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Would a Joint Bank Account Work for You and Your Parents?

Like any other financial move that seems to make sense at first, a joint bank account could actually create more issues than it solves, warns NextAvenue in the article, “Should You Have a Joint Bank Account With Your Parent?”

A joint bank account can be a quick and easy way to help your parents pay bills and monitor their spending. With you monitoring their account, it’s also easier for you to see potential fraud. It allows an adult child to watch for unauthorized purchases or other issues with the account, like late fees or overdrafts. Another benefit is that in the event of your parents’ deaths, you will have immediate access to the account funds without the need to go through the probate process. This can be helpful when paying burial and other final expenses.

However, there’s plenty that can go wrong if you have a joint bank account with your parents.

First, your parents’ money won’t be safe from your own debts or liabilities. If something happens to you, like an accident, divorce, or bankruptcy, you’ll be putting your parents’ money at risk. Depending on the rights of survivorship on the account, all the money in the account could go directly to you when the last of your parents dies. That would disinherit your brothers and sisters.

If you make deposits to the account yourself, it may impact your parents’ eligibility for government benefits, like Medicaid. A joint account may also play a role in your child’s student financial aid eligibility because government and financial institutions can designate all the money in the joint account as your money—even if half of it is yours and half belongs to your parents.

There can also be tax implications to having a joint account. The IRS could deem this to be a gift, triggering a gift tax return, if the account is valued above $15,000 (from each parent for 2018). Likewise, if the parents and adult child open a new account together, and the parents deposit a large amount of money which the adult child later withdraws, it could arguably be seen as a gift.

Look at these options that might work better for you and your family instead of a joint bank account:

1. With signature authority on an account, you can pay your parents’ bills. However, you won’t be authorized to use the money in ways that aren’t for their benefit, and the money will be protected from your creditors.
2. With power of attorney, an adult child can make financial decisions on the accounts that are titled in the parents’ names. The POA should be durable, so that it will still be in place, if the parents become incapacitated.
3. Your parents can create a revocable living trust, appoint you as co-trustee and open a bank account in the name of the trust with two or more signers. Talk with an estate planning or elder law attorney to see if this makes sense in your situation.
4. If you’re worried about your mom or dad’s mental capacity, you petition the court for guardianship, which will let you to manage his or her finances. The guardian doesn’t own the funds, and the money can’t be garnished or seized to settle a guardian’s debt. However, it’s a difficult and complicated process. All concerned may be better served to have a durable power of attorney in place, before a parent becomes incapacitated.
5. What if your larger concern is that funds will not be available after your parents die, because they’ll be part of probate? One way to address is by adding a ““Payable on Death” provision to their bank account. The funds will be paid directly to the account’s beneficiaries. A word of caution: speak with an estate planning attorney to be sure that this will not have an impact on any estate planning already in place.

Reference: NextAvenue (July 17, 2018) “Should You Have a Joint Bank Account With Your Parent?”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Are You Financially Ready to Live Past 90?

Longer lifespans mean that financial planning has had to change. As recently as one generation ago, advisors considered retired people in their 60s and 70s close to death’s door, but today many people are working well into their late sixties, even early 70s.

Baron’s recent article, “Planning Ahead for Longer Lifespans,” says that people are just living longer, well into their 80s and 90s. But there’s a problem: people, even wealthy ones, aren’t preparing to live longer.

Once people reach their late 50s or early 60s, they’re likely to live into their mid-80s or beyond.

That’s a long period of time, but it’s manageable, if it is planned for.

One of the biggest fears many people have is cognitive decline. Therefore, they need to put a plan in place for managing the family’s investments or the family business, should the head of a family suffer from dementia.

Dementia is a general term for a decline in mental ability severe enough to interfere with daily life. Memory loss is one example. Alzheimer's is the most common type of dementia.

Those with dementia may have issues with short-term memory, keeping track of a purse or wallet, paying bills, planning and preparing meals, remembering appointments, or traveling out of their neighborhoods.

The Alzheimer’s Association reports that one in three seniors dies with Alzheimer’s, or another form of dementia. That means it’s a very real scenario for many families.

Planning for cognitive decline is a smart strategy, since “competence” is still a fuzzy definition at best, even among doctors. Attorneys are already seeing a rise in litigation around this issue, and some expect questions concerning competence to be a defining issue of the future. When your family discusses estate planning and aging, include cognitive decline planning as an important topic.

Reference: Baron’s (June 8, 2018) “Planning Ahead for Longer Lifespans”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Why Do I Need a Living Will?

A living will provides instructions about how you want to be cared for at the end of your life. It allows you to convey your wishes at during a time, when you may not be able to do so. It also spares loved ones from having to guess at what you wanted.

The (St. George UT) Spectrum’s recent article, “How to Make a Living Will,” explains that to adequately detail your wishes concerning your end-of-life medical treatment, you should have two legal documents: a living will that tells your physicians what kind of care you want to receive, if you become incapacitated; and a health care power of attorney or health care proxy. This document designates an individual you authorize to make medical decisions on your behalf, if you become incapacitated.

These two documents are sometimes called an Advance Directive. The documents are only used, if you are too ill to make medical decisions yourself. You can also change and update them, whenever you want.

It’s recommended that you have these documents prepared by an attorney who focuses their practice on estate planning and health care related matters. Many are members of the National Academy of Elder Law Attorneys (NAELA.org) and the National Association of Estate Planners and Councils (NAEPC.org).

In addition, you should think about whether or not you want to include a Do-Not-Resuscitate Order (DNR) as part of your advance directive. That’s because an advanced directive doesn’t really protect you from unwanted emergency care, like CPR. Doctors and hospitals in all states accept them. To create a DNR, ask your physician to complete a form that’s accepted in your state and sign it. Make sure to tell friends and family where it is located, if the time comes that it is needed.

Another document that you should know about, also related to your advance directive, is the Physician Orders for Life-Sustaining Treatment (POLST). This document is currently endorsed in 22 states, with 24 more in some phase of development. A POLST translates your end-of-life wishes into medical orders that will be honored by your doctors.

To be certain that your final wishes are followed, make sure that you tell your family members, health care proxy and healthcare team, so they all are informed as to what you want.

You should also provide copies of your advanced directive to all those involved, to help prevent stress and arguments when the time comes.

If yours is a tech-savvy family, you may want to consider the use of an online service that stores your advance directive, so that anyone with access to the account can obtain the advanced directive instantly when needed. Be certain that everyone has log in information.

Reference: The (St. George UT) Spectrum (June 11, 2018) “How to Make a Living Will”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899

Can There Be an Exception to a No-Contest Clause?

The idea of a no-contest clause or in terrorem clause is to prevent any parties with standing from contesting an estate, but the threat of penalties or litigation doesn’t seem to warn off everyone.

In a case heard by the Supreme Court of Wyoming, a trust's in terrorem clause stated that any challenge made by or on behalf of the settlor's son or grandchildren would terminate any interest in the trust of any descendant, reports Leagle.com in the case of “EGW v. First Fed. Sav. Bank.”

The Appellants were the grandchildren of Mr. Willey, who created a revocable trust. They filed suit seeking to prevent the sale of land held in the trust. They challenged the court's grant of summary judgment in favor of the Appellees, a bank that was the successor trustee, and the beneficiaries of the trust. The district court determined that the Appellants were no longer beneficiaries of the trust, as a result of their father's 2014 lawsuit against Mr. Willey and his wife.

Among the issues that the Appellants presented was whether, as a matter of law, the Appellants' father's 2014 lawsuit challenged only the 2010 Trust Amendment, at a time when the in terrorem clause did not disqualify the Appellants.

In 2001, Allen Willey created a revocable trust that provided for the management of his assets during his lifetime and for distribution of the assets upon his death. A ranch was included as a trust asset. Mr. Willey served as the trustee of the trust during his lifetime, and the trust initially named his son Spencer as successor trustee. The trust ultimately benefitted Spencer's minor children, E.W. and A.W.

Mr. Willey amended the trust to add his wife's daughter and granddaughter as beneficiaries. In 2010, he made additional changes to the original trust, removing Spencer as beneficiary and successor trustee. The Appellants remained as beneficiaries.

In 2014, he amended the trust again and changed the successor trustee to a local bank. The charge also provided that under no circumstances, should Spencer or any lineal descendant of Mr. Willey be named trustee. The amendment also added an in terrorem, or "no-contest" clause, which is the subject of the case.

In 2013, Mr. Willey hired a real estate broker for to sell the ranch. Spencer filed for an injunction and Declaratory Judgment against Mr. Willey, individually and as trustee of the trust, and Mr. Willey's wife. Spencer sought to set aside the listing of the ranch and requested that Mr. Willey be removed as trustee due to incapacity. Spencer also alleged that Mrs. Willey had exercised undue influence over Mr. Willey and convinced him to sell the ranch, instead of leaving it in the trust. Spencer amended his claim to add that Mrs. Willey exercised undue influence over Mr. Willey by convincing him to remove Spencer from the trust, reduce the benefits to E.W. and A.W. and grant additional benefits to herself.

About a month after the Amended Complaint was filed, Mr. Willey died. The case went to trial, and the jury found that the trust amendments weren’t the product of undue influence. Spencer appealed, and the Wyoming Supreme Court affirmed.

As that appeal was pending, the Appellants filed this action through Spencer, who acted as "next friend" for his children. They sought an injunction preventing sale of the ranch, a judgment that the in terrorem clause wouldn’t apply to them, removal of the bank as trustee, and damages for the bank's alleged breach of fiduciary duties.

After a hearing, the district court granted summary judgment to the Appellees, determining that the Appellants' claims relating to Spencer's standing (right to bring a lawsuit) in the 2014 suit lacked support or authority. But the court said that Spencer had standing to challenge the trust in the 2014 action and that the challenge terminated E.W.'s and A.W.'s interest in the trust.

On appeal, the Appellants claimed that Spencer's 2014 suit could not have constituted a "challenge" to the trust because the suit was filed during Mr. Willey's lifetime. Further, the Appellants assert that, because Mr. Willey did not remove them as beneficiaries after the 2014 suit was filed, he must have intended for the in terrorem provision not to apply. The Supreme Court of Wyoming didn’t agree.

Chief Justice E. James Burke wrote in his opinion that Wyoming doesn’t recognize an exception to enforceability of no-contest clauses where a will contest is made in good faith. The Appellants also didn’t allege any changed circumstances between the time of the creation of the trust and Mr. Willey's death. The Court wasn’t persuaded that the 2014 suit couldn’t have constituted a challenge to the trust, because it was initiated during Mr. Willey's lifetime.

Judge Burke said the Court must interpret the intent of the settlor, according to provisions contained in the trust. The Court was not persuaded by the Appellants' claim that because Mr. Willey didn’t remove them as beneficiaries after the 2014 suit was filed, he must’ve intended for the in terrorem provision not to apply.

The Judge noted that the decision was governed by the “plain and ambiguous language of the in terrorem provision.” Clear language that is not open to misinterpretation, is a powerful force in the law.

The case was affirmed.

Reference: Leagle.com (March 5, 2018) “EGW v. First Fed. Sav. Bank”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899 .