. Using the flexible phone system in my office, I called both and patched them together on the same phone call so that they could speak to each other. I was promptly informed that Kaiser could not speak to the pharmacy if the conversation was on the patient's phone.


One of my clients had back pain. She cried hard enough over the phone about the pain that she was allowed an MRI to see what was wrong. She had the MRI and was eagerly awaiting a message from her doctor as to the results. Instead, she got a call from the office of a surgeon attempting to schedule a surgery she knew nothing about.


So what to do? Not much. I do, however, have a couple of suggestions. When a large bureaucracy is giving you problems, it is often useful to change the method of communication of the angle of approach.


If phone calls are not working, try email. Sometimes just a change in the communication channel produces results. It is odd, but it is a true. Write a letter. Some folks will be impressed that you took time to write in this technological age, but it may work. Have an agent, friend or lawyer call on your behalf. You will have to provide a release to allow them access to records, but an assertive friend may have success where you did not.


Try to talk to someone else. My studies in organizational theory suggest that organizations employ gatekeepers to protect the "us" who belong to the organization from the "them," who don't. If you bump into a particularly tough gatekeeper, try to find a different one.


If these don't work, you may need to take a more aggressive stance. Most commonly these approaches will be taking advantage of the fact that the people who work within large bureaucracies are also victims of bureaucratic complexity. There are another set of rules and expected behaviors that vex them, just as much as the ones they enforce vex you. In my next post, I will address some strategies that use this aspect of living and thriving in a highly bureaucratic society.



x

Tuesday, March 7, 2017

Inheritance, rights and expectancy in Oregon - Did you have something to lose?


A tax lawyer once told me that an inheritance is the largest tax-free lump sum of money most people ever receive. Most wealthy Americans got their wealth because they inherited it. Parents most often leave their assets to their children, and children expect that they will inherit when their parents die. Children have an "expectation" that they will receive the wealth of the parents when the parents die. Googling the definition of “expectation” brings up the following:

the state of thinking or hoping that something, especially something pleasant, will happen or be the case.

In my office I see families in which the children are not only hoping that they will receive their parent's money, they are making life decisions based upon that hope. They are depending upon it. Sometimes they even jump the gun and begin taking and spending the money before the parents are gone.

In law, an "expectancy" is something you might get, but which you have no legal claim to. You expect your parents to leave you their money, but they don't have to. They can cut you out and leave it all to your siblings or cut everybody out and leave it to charity. They could leave you in the will but give or spend all the money before they die so you get nothing anyway. They might have named you as a beneficiary on a life insurance policy or a retirement account. You "expect" that they won't change the beneficiary, but you have no legal claim to the money until they die with your name still on the policy. If they do, you may feel like you have lost out, but in the eyes o the law you had nothing to lose.

Some expectancies are highly likely to materialize. If grandma named you in her will and she has now lost the cognitive ability to write a new will, that money is highly likely to be coming your way sooner or later. (The law assumes she can recover capacity and write a new will, so no matter how bad she is, it is still an expectancy.) Some vested legal claims are very unlikely to produce anything for you. If you buy a lottery ticket you have a legal right to the payout if your number is picked, but don't go taking out a loan on the hope it will pay off.

The difference between an expectancy and a vested right becomes important when something you hoped would happen does not. If I hoped to get some cash when grandma died, and it didn't happen, whether I can successfully sue someone may depend on whether my hope was based upon an expectancy or a right. If it is a right, I will have a document to hang my hat on. If it is an expectancy, the road may be tougher.

But it does get confusing.

If grandma named me in her will, but made a new will just before her death because my sister held a gun to her head, the second will is invalid. I have a vested right after grandma's death so long as I can prove that the second will was invalid. If grandma named me in her will, but just before her death she gave all her property to my sister because my sister held a gun to her head, I can sue my sister on behalf of my grandma's estate to recover the property wrongfully taken. In both cases I have a better claim to the money than the person who got it.

If, however, grandma changes her will or her beneficiary designations while capable and not subject to undue influence, I am out of luck. If she spends all her money on her new boyfriend or appoints an agent under a power of attorney who spends my inheritance on her care, I am similarly out of luck. If she or her agent takes all the money out of the account on which I am a beneficiary and puts it in an account for which I am not a beneficiary, I am out of luck. In these cases the change in the estate plan was not caused by wrongful behavior and the person who has the best right to the money is the person with their name on the last document signed by grandma. My expectancy is defeated.

I hate writing blog posts that end in my telling the reader he needs to consult an experienced probate attorney -- preferably the writer of this post -- but in this case it is true. If you feel wronged and are not sure whether your claim was an expectancy or a right, and whether there might be a benefit for you to take a trip the courthouse, talk to your local probate litigator.

Saturday, September 17, 2016

When Beneficiary Designations and Powers of Attorney Don't Play Well Together


When a person dies, property passes to the heirs in one of three ways. The first way is through joint ownership with a right of survivorship. This most often happens when real property is owned by husband wife. The second way is by beneficiary designations. Beneficiary designations control life insurance, most annuities and most individual retirement plans. The third way is the will of the decedent. Anything that doesn't pass to heirs through joint ownership or beneficiary designation, passes according to the terms of the will (or probate-avoidance trust). In a coherent estate plan, all three ways work together to carry out the wishes of the deceased.

More and more, I see people putting beneficiary designations at the center of their estate plan. In these estate plans, all the major assets pass through survivorship or beneficiary designations. Some people like the simplicity of it. Others are encouraged by bankers or brokers to use beneficiary designations because it "avoids probate".


Most people, in addition to an estate plan, have a power of attorney. The power of attorney is a document that anticipates disability rather than death, and a power of attorney becomes scrap paper the moment the person who created it dies. Death and disability are closely related, however, and people tend to plan for them both at the same time.


Powers of attorney and beneficiary designations do not always play well together.


A beneficiary designation is designed to determine who gets your money when you die. A power of attorney is designed to allow an agent to help you with money management while you are alive. The power of attorney I write for my clients does not allow the agent to change beneficiary designations. My reasoning is twofold: (1) I have a hard time seeing how a change in who gets money when you die protects you while you are alive; and (2) changing beneficiary designations by use of a power of attorney invites litigation.


Not everybody agrees with me about using a power of attorney to change beneficiary designations. I got a call one day from a brokerage who had used my opinion on the issue, as expressed somewhere in this blog, as reason not to allow a change in beneficiary designation by the agent named in a power of attorney. My opinion, however, is more of a good idea than a statement of law and that case proceeded to litigation.


When an estate plan is relying heavily on beneficiary designation, an agent under a power of attorney can significantly change the plan without changing the beneficiary designation.


It works like this. Uncle Scrooge has his money with the Imprudential Fund and a personal investment advisor is managing the money by investing it in the investments that bring the advisor the largest commissions. The beneficiary designation on file at the Imprudential Fund names Scrooge's favorite nephew, Huey, to receive the money when he dies. Louie is named as Scrooge's agent in a power of attorney, and Uncle Scrooge's will leaves everything to Huey, Louie, and Dewey in equal shares.


Louie doesn't like seeing Uncle pay all those broker commissions, so when Uncle becomes incapacitated, Louie moves the money in the Imprudential Fund to the Walletguard Fund, a broadly based index fund. No beneficiary designation is made for the Walletguard fund. This means that at Uncle's death the money will pass by will to all three nephews.


When Scrooge dies, Huey, Uncle’s favorite, sues Louie for changing the investment subject to beneficiary designation to one that was not subject to the same designation. Louie defends with the fact that he was only doing what was best for Uncle Scrooge while he was alive, and the benefit to  Louie and Dewey was incidental to protecting Scrooge.  


This problem can arise in a variety of fact patterns. What if, instead of moving Scrooge's accounts, Louie has simply paid for all of Scrooge's long term care needs from that account (rather than from other accounts) so that when Scrooge died, there was nothing left. Could Louie still be sued because he did not pay the long term care costs from Scrooge's assets in approximate proportion to the heirs expectancy interest in the eventual estate? It can get complicated.


We often say in the law biz, that the agent steps into the shoes of the principal, and can do whatever principal could do. Uncle Scrooge certainly could have moved his accounts or paid all of his long term care from a single account without regard to how it affected any of his nephews. So why can't his agent do the same? Well, because the agent risks being sued and losing. It seems that the agent cannot safely change the principal's estate plan nor be indifferent to it.


The question for the litigation-averse agent in a power of attorney is whether he must refrain from moving an account subject to a beneficiary designation, even it is in the principal's best interest while he is alive. And if he does, can he put a similar beneficiary designation on the new account without getting in trouble with the people who take under the will. Can he combine two accounts if they have different beneficiaries. Must he consider the expectancy interest of the beneficiaries when paying care costs or paying for a trip for old Scrooge to Disneyland. These are all unresolved questions and resolving them -- through litigation -- is going to be expensive for somebody.


I have changed my own power of attorney to authorize my agent to engage in transactions without regard to the effect it may have on those who are in line to receive my money when I am dead. This clause, combined with a prohibition on changing any beneficiary designations I have, seems to honor my estate plan while encouraging my agent to think more about my well being than that of the people who will benefit from my death.













Friday, September 9, 2016

Why Oregon conservators should be using fee-only financial advisers.



I have gotten some pushback from professional fiduciaries about my advocacy of index funds when investing money belonging to the disabled. The complaint is that the professional fiduciaries have too much to do already. They can't be expected to understand the intricacies of investment, diversification, risk, and the prudent investor rule. Thus, they should be allowed to contract out that aspect of the job to experts.


It is a good point, but not a great point. I don't think the job is that difficult these days if one was a rudimentary understanding of money and math, but I am a nerd and it may be unfair to expect others to share my interests.


However, professional fiduciaries who hire financial advisers to help manage the money of the disabled are required each year to disclose the amount paid to these advisers. No professional fiduciary wants to have that disclosure be an embarrassment.


Disclosing how much is paid to most commission-based financial adviser is not easy. The fee is not listed anywhere in those thick quarterly statements that many brokerages send their clients. In dealing with one national brokerage I have had to write a separate form for the agent to fill in  the amount of his firm's fees. I was always shocked by how high it was.


I think the solution to both the disclosure problem and the excessive fee problem lies in Oregon conservators hiring "fee only" financial advisers who charge either by the hour or the project. (Avoid paying a percentage of the assets managed unless this works out to rate under $200 per hour). These guys and gals get paid directly by the person who is hiring them. The money comes from the client, not from the manager of the product they recommend. They are not influenced by the commission associated with the product because there is no commission. Because the fiduciary will be writing the check for the fee, it will be easy to make that disclosure at the end of the year. And in most cases, the fee itself is going to be lower than the fee paid to commissioned agents.


Fee only financial advisers often advertise at the Fee Only Network website. Portland fee only advisers can be found here.
By selecting a fee only adviser, Oregon conservators can assure that their clients investments are not being skewered by the commission associated with the investment and that they will have a comprehensible statement of fees to present to the court.


Now, I happen to think that a fee only adviser will often suggest the safety and predictability of index funds for disabled clients. If, however, I am wrong and the independent adviser suggests a fund with a three percent cost ratio, at the very least the conservator has the safety of being able to tell the court that the investment advice was not influenced the commission the adviser got from the sale.