New Power of Attorney Act

After a few years of study and deliberation Colorado finally enacted the Uniform Power of Attorney Act this year. Bizarre though it seems in this day and age, the Act is not very controversial and most, including your humble correspondent, believe it will be a genuine benefit to us.  Without raising taxes or the deficit! 

 

How is this possible? Well, it’s possible through the dedicated work of a lot of professionals, including the National Academy of Elder Law Attorneys and American College of Trust and Estate Counsel who together with select committees of the ABA put together the Uniform Power of Attorney Act.  This Act was the culmination of years of effort to address what practitioners and clients alike viewed to be deficiencies and needs in financial/property powers of attorney.

 

You’ve read in this space how Colorado law respecting incapacity can be expensive and time-consuming.  Good powers of attorney, both medical and financial, could save thousands in expense in avoiding going to court for a guardianship and/or conservatorship.

 

Provided, that is, those powers of attorney were honored.  It’s always been a delicate balancing act between the need to reinforce and protect self-determination—that is, the principal’s choices—with the potential for abuse that inheres in any unsupervised fiduciary arrangement.  The idea is that an individual ought to be able to choose who to trust as a surrogate should something happen where the individual, temporarily or otherwise, loses capacity.  Any good estate planner understands that planning for incapacity is at least as important as planning for death, and that families need to have tools to assist them in coping with the incapacity of a loved one.

 

For years we used the Colorado Statutory Power of Attorney for Property, as confusing a tangle of legal gibberish as was ever wrought by the fevered minds of a committee of lawyers. Even so, it worked pretty well in Colorado; except that when it came to trying to transfer or manage brokerage accounts, insurance policies, savings accounts, IRA’s or the like, well . . . not so much.  Too many times I found myself speaking to a suit two time zones distant who refused to honor the Colorado power of attorney and insisted either upon the institution’s proprietary power of attorney or, in some cases, that there be a court-ordered conservatorship.  It didn’t help that the statutory form contained some legal double-negatives that left those unfamiliar with it scratching their heads and suspicious.  The new statutory form corrects many of these problems and is considerably simpler and more direct than its predecessor.

 

Going into effect 1 January 2010, the new Act also takes on the problem of third-party acceptance in other ways.  Unless the bank or other third-party entity has a sound reason to suspect the authority of the agent appointed in the power of attorney, it should honor it.  To encourage acceptance the Act puts the risk of a rogue agent on the principal who appointed him or her in the first place, not on the one accepting the power of attorney.  Unless the bank or institution falls within one or more of a number of statutory “safe havens,” (such as where there is actual knowledge the power of attorney has been rescinded) unreasonable failure to honor a power of attorney and forcing the agent to seek a court order can subject the recalcitrant to liability for the reasonable attorney fees and costs associated with having to go to court.  Previously the statute provided that a third-party might be liable for the fees and costs associated with getting a court-ordered conservatorship—always an expensive and sometimes lengthy undertaking.  The new Act doesn’t force you to get a conservatorship but permits a more abbreviated proceeding in probate court that simply puts a judicial imprimatur on the power of attorney itself. The Act prohibits the third-party from requiring an additional power of attorney of its own making.

 

The new Act also does something long overdue—it codifies certain minimum standards of care and duty on behalf of the agent.  These include the duty to act in accordance with the principal’s wishes when known, act in good faith, and to abide by the limits of the authority in the power of attorney.   Unless the principal directs otherwise, these duties also include the duty of loyalty, to avoid any conflict of interest, and to act with “care, competence, and diligence.”

 

What happens to powers of attorney that were drafted before—that is to say, the ones you have now? You’ll be relieved to know that they’ll still be good, but after this year they will be measured against new statutory presumptions and defaults that can only be overcome by specific language in the instrument.  Still, if you’ve been hangin’ out waiting for a good excuse to update your powers of attorney, 2010 might be a good time to “git ‘er done.”

Relief for Military Spouses

All of us post WW II-ers took for granted that portion of the Soldiers and Sailors Civil Relief Act (now termed the more politically correct, inclusive, and New Age “Servicemembers Civil Relief Act”) that allowed us to keep our home-state legal domicile for purposes of voting and taxation when assigned elsewhere.  During the course of a career many of us somehow found a new legal “home” in those states that did not have an income tax, or that exempted income earned out-of-state.  It was not uncommon to make it through an entire career without paying any state income tax and, for the exceptionally devious, with a driver’s license that had technically expired in 1978.

 

Not so our spouses.  If you were assigned to the International House of Waffles (aka the Pentagon), and you lived in the Military Ghetto of Burke, Virginia, while your non-military spouse worked in the more soul-satisfying International House of Pancakes, her income was aggressively (and invariably successfully) pursued by the Commonwealth of Virginia.  In fact, such was Virginia’s ardor for the military spouse that they would continue to consider her a domiciliary (for tax purposes) well after you’d both left the MGOB and your respective jobs in IHO[P]/IHO[W].  The non-military spouse might also be required to get an in-state driver’s license and vehicle tags because the ever-welcoming embrace of Virginia was suffocatingly comprehensive.  Why? The Civil Relief Act did not cover spouses.  Worse, in taxing the non-military spouse’s income, state taxing authorities would often tax it at the marginal rate that included the military spouse’s income, even though they couldn’t tax that income directly. 

 

For many years MOAA and other service organizations lobbied unsuccessfully to correct this and to give both husband and wife the same exemptions.  And this year they finally succeeded. Last Veterans’ Day the president signed the Military Spouses Residency Relief Act into law.  The law amended the Servicemembers Civil Relief Act to add non-military spouses to the protected class. Henceforth, the non-military spouse will be entitled to the same benefits and exemptions as the military member.  That is, non-military spouses will not be deemed to have lost their legal domicile if they accompany their spouses to another state or location pursuant to military orders. They can still vote in their state of domicile and participate in local elections. They will be exempt from income and personal property taxation of the state in which they are resident by reason of military or naval orders.  Shoot, they might even take a stab at keeping the same tatterdemalion license for twenty-six years.  So, this month, a crisp and appreciative salute to the tireless people at MOAA and elsewhere who work to improve the quality of life of our military families.

 

(PSST.  Wanna see how long then-Capt Morgan’s hair and lamb-chop sideburns were in his last year at the University of Texas law school in 1978?)  No? Didn’t think so.

President, Precedent, and Presumption

In August of 1970 the nation was riveted by the trial of Charles Manson and members of his gang who were being tried for the multiple murders on consecutive nights at the Tate-Polanski and LaBianca residences.  A young and aggressive Vince Bugliosi secured convictions and death penalties (later commuted to life by the California Supreme Court) against Charles Manson, Susan Atkins, Leslie Van Houten, Tex Watkins, and Patricia Krenwinkel. If you’re into a true-life thriller and are curious about what really goes on in the courtroom, I commend Bugliosi’s exhaustive account of the crime, investigation, and trial of Manson in his book Helter Skelter.  But that’s not why I write to you today.

 

Rather, it is to highlight a long-forgotten moment in the trial when President Richard Nixon, in a contentious press interview, declared his belief that Manson was guilty.  “Manson guilty, Nixon Declares,” was the four-inch headline in the Los Angeles Times while the case was ongoing.  The judge immediately moved to exclude the jury, who had long been sequestered, from the possibility of exposure, going so far as to blacken the windows of the jury’s bus.  To no avail.  The next day Manson himself displayed the headline in open court for the jury to see.  Then, of course, his lawyer moved for a mistrial.  After each juror was questioned individually by the judge, and the judge was satisfied that none of them was swayed by the president’s pronouncement, the trial continued. (One juror in the Manson case was famously heard to declare that she would never take Nixon’s word for anything – to the delight of the assembled media-types.) 

 

Good thing, too, because the trial lasted nine months and was at the time the most expensive in U.S. history.

 

So, I’m asked, what is the effect of the president, the attorney general, and the president’s press secretary all announcing with the conviction borne of certainty that Khalid Sheikh Mohammed is . . .toast?  There is a process called voir dire, in which attorneys for both sides question prospective jurors to try to get only those individuals who have not made up their mind and who are not tainted by extraneous evidence or influence.  Voir dire in the Manson case took over one month before a jury could be seated, such was the extent of the pre-trial publicity.  Now consider that you are a defense counsel for KSM (okay, okay, I know how repulsive the thought is that you would actually be a . . . .lawyer), but just suppose.  Would you want anybody on the jury who had heard the president himself voice an opinion not just of guilt, but of the punishment as well?

The jury selection process in any trial is tough; in one with this notoriety, it borders on the Sisyphean. Adding the additional problem of poisoning the well through the pronouncement of the President of the United States doesn’t merely complicate things, it can serve to ensure that the jury is composed of people who either had never heard the statements, or who are willing to say they didn’t even if they had, or who had heard them but swear up and down they will not be influenced by them..  Any and all of these possibilities introduce a perplexing wild card to the trial – and can result in, shall we say, a non-representative sampling of citizens sitting on a very, very important trial.

 

Even though public pronouncements of guilt by senior officials are certainly problematic in a federal criminal trial, they would not necessarily be fatal (to the prosecution, I mean). Paradoxically, if KSM were to be tried under the court-martial system, such a pronouncement might prove just that.  This is because of something called unlawful command influence. The president, as commander-in-chief, sits at the apex of the military command structure, and thus an opinion as to guilt and sentence might very well create an irredeemable problem of unlawful command influence in a UCMJ-governed court.  The Court of Appeals for the Armed Forces, the civilian court that sits just below the U.S. Supreme Court in the appellate chain for the military, has time and again pronounced unlawful command influence to be the “mortal enemy” of military justice. They’ve put teeth in that declaration as well, routinely dismissing all charges where they find there has been the taint of unlawful command influence, and requiring the prosecution to disprove its existence beyond a reasonable doubt.

 

The simplest second-year law student knows about the presumption of innocence, and that the courts have over time crafted elaborate rules to ensure that constitutional rights are not infringed in the criminal process.  Rules that can result in a tainted jury pool at best, and at worst in setting a monster free.  Is anybody listening? 

Picking a Lawyer

 

Previously, we’ve discussed picking fiduciaries among families.  Couples often have each other as the principal fiduciary—power of attorney, personal representative—and then choose one or the other of their adult children as alternates. Yet, in some instances it is either impracticable or, yes, unwise, to have a family member as a fiduciary.  In such cases you may need to seek out a professional or institutional fiduciary.  To a degree professional fiduciaries are regulated by the courts and statutes. But in the end we cannot and should not look to government, whether state or federal, to fix things. Indeed, at least part of the stated motivation for HB 1105 was to streamline the fee-dispute process which can indeed be complex, time-consuming, and expensive.

 

It’s worth remembering that for the most part we are the ones who pick our fiduciaries and it is before not after their selection that we can specify the fee arrangements. Fiduciaries, even though they owe their principal “that punctilio of an honor the most sensitive,” are, after all, people. Even within a given bank, trust company, or law firm, there are wide variations.   You should not, therefore, necessarily choose a fiduciary based on your perception of any one given individual.  This month, then, we’ll just talk professional trustees or conservators and their costs—dollars and cents.

 

Suppose you have a disabled family member you know will require somebody to manage his estate—a trustee. The law states that such a fiduciary is entitled to “reasonable compensation,” but that covers a lot of territory.  If in your trust instrument you don’t specify what you consider and agree is reasonable compensation you can readily see that any dispute winds up in court—thence the difficulty.  A thoughtful trust instrument should therefore carefully specify the terms of compensation, thereby greatly reducing the chances of future disagreement.  Some trust language will allow the fiduciary to be paid according to its published compensation schedule.  For professional trustees, this will usually entail charging a percentage of the trust estate.  The percentage among trustees will vary according to the size of the trust estate, with the greatest percentage charged for the smaller estate, and thence sliding down as the state becomes larger.

 

This percentage fee usually refers to the percentage of the estate being managed. Here too, careful consumerism can help to avoid conflict.  The question you should always ask any prospective trustee/conservator is what is counted against principal in the estate.  For example, if a residence in which the family member is staying is part of the estate, it does not seem that a fiduciary should charge a percentage of the value of the house—but that is not necessarily a foregone conclusion.  Learning what will and will not be included in calculating the size of the estate against which the percentage is to be applied is therefore a key component of your planning and selection of a fiduciary.

 

Likewise, institutional trustees may have something called “extraordinary fees.”  Depending upon the fiduciary these can be quite large.  For example, if a trust officer must visit your disabled adult child, will the trust will be charged?  If so, how much?  Will travel time be included? What if two trust officers come—does that mean the hourly charge will be doubled?  What about any court proceedings?  Finding out in advance what the extraordinary fees will be, under what circumstances they will be charged, and then providing a mechanism for the timely disclosure of such fees and for informal resolution of fee disputes can save your adult child (and his attorney) thousands in fees and an incalculable amount of emotional distress.  If your potential trust company does not have clear answers to these questions it pays to either pin them down into an acceptable contractual arrangement or to look elsewhere.  Not all professional trustees charge extraordinary fees.

 

Your fiduciary is also allowed to hire people for professional assistance, such as attorneys and accountants. They too are entitled to “reasonable” compensation. In such cases, particularly for attorneys, the circumstances of their employment, their rates, and the ability to have a voice in their selection are all useful considerations to anticipate and to structure in your trust agreement.  I know of some professional trustees who routinely retain law firms that provide two counsel, both billing at the same time for the same proceeding or event.  This can run $600 to $800/hour.  Knowing in advance the circumstances of the retention of counsel, who will be retained, the retainer agreement and requiring that any retainer agreement be disclosed and approved in advance, along with the purposes of representation can be essential to ensuring you have no surprises.

 

Remember.  The time to work out the circumstances, amount, and procedures for the payment of the trustee and other fiduciaries is in advance.  Once you’re in court, you can not only lose the amount originally disputed, but be liable for paying your fiduciary for the privilege of opposing you.  If HB 1105 were to pass, they’d only have to show “good faith” to collect. HB 1105 or no, you can and should select your fiduciaries and arrange the circumstances of their employment up front and in a manner both deem acceptable.

 

Next month—attorney fees.

Picking Your Fiduciary – the Conservator

            By his own admission Colonel “Ace” Azimov was not the world’s greatest fighter pilot (this is so you’ll know this is a fictional character).  Flew Jugs during WW II, F-51s in Korea.  Married his childhood sweetheart, Melba, when he came back from the war. Raised four kids and retired here in the Springs.  A superb bridge player, back in the day he could tell you every card in dummy’s hand from three rubbers ago.

 

            Until recently, that is. When Melba died in 2005 Ace seemed to fail, a little bit at first, then more rapidly.  His kids are concerned.  Ace can’t play even a hand of bridge anymore, doesn’t remember the last bid, hasn’t been able to keep score for over a year.  Mail piles up at the house. Bills aren’t getting paid; they’re not even getting opened.  Worse still, Ace seems to be falling for every fly-by-night get rich scam in the books. He’s become an unwittingly generous sponsor of Nigerian “widows” and has had his bank-account nearly emptied by scammers.  He writes checks, but there’s been no entry in the register since July of 2009.

 

            Still.  He is well able to care for himself.  He’s able to keep track of his medications with the help of the weekly pill sorter.  Takes great pride in the appearance of the house, his lawn and his garden and keeps them up.  Still eats well, preparing many of his own meals. It’s just those darn finances.  There’s reason for concern.  Ace probably has (had) close to $1million in savings, investments, and equity in the house. But unpaid bills are racking up interest and penalties.  Foolish investments follow hard on one another.  It’s time to do something.  But what, and who?  None of the kids live in Colorado Springs, and none is in a position for the kind of day-to-day monitoring Ace needs.  Plus, there is the issue of trust.  Not only do the kids not necessarily trust each other, Ace can’t bring himself to put his financial fate in the hands of his children, or to pick one of them over the others.  Finally, Ace was persuaded to go to get a cognitive evaluation.  While the neuropsychologist agreed he did not need a guardian, he thought that Ace did qualify legally for a conservatorship.

 

            A conservator is a fiduciary who is appointed a guardian of the estate (finances) of the “protected person.”  It is the conservator’s job to step in and look after

the protected person’s money – including investments, maintenance, bills, and budgeting.  The conservator must be appointed through a court process, which can be an adversarial hearing where Ace will likely have an attorney whose job it will be, if Ace desires, to resist the imposition on personal liberty that the appointment of a conservator represents. Ace will have a voice in those proceedings, and will be heard (although not always deferred to) as to his preferences on who, if anyone, should be appointed. As in guardianships, the court may order a visitor to look into Ace’s situation, interviewing him, family, friends, and the prospective conservator, and then preparing a written report to be considered by the judge.

 

            Of course, family members can serve as conservators, but that may not always be desirable because, at least in Ace’s case, there’s nobody local.  It should also be recalled that conservators have strict reporting requirements.   After their appointment they must file a financial plan with the court which sets forth and inventories Ace’s estate, his income, his bills and obligations, and establishes how the conservator intends to protect the estate and ensure that Ace’s estate is used for what it is intended—his benefit.  They then have to file annually with the probate court a report on Ace’s progress.  They are responsible for the prudent investment of Ace’s estate consistent with his needs and, to the extent possible, his desires.  While a conservatorship does have the effect of withdrawing a degree of financial independence, the courts are admonished by the law to select the least restrictive option possible and to maximize self-determination.  Unlike a guardianship, a conservatorship can be established without a finding of incapacity, meaning that Ace can maintain most of his legal rights and self-direction.

 

            For veterans who may suffer from traumatic brain injury or other service-related cognitive impairment covered by the VA, there is a proceeding called the Uniform Veterans Guardianship Act.  If the VA thinks that a veteran is no longer able to care for him or herself, they can simply appoint somebody to take over the VA benefits account.  The proceeding for appointment is much more streamlined, but the VA has very strict accounting provisions, and it’s often very difficult for a family member who is not also an accountant and/or an attorney (and sometimes not even then!) to get the accountings to the VA’s satisfaction.  Once the VA account gets to a certain size, the VA may go to court and get an actual judicial appointment, usually of a professional bank-fiduciary. The veteran’s preferences in these matters, while to be considered, are not necessarily determinative. 

 

            There are professional or institutional conservators available.  Most will charge a percentage fee for what they will do.  Some will hand-off the investment/portfolio management piece to a professional financial advisor, but then attend personally to the personal care aspects–paying bills and taxes, making long term care/assisted-living arrangements, monitoring medical costs, obligations, and financial maintenance of the protected person.  

 

            None of us, least of all Ace, likes the idea of surrendering a portion of our lives to anybody else, still less to a stranger.  That’s why many powers of attorney may specify that the nominated attorney-in-fact is to serve as the guardian and/or conservator if one must be appointed.  None of us plans to be incapacitated, and that’s why all of us should plan for incapacity.         

The Emergency Guardian

Last month, we looked into how we might help our retired fighter pilot Ace Azimov with his finances when it became apparent he was no longer able to manage them himself.  We arranged for a professional conservator to manage his money and finances, while still keeping him substantially independent. Ace wasn’t thrilled with the idea, naturally, but was smart enough to know that he needed someone’s help managing his money and appreciated that he had a voice in who that would be. 

            It was fortunate that Ace liked to be out and about putzing in his yard, because a neighbor spotted him on his back patio when the stroke hit, and immediately called the EMT’s when she saw him collapse.  She probably saved his life.

            But now Ace is, at least temporarily, cognitively disabled.  The docs aren’t sure how much he’s receiving and processing, as Ace isn’t able as yet to communicate, but there is reason to suspect that the stroke may have taken a good bit of his executive function, and it’s certain that there is partial paralysis.  With no family in town and Ace unable to speak for himself, there’s an immediate need for somebody to have legal responsibility for Ace’s physical well-being.

            Fortunately, Ace’s eldest daughter, Karla, lives in Cheyenne, and the neighbor who had access to Ace’s house was able to look her up and telephone her.  Five critical hours later she arrived at Memorial, only to be told that without a power of attorney or guardianship she had no legal authority to act on her father’s behalf.  Karla remembered that in years gone by Ace had gone to the base legal office and gotten a will and powers of attorney, but she has no idea where they might be, and anyway she’s pretty sure that Ace would have appointed her mom, Melba, as his power of attorney.  But Melba passed away in 2005, and at the time the powers of attorney were drafted none of the children was an adult so it’s unlikely Ace nominated any of them as a back-up.  Karla wants to take care of her dad, but she has pressing problems at home herself, and cannot remain long in Colorado Springs.

            It’s futile to wish that Ace had updated his powers of attorney when Melba passed away. He didn’t, and Karla and her siblings must contend with the fact that health privacy laws will bar them from even learning much about their father’s condition, much less make critical care and treatment decisions.  A guardianship will clearly be necessary, sooner rather than later.

As I’ve explained in earlier missives, the formal guardianship proceeding will usually require an evaluation by a physician or neuro-psychologist, in-court presence of the respondent, representation of the respondent by an attorney, a court visitor (who investigates the situation then reports findings and recommendations back to the court) and often a guardian ad litem, something we’ll address in the future. It can take two months or more.  In situations like Ace’s though, where critical decisions can’t be put off without jeopardizing his health and safety, that process is too long. 

In such cases the probate court can appoint an emergency guardian to serve for up to 60 days if there is legitimate concern that waiting for a formal appointment will injure the respondent.  Ace needs decisions on his care, and he needs them now.  Appointment of an emergency guardian will cover the gap until a permanent guardian can be appointed. With any luck time can be found on the court’s docket for a hearing in the next few days.

            Who to appoint?  The nearest child geographically is Karla, and this is a situation that requires frequent in-person contact, both with Ace (on the hopeful assumption that he comes around), and with his care providers. None of the adult children is in a position to pull up stakes and move to the Springs.  In such cases there are a few professionals who can assume guardianship duties and take over the actual appointment.  The fees and services provided by such people can vary greatly, so this is one situation where you will want to take your time, do your homework, interview prospective professional guardians, and make an informed choice.

Just because Karla and the other kids cannot be close to Ace full time does not mean they must hire a professional guardian. Other professionals specialize in helping families with care planning, bringing together the various resources in the community to try to tailor a care program to maximize Ace’s independence while seeing to his safety and recovery.  A guardian, once appointed, is entitled to contract with various agencies and facilities specializing in attending to the senior community and to the disabled and making sure that there are eyes on target for Ace, even if the guardian doesn’t live nearby.  

No matter which way Ace’s family decides to go, there are a large variety of services that can be of great help to the guardian and assist Ace and his family through this difficult time.  Navigating this sea of options is not advisable for rookies, so finding somebody who knows the terrain (to mix metaphors) is the best way to start.  Getting an emergency guardian appointed solves the short-term problem of having somebody who can talk to the doctors today, and it buys up to two months for the family to craft a comprehensive care plan integrating private and professional services.  Ace gave his all to his country and his family, and decent respect for him demands that he not be warehoused in a nursing home and forgotten.  We won’t let that happen.

Grasping Hold of Letting Go

I was honored recently to be invited to a dinner meeting of the El Paso County Medical Society’s Medical Ethics committee.  Surrounded by people of vastly greater distinction and achievement in the fields of philosophy, medicine, and law, I could only eat quietly and try to absorb what was being discussed.

The subject, at least in part, was end-of-life care, and the growing importance of advance care directives in managing a part of life, that despite its inevitability, most of us recoil from considering.  We need to, and here’s why.

 Despite monumental temptation, I have intentionally steered away from discussing the legal implications of what has been called Obamacare, and tried (not always successfully) to keep my political opinions to myself in writing this column.  Whatever you might think of the growing role of government in health-care, we must all agree that medical science’s ability to prolong life has outstripped our ability to understand its medical, philosophical, ethical and religious implications. And at the dawn of the age where demand for medical services will surely overwhelm supply, something must yield. The question is not so much whether health care will be “rationed,” but how and by whom.

Atul Gawande has written a moving essay in the New Yorker entitled “Letting Go” found at http://www.newyorker.com/reporting/2010/08/02/100802fa_fact_gawande.  Dr. Gawande is a Rhodes Scholar, a physician, and was active in the Gore and Gary Hart campaigns, as well as being part of Bill Clinton’s inner circle of health care advisors.  While I cannot pretend to do justice to his article and encourage you to read it yourselves, his point is that physicians as a rule are ill-prepared and thence reluctant to have the kind of frank discussions with patients and their family where the prognosis—too often undeclared—is that the patient is terminal.  Failure to have this kind of discussion can, however, mean that end-of-life decisions might be taken from the patient and placed into the hands of others for whom the economic imperative is paramount, or proxies who, working without a clear understanding of the loved-one’s wishes, may be groping in the dark with little to go on except surging rip-tides of emotion, futility, and guilt.

Two key components of a basic estate plan are the medical power of attorney and the living will, (not to be confused with a living trust), which complement but do not duplicate each other.  For many, even for long-time married couples, this may be the first time the subject of end-of-life planning has been broached.  The model language for advance care directives such as the living will has been evolving as Colorado’s legislature grapples with trying to put legal definition, and limits, on what can and cannot be done with advance care directives. For example, recently the assembly has approved language in advance care directives that permits the patient or a duly authorized surrogate to decline medical intervention even where there is not a definitive terminal diagnosis, such as in the situation where there is a “persistent vegetative state.”   The difference is subtle, yet profound, for in the past the model language specified that the attending physician and one other physician avow in writing that the patient suffered from a terminal disease or condition.  A “persistent vegetative state” such as the case of Terry Schiavo, is not necessarily “terminal.” 

More recently, the Colorado legislature has approved the Medical Orders for Scope of Treatment (MOST) form.  This permits the patient, or the patient’s surrogate, to decline, in advance, CPR, artificial nourishment and hydration, and other medical interventions irrespective of the patient’s diagnosis.  Premised on the idea that a patient has the right to refuse treatment, even if that refusal means death, the MOST form, found at http://coloradoadvancedirectives.com/MOST_Form_08.11.10.pdf, does not require a terminal diagnosis at all.  Although the explanatory accompaniment, “Getting the Most out of the Medical Orders for Scope of Treatment Process and Form – Guidance for Healthcare Professionals” found at http://www.coloradoadvancedirectives.com/MOST_Instructions.pdf , explains that the MOST form “is primarily intended for elderly, chronically, or seriously ill individuals, who are in frequent contact with the healthcare system, it is not limited to that demographic.  Hence, unlike the previous model language for a living will, there is no “trigger” requirement for a terminal prognosis.  While the MOST document is intended to complement, not supersede, advance care directives such as a living will, according to the Guidance document, the MOST document will trump prior instructions to the extent they are in conflict.

I must stress here that the MOST form is not mandatory.  Physicians and other health care advisors are encouraged but not required to have this discussion with those who are confronting life-limiting illnesses and conditions. On the other hand, the significance of the removal of the terminal prognosis requisite should not be lost on anyone.  

We should not forget that even if model language now permits declination of medical interventions in the absence of a terminal diagnosis, this is not a default position.  It is premised on the a priori decision of the patient, or the patient’s surrogate.  It becomes all the more important, therefore, that we make our own desires as clear as possible in our documents and to our nominated medical proxies what we want and what we don’t want. Quality of life and end-of-life decisions are not abstractions when the life and the decision is yours.  So don’t leave it to chance.  If you haven’t had that conversation with your spouse and family, now is the time.  The decision should be yours, but you have to make it first.  

To Whom Do We Owe Thanks?

To Whom Do We Owe Thanks?

 

Revisionists have spent the last fifty years trying hard to excise Thanksgiving from among those few remaining holidays with expressly religious origins.  We are told that the Founding Fathers were atheists, agnostics, or, at best Deists.  A certain elementary school I know advised its students that the first Thanksgiving was the Pilgrims giving thanks to the Indians for their help and assistance. 

While such historic perversions may lend a degree of false comfort to those who seek to deny our religious heritage but who don’t mind a heap o’turkey, pumpkin pie, and the Detroit-Chicago game, such narratives are just that, perversions.

This nation was and is unique in its circumstances of its founding—based expressly and to a degree exclusively upon religious belief, and the then-revolutionary idea that government, though established under God, derived its just powers from the consent of the governed.  And that both these ideas, if they did not originate with the Pilgrims, certainly were germinated, nurtured, and given protection under their stewardship. 

In 1534 Henry VIII, frustrated with the refusal of the Pope to declare his marriage to Catherine of Aragon invalid so he could marry Ann Boleyn, established the Church of England with himself as its head. Henry’s break with Rome had less to do with theological disputation than it did with political expediency and the urgent need for a male heir. Still, the Church of England was quick to exploit the schism with Rome and to torture and thence execute loyal Catholics, St. Thomas Moore being one of the more celebrated.  Henry’s son, the short-lived Edward VI, allowed the nascent Church of England to become more distinctly Protestant, but Edward lasted only six years before his older sister, Mary, daughter of the humiliated Catherine of Aragon, ascended the throne. Bloody Mary shoved the pendulum back sharply in favor of Catholicism, seeking restoration of Rome as the only legitimate State religion.  The lengthy, more equable reign of her half sister, Elizabeth, while clearly favoring Protestantism, at least for a time set at bay the more sanguinary excesses of the state-established Church.

That religious interregnum ended when Elizabeth died, leaving no heir, bringing James VI of Scotland to the throne.  While James was in many ways irresolute, he was utterly persuaded of his divine right as king and firm in his antipathy for Puritanism and Separatism (of which the Pilgrims were a part).  Under his reign, both suffered imprisonment, exile, torture, and death.

It was under James that the Pilgrims founded their own illegal church in Scrooby, a tiny village in Nottinghamshire.  Quickly found out and imprisoned, they fled to the Netherlands, believing it to be a place of religious tolerance.  For a few years at least it was, but soon even the Netherlands bowed to mounting British diplomatic pressure to oust the fledgling church, then headquartered in Leiden.

But it was while in Leiden that the seeds were planted.  In a letter to the Pilgrims, their pastor, John Robinson, advised them to form a government by consent, appointing leaders from among the party who derived their authority from their selection by the people, with the concomitant assumption that God would act through His church to bless the formation.

So it was that William Brewster, Pastor Robinson’s First Elder, drafted the Mayflower Compact, signed November 11, 1620 with just that in mind, leaving no doubt as to the purposes of the Pilgrims themselves and their conviction that their undertaking was ordained by God.

In ye name of God Amen · We whose names are underwriten, the loyall subjects of our dread soueraigne Lord King James by ye grace of God, of great Britaine, franc, & Ireland king, defender of ye faith, &c Having undertaken, for ye glorie of God, and advancemente of ye christian faith and honour of our king & countrie, a voyage to plant ye first colonie in ye Northerne parts of Virginia · doe by these presents solemnly & mutualy in ye presence of God, and one of another, covenant, & combine our selves togeather into a civill body politick.

 

One would think that the savage conditions of the New England winter of 1620-21, where fully half the Pilgrims died, might have dimmed their religious ardor.  If anything it intensified it.  So much so, that in November of 1621, a feast was held with some ninety Patuxet tribe members in attendance.  It was not expressly termed a thanksgiving, but its purpose was made clear by Edward Winslow, who wrote of the three-day event.

 

And although it be not always so plentiful as it was at this time with us, yet by the Goodness of God, we are far from want.

 

Two years later, William Bradford, the duly-elected governor of the colony, issued his Thanksgiving Declaration:

 

Now I, your magistrate, do proclaim that all ye Pilgrims, with your wives and ye

little ones, do gather at ye meeting house, on ye hill, between the hours of 9 and 12 in the day time, on Thursday, November 29th, of the year of our Lord one thousand six hundred and twenty-three and the third year since ye Pilgrims landed on ye Pilgrim Rock, there to listen to ye pastor and render thanksgiving to ye Almighty God for all His blessings.

 

In his Thanksgiving Declaration of 1789, George Washington also left no doubt as to who was to be credited, appointing the day “to be observed by acknowledging with grateful hearts the many and signal favors of Almighty God.”

The national character of the holiday was established by Abraham Lincoln in November of 1863.  This too had avowedly religious derivation, coming as it did after Lincoln had trod the blood-soaked earth of Gettysburg and then delivered his Gettysburg address.  What few know is that this came at a pivotal point in Lincoln’s life.  As he confided to a friend:

 

When I left Springfield [to assume the Presidency] I asked the people to pray for me. I was not a Christian. When I buried my son, the severest trial of my life, I was not a Christian. But when I went to Gettysburg and saw the graves of thousands of our soldiers, I then and there consecrated myself to Christ.

 

            Lincoln, too, was incandescently clear as to the source of the Nation’s bounty, and the object of Thanksgiving, proclaiming:

 

I do therefore invite my fellow-citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next as a day of thanksgiving and praise to our beneficent Father who dwelleth in the heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners, or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it, as soon as may be consistent with the Divine purposes, to the full enjoyment of peace, harmony, tranquility, and union.

 

            No less positive was the Thanksgiving proclamation of John F. Kennedy in 1961, who concluded:

 

I urge all citizens to make this Thanksgiving not merely a holiday from their labors, but rather a day of contemplation. I ask the head of each family to recount to his children the story of the first New England thanksgiving, thus to impress upon future generations the heritage of this nation born in toil, in danger, in purpose, and in the conviction that right and justice and freedom can through man’s efforts persevere and come to fruition with the blessing of God.

 

The pull of secularism and commercialism is by no means recent.  In 1936, Franklin Roosevelt sought to advance Thanksgiving from the fourth Thursday in November to the third, with the express purpose of stimulating the economy by adding another week for Christmas shopping.  Overwhelming hue and cry caused him shortly to retreat, and the holiday was restored to the fourth Thursday, as Lincoln had designated.  One wonders if there would be similar resistance to such a move today.

 

November, then, commemorates much.  Much to be thankful for: the manifold blessings of our country– material, cultural, political, philosophical and spiritual–the revolutionary notion that our government owes its authority to us; generations of sacrifice and resolute courage that made this country possible and extended the blessings of liberty and self-determination across the planet; the list could go on and on.  What might just be the most important legacy of all? The unabashed certainty of generations of Americans–from Brewster to Bradford to Washington to Lincoln to Kennedy–of Whom to thank.

VA Pensions – The Unknown Benefit

 

Most of us are familiar with VA disability compensation.  We know it is income-tax free, is based upon service connected or service aggravated disability, and can replace on a dollar-for-dollar basis military retired pay, thus providing the retired veteran with a modest tax break.  This is not about concurrent receipt – I’ll talk about such non-incendiary topics as Don’t Ask Don’t Tell, Wikileaks, and Lady Gaga’s sexual orientation before I’ll take on something really controversial like that.

 

What many of us don’t know about is that the VA provides pensions for veterans who are in severe need.  One must be a qualifying veteran, meaning that an honorable or general discharge, and active wartime service.  That service need not be in a combat zone, but must involve at least 90 days active duty, at least one of which was during a defined period of war. The VA has a chart for wartime periods.  According to that chart, for example, Vietnam goes from 1964 to 1975, and we’ve been at war from 1990 to the present.

 

There are three types of pension: the basic, or service pension; basic pension with housebound allowance; and basic pension with “Aid and Attendance.” The benefit varies according to the number of dependents from about $1,000/month service pension to close to $2,000/month if you qualify for aid and attendance with dependents.  Unlike disability compensation, this is a needs-based benefit.  Actual income offsets the benefit on a dollar-for-dollar basis.  However, and this is a big however, income can be set off for certain unreimbursed medical expenses. The formula is complicated, but a veteran who, for example, is paying for nursing home or assisted living care may well have his entire income offset by the pension, and thus would qualify.

 

Beyond the question of income is the net worth test.  Unlike Medicaid, there is not a set dollar-amount maximum.  As with Medicaid the home is excluded, even though the proceeds from the sale of a home are countable for purposes of computing Income for VA Purposes (IVAP).  Pensions will be denied or discontinued when the corpus of the veteran and the veteran’s spouse’s “estate” is large enough that “it is reasonable that some part of the corpus be consumed for the veteran’s maintenance.”  Translated from the precise VA legalese, that means your maximum net worth is . . . whatever the VA pension calculator decides it is.  Experienced practitioners advise that the absolute maximum net worth is $80,000, but that pensions are more routinely (and quickly) approved where the total resources are between $10,000 and $20,000.  The VA is pretty inclusive in defining net worth, much as it is in assessing IVAP – it’s pretty much everything you own exclusive of the value of your house and personal effects.

 

A degree of disability is also involved, but it’s much different than the disability compensation system.  For the basic, or service pension, there must be a permanent and total disability, but it is for non-service connected disability.  Here’s the kicker.  If you are over 65, or a nursing home patient, or disabled according to the Social Security Administration, or unemployable due to disability, you are considered permanently and totally disabled.

 

The pension with household allowance is the next step up.  Qualification is for those with a single disability rating of 100%, plus a second rated at 60% (don’t bother calling, I’ve no idea what that means either), or (and this is the real-world test) the veteran is “substantially confined” to the home and is expected to remain so.

 

Finally, the most generous pension is the service pension with “aid and attendance allowance.”  To qualify, the veteran must be effectively blind, or a patient in a nursing home, or bedridden, or unable to take care of the basic needs and functions of life without care and assistance on a regular basis.

 

These benefits may also be available to widows and widowers of qualifying veterans. Importantly, payment to a surviving spouse is not automatic, must be applied for, and is circumscribed by the same needs-based analysis as the original benefit for the veteran.  So, if the surviving spouse receives a death benefit, life insurance proceeds, or other assets at the death of the veteran spouse, she may be disqualified for a period of time under the net worth or income analysis.

 

As so many government programs tend to be, the VA pension benefit is pretty involved and complicated. Recognizing that for those of us who are retired active duty it is unlikely that we will qualify for or have need of these pension benefits, we may be aware of friends or family who are in need and who may qualify. Surprisingly, the orientation of many VA employees and veterans’ service organizations towards the disability compensation scheme means that lay assistance, including from the VA itself, may be less robust when it comes to VA pensions.   Knowledgeable attorneys (did I just say that??!) can sometimes help, but to represent a client before the VA they have to have been certified by the VA to practice before it.

 

And finally, this is the time of year when we give and receive gifts.  As I wrote a couple of months ago, I like to think that it is always the season to give thanks for the gifts we have already received.  My thanks this year goes to all of you who have devoted your lives in service to this, the greatest country on this earth, at this or any time in human history.  Everybody’s tree is fuller, New Year’s more promising, and life more bounteous, because of you.

Dracula Lives! The Death Tax Returns from the Dead

Faithful readers recall that way too many trees have been sacrificed in this column trying to track the federal estate tax.  Well, lissen up!  It’s b-a-a-ack.  All of the garlic, stake through the heart, holy water, decapitation and direct sunlight at Dr. Van Helsing’s disposal has failed to put an end to this blood-sucking monster that preys on the living by first killing their loved ones and then draining their blood.

 

Okay, maybe that metaphor was a little bit, well, breathless.  So, if you haven’t heard, the tax compromise of December has resulted in the reinstatement of the estate tax.  Who is affected?  All of you who died last year with more than a $5 million estate or $10 million per couple, or those of you have such a sizable estate who plan on dying in 2011-2012.  

 

Based upon those criteria, it’s safe to assume that those of you still reading are now doing so out of morbid curiosity.  Here it is in a nutshell.  For 2010, recall, the estate tax was repealed.  Everybody thought George Steinbrenner got away with something by sneakily passing away last year.  Congress, perturbed that another rich guy might have slipped the noose, passed their bill retroactive to 1 January 2010, Damning the Yankee post-mortem. So, as I say, all of you dead multimillionaires will need to pay heed to what follows.

 

In 2009, $3.5 million per person was the applicable exclusion amount (the maximum size of an estate that can be passed tax free), and the taxable margin beyond that was 45%.  For 2011, the applicable exclusion amount is raised to $5 million, and the margin  reduced to 35%.  The gift tax and generation skipping tax will also have $5 million thresholds and a 35% margin, so there’s no advantage to giving away your millions on your death bed.

 

A long overdue innovation starting in 2011 is a concept called portability.  Previously, the applicable exclusion amount applied to the individual.  This meant that without using clever devices like credit preservation trusts if a couple had $5 million, husband dies first (it is ever thus) leaving everything to the wife, when she died the full $5 million would be subject to tax (after her $3.5 million was used up).   As a practical matter, in our scenario, the estate would owe close to $700,000.  Now, however, the surviving wife can use whatever part of her husband’s $5 million exemption wasn’t used up at his death without having to resort to any estate planning gimicks.  It means, in simple parlance, that a married couple can effectively pass $10 million estate without fear of federal taxation.

 

There were those, including the president, who grumbled at this compromise and swallowed it only out of political expediency, if not necessity.  A major component of the compromise is that the administration and the Democrat majority in the lame duck congress would only agree to extend the “Bush tax cuts” to 2012. In a kind of legislative game of chicken, both sides seem to be betting that political hay can be made in 2012 when the Bush tax cuts will face yet another expiration.

I’m betting that the dead readers and billionaires among you number about the same, so the question fairly arises as to why I bring this piece of legislative arcanum up at all, my dear Eagle-istas.  It is because some of you may listen to those people who persistently conflate estate taxes and probate, the implication being that if you can just avoid probate you can avoid estate taxes.  Take this to the bank – there is no relationship between probate and estate taxes.  There is no reason for all or nearly all of us to incorporate estate tax planning into our estate, and if you’re fortunate enough to have an estate vulnerable to estate tax, you’re probably savvy enough to do the planning necessary to avoid or minimize the tax without buying a mass-produced estate plan or living trust.

 

Make no mistake, I’ve no wish to become the legal equivalent of the Maytag repairman.  The need for practical, common sense estate planning is undiminished.  Planning for temporary or permanent incapacity, ensuring that the children in a blended family are treated equitably, and making sure that inheritances are not squandered or given up to the state, to name just a few, are just as vital as before. 

 

On the other hand, if, just maybe, you should hit the Lotto, well, operators are standing by . . ..