Christopher B. Kroll & Associates – Elder Law Solutions

     One way to plan in advance for the end of one’s life is to sign a formal contract called a “preneed funeral plan.” With this plan, money to pay for a funeral and/or burial is held in a trust, in an escrow account or paid through an insurance policy on the life of the person desiring the plan. Parts of or all of the funeral service and burial are designed in advance and pre-funded in advance and the family has little to do but show up.

     Here are some advantages as to why one would want to buy a preneed plan for funeral and burial services and goods.

• It provides peace of mind knowing these arrangements have been made in advance.

• It avoids the burden on family members to make decisions when they are most vulnerable to manipulation.

• It allows one to virtually control from the grave by determining in advance the funeral products, funeral services, burial products and burial services that one would prefer having for final arrangements.

• It helps the family to avoid taking loans, arranging finance plans, raiding savings or selling assets to pay for a funeral and burial.

• It guarantees (for many contracts) that if products and services currently purchased are not available in the future, equivalent substitutes will be provided at no additional cost.

• It locks in guaranteed prices (available with some contracts) forever.

• It allows for inflation in future costs (for those contracts that do not guarantee prices) by investing money in an interest-bearing account or buying life insurance that increases in value over time.

• Depending on the contract, it may allow for transfer to another funeral home or for partial or full refund.

A “CCRC” is a Continuing Care Retirement Community, the most comprehensive retirement living option available to seniors in America today.

A CCRC combines the services of an independent living retirement community with an assisted-living facility and a nursing home at a single location.

In exchange for an entrance fee and ongoing monthly service fees, the resident receives the immediate benefit of all of the independent living services, together with the assurance of high quality assisted-living or nursing home services if the need should arise, for the rest of the resident’s life.

Most CCRCs are operated by charitable or religious organizations on a not-for-profit basis. Financial surpluses generated in these CCRCs are reinvested in the community for the benefit of its residents, rather than distributed to investors as dividends.  This reinvestment enables most CCRCs to continue to care for their residents who outlive their assets.  Virtually all for-profit long-term care facilities require such residents to move out and/or receive government assistance.

     Recently, a few of my clients have asked me questions regarding a financial product that was offered to them by their investment advisor.  The product is called a “FDIC Insured Callable Certificate of Deposit” (Callable CDs).

     According to my research, callable CDs are certificates of deposit that may be redeemed at the discretion of the issuer on a specified call date, returning the outstanding principal amount, plus accrued interest. Callable CDs are typically available with maturities ranging from 2-15 years and in minimum denominations and increments of $1,000 to $250,000.

     Callable CDs are typically FDIC insured up to the maximum of $250,000 for principal and accrued interest combined.

     In the event of death or the adjudication of incompetence of an individual owning a callable CD, early withdrawal of the entire CD will generally be permitted without penalty.

     In a nutshell, callable CDs are FDIC insured CDs that typically offer a higher return because of the callable feature, with the added benefit of a penalty free withdrawal in the event of the owners death or incapacity.

WAIVER:  CHRISTOPHER B. KROLL AND ASSOCIATES, P.C. IS NOT IN THE BUSINESS OF OFFERING OR RECOMMENDING ANY TYPE OF FINANCIAL INVESTMENT PRODUCT OR ADVICE.  FOR FURTHER DETAILS, PLEASE CONSULT YOUR FINANCIAL ADVISOR.

Generally, this is what the law has to say about who has responsibility for a dead relative’s debts:

• Under most circumstances, someone’s estate is responsible for paying their debts. But if there isn’t enough in the estate to cover the debts, they typically go unpaid.

• You usually don’t have a legal obligation to pay the debts of a deceased relative who was not your spouse. Even a spouse’s obligation to pay may be limited under state probate law. To determine whether you’re legally obligated to pay, talk to an attorney who is knowledgeable about this area of the law.

• If you are contacted by a debt collector, give the debt collector the contact information of the decedent’s personal representative. That’s the person responsible for settling their affairs, including paying any outstanding debts from the estate. If there is a will, the personal representative is known as the executor; if there is no will, the personal representative is known as the administrator. Don’t give any of your personal information, like your Social Security number, birth date, or financial account numbers to anyone unless you know who you’re dealing with. Some con artists may check obituaries and other legal notices, and then contact relatives of a deceased person posing as debt collectors. These scam artists can use your personal information to help them commit identity theft or other types of fraud.

• If you decide that you don’t want a debt collector to contact you again, write a letter tothe collector saying so. Then, make a copy of your letter, send the original by certified mail, and pay for a “return receipt” so you will be able to document what the collector received and when.

     Accounts that allow the owner to designate a beneficiary avoid probate if the beneficiary survives upon the death of the account owner. Properties for which the owner cans designate a beneficiary include life insurance policies, Individual Retirement Accounts, annuities, retirement plans and transfer-on-death accounts. The beneficiary in these cases need not be named in the decedent’s will, but only in the contract or policy. If a living beneficiary has not been designated, then the decedent’s estate is typically the beneficiary by default, and the property in question becomes part of the decedent’s probate estate. Sometimes, however, the contract, policy, or custodial agreement designates a different default beneficiary, such as the surviving spouse, when the owner does not specifically make a designation.

     Hospice is a philosophy of care. The hospice philosophy or viewpoint accepts death as the final stage of life. The goal of hospice is to enable patients to continue an alert, pain-free life and to manage other symptoms so that their last days may be spent with dignity and quality, surrounded by their loved ones. Hospice affirms life and does not hasten or postpone death. Hospice care treats the person rather than the disease; it focuses on quality rather than length of life. It provides family-centered care and involves the patient and the family in making decisions. Care is provided for the patient and family 24 hours a day, 7 days a week. Hospice care can be given in the patient’s home, a hospital, nursing home, or private hospice facility. Most hospice care in the United States is given in the home, with a family member or members serving as the main hands-on caregiver. disease

Reverse mortgages, as useful as they are, can be misused as well.  These are some, not all, of the danger signals that are possible with these loans.  The single biggest danger signal is someone pressuring you to take the loan or to make an immediate decision for any reason other than protecting your home from a foreclosure sale or other similar emergency.  There are other alternatives to reverse mortgages and they should be explored.

Reverse Mortgage Danger Signals:

• Counseling is perfunctory, extremely short, and/or you are not encouraged or given the chance to ask questions.  Counseling is to help you understand the loan, if you do not, let the counselor know.
• You are being steered to or directed to see a particular counselor or lender.
• You are being discouraged from looking at or discussing all of the various loan products, even if they might not be useful in your case. It is one thing for you to know a loan or product is not useful to you; it is quite another for either the lender or the counselor to not give you all of the facts and let you decide.
• You are being discouraged from talking with family, friends, or the counselor regarding the loan, the loan’s terms, or what you intend to do with the money. While you may choose not to do so on your own, no one should discourage you from talking to anyone, particularly those closest to you, about the loan.
• You are told that providing any money, either up front or to be paid outside of closing, to any party will speed up processing of the reverse mortgage.  (Fourteen days is the shortest known, sixty days is typical.)
• You are offered a discount to sign by a certain date and/or are being pressured to accept.
• You have signed a contract or agreement with an estate planning service or firm that requires or claims to require, that you obtain a reverse mortgage to use their services.  Avoid offers in which the service provider promises to invest the money from the reverse mortgage.
• You are being pressured to use equity in your home to buy a financial product or something else with the proceeds that you do not necessarily need or may not want or that does not benefit you directly.
• Anyone (children, grandchildren, relatives, friends, etc.) is pressuring you to get a loan so that they can use either all or some of the money from the loan.  Even if they promise to pay the money back, or even sign a promissory note, using a reverse mortgage to make such a loan may well deprive you of the means to help yourself.  You must be sure of your own security first and foremost.

     Elder Law attorneys focus on the various problems and issues that concern the elderly and their families.        

     The typical issues that an Elder Law attorney can assist with are:

• A loved one needs to be placed in a nursing home.

• A determination needs to be made regarding Medicaid qualification and planning the preservation of assets to avoid spousal poverty

• Incapacity planning, including the preparation of Financial and Medical Powers of Attorney

• Probate issues, including guardianship and conservatorship, and estate administration

• Estate planning, both during one’s lifetime and planning for the distribution to beneficiaries after death

     Professional planning for possible disability or eventual death is necessary for everyone.  An experienced Elder Law  attorney can assist with the necessary planning and prepare any documents that are needed.

     Whether or not a person has capacity is a determination made by the Court.  It is a legal concept and the definition varies by jurisdiction.  A doctor’s opinion on capacity remains an opinion until a judicial ruling on the evidence is given.  All adults are presumed to be competent until proven otherwise.

          Under current Michigan law, an “incapacitated person” is defined as an individual who is impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, or other cause, to the extent of lacking sufficient understanding or capacity to make or communicate informed decisions. MCL 700.1105(a).  If a person (other than a minor) is determined by a Court to be legally incapacitated, then a guardian is appointed to provide continuing care and supervision for that individual.

     The law recognizes that a person is rarely totally incapacitated.  Capacity may depend on the type of decision that needs to be made or the surrounding circumstances.  For instance, a person may be capable of handling personal safety issues but not money matters.  Often the Court will consider appointment of a limited guardian that is only allowed to assist the incapacitated individual under specific circumstances.

     Many people bypass lawyers and create their own wills, trusts, powers of attorney and other estate planning documents with the help of online tools and books.  Does this approach breed mistakes?  When it comes to legal issues, does one size fit all?

      There are many risks involved with preparing estate planning documents yourself.  One risk of the do-it-yourself approach is that self-written documents may contain holes that can lead to costly errors.  If the documents are  not properly witnessed or notarized, then the documents could be considered invalid.  In addition, a self-written documents may  inadvertently give someone more power than you want (when writing a durable power of attorney).  The do-it-yourself approach to estate planning can lead to a  false sense of security; answering one question incorrectly or overlooking something such as appointing a guardian for children can lead to major problems down the road.

     Bottom line:  consult an attorney that is knowledgeable in estate planning when preparing your estate planning documents.  Spending a few dollars now may save your estate  thousands of dollars later to fix problems that your do-it-yourself documents created.