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Case Study: Beneficiary Designations, Divorce, and Probate – Which Applies?

Richard Hibbard purchased an annuity from Allianz Life Insurance Company that named his wife, Jeanne, as primary beneficiary. The Hibbards later divorced but Richard never changed the beneficiary designation. At Richard’s death, Allianz paid Jeanne $97,000 as the beneficiary of the account.

Richard’s estate sued Jeanne and Allianz, contending that the Florida statute section 732.703 automatically revoked the beneficiary designation at the time of divorce. This statute states, in part:

A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order.

Jeanne, who still lived in New Hampshire (where the Hibbards had lived during their marriage and at the time of divorce), moved to dismiss. She stated that federal court did not have jurisdiction and that the statute did not apply due to the provisions in the New Hampshire divorce decree. The motion to dismiss was denied.

The court held that there was no basis to conclude that the federal court was interfering with the probate proceedings. Thus it was appropriate to resolve this at the federal court. In addition, the court stated that the Allianz contract was the governing contract and not the New Hampshire divorce decree.

Of course, this could have been avoided had Richard updated his beneficiary designations. This case underlines the importance of keeping your beneficiary designations up-to-date. Our lives change constantly so your estate plan and beneficiary designations should reflect your current wishes. If you have been putting off updating your estate plan, contact our office. We would be happy to help you review and update your estate plan to reflect what you want.

Source: Estate of Richard Brookes Hibbard v. Jeanne Hibbard et al.

Nursing Homes Abandoned Elderly in Fire

fire nursing home

Last year, deadly wildfires ravaged northern California. The firestorm left dozens dead and thousands misplaced. In the midst of this disaster, staff members at two nursing homes in Santa Rosa, the city affected most by the firestorm, abandoned their residents, many of whom could not walk and suffer from memory problems. The California Department of Social Services has filed a legal complaint against the two nursing homes and is now seeking to close the facilities and strip the managers of their licenses.

Fortunately, none of the nursing home residents died or were injured in the fire. However, the Department accuses the staff of being unprepared and leaving before everyone was taken to safety. In one nursing home, staff members did not know the evacuation plan, had never participated in a fire drill, could not find flashlights or batteries when the power went out, and did not know where to find keys to a bus that could have helped in evacuation.

When the last staff members left the nursing home, family members and emergency medical workers took charge to evacuate the remaining 20 residents. “If these family members and emergency responders had not evacuated Villa Capri [nursing home] residents, more than 20 residents would have perished when Villa Capri burned to the ground after all staff left the facility,” states the complaint.

Michael Weston, spokesman for the California Department of Social Services, said that Oakmont Senior Living, the company that owns the two nursing homes, has 15 days to appeal the legal complaint and request a hearing. “Based on evidence gathered during the investigations and the statements of witnesses, the Department has determined that Oakmont Senior Living failed to protect the health and safety of residents at Varenna and Villa Capri,” Mr. Weston said.

The Department of Social Services has also accused Oakmont Senior Living of publishing inaccurate statements about the evacuation. The company said that seven employees “successfully evacuated all residents at Villa Capri,” describing it as a “team effort led by staff.” Oakmont Senior Living said on its website, “Many of our Oakmont residents and families, alongside emergency medical workers, worked hard to alert their neighbors and ensure they were also brought to safety.” However, the Department of Social Services feels these statements are “false and misleading.”

This event is a powerful reminder that disaster situations (including hurricanes, tornadoes, heat waves, forest fires, and blizzards) can be especially detrimental to elderly ones with dementia. As a loving family member or friend, there are steps that you can take to assist your elderly loved ones with dementia in case of a disaster. Following these tips and being prepared can help you and your loved ones deal with an emergency situation in the best way possible.

Source: New York Times “California Says Nursing Homes Abandoned Elderly During Fire”


Guardians and Attorneys-in-Fact Cannot Dissolve Marriage

A recent Court case clarified an area of law which was previously unclear: whether or not a guardian or attorney-in-fact can file a dissolution of marriage. When Jerry and Susan married, they signed a Pre-Marital Agreement. Jerry later changed his estate plan to leave Susan a larger share than the Pre-Marital Agreement provided. Jerry’s health declined and his children were given guardianship over him.

During this time, Susan filed for a dissolution of marriage. As Jerry continued to decline, Susan dismissed her petition for dissolution. However, the children (who were serving as guardians) instructed their attorney to file a cross petition for dissolution on behalf of Jerry. The attorney filed the cross petition but advised the children that there was no specific legal authority allowing guardians to pursue a dissolution of marriage.

Despite objections from Susan’s attorneys, the trial court allowed the petition to proceed.  In the midst of these proceedings, Jerry died before the marriage could be dissolved. The children, who would have gotten more had the marriage been dissolved, filed a legal malpractice claim against their attorney for not diligently prosecuting the dissolution of marriage. However, the trial court found no evidence of this claim and dismissed it.

The Court of Appeals affirmed. It agreed that there was no evidence of malpractice. In addition, it clarified the area of law regarding guardians or attorneys-in-fact filing a dissolution for marriage. The Court found that a guardian has no authority to pursue a dissolution of marriage either under family law or probate code. The children argued that they also had power of attorney and should have been able to file for dissolution. However, the Court found that an attorney-in-fact does not have authority to pursue a dissolution of marriage. It acknowledged that although the law regarding an attorney-in-fact’s power is quite broad, it does not specifically mention dissolution of marriage. Because it is not mentioned in the statute, then an attorney-in-fact does not have that authority. Therefore, the children’s cross petition for dissolution would have been unsuccessful.

Changes to Indiana Law Impact Health Care Decisions

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Recent changes to Indiana law impact those who are unable to make their own health care decisions.  Under the newly enacted Indiana code section, the following are prohibited from making health care decisions:

  • A spouse who is legally separated or with whom the individual has a pending divorce action
  • A person who may not contact the individual because of a protective order
  • An alleged perpetrator of a crime against the individual with pending criminal charges

If you do not have Health Care Directives in place, Indiana now has a new hierarchical order for health care decision making.  The order of priority is:

  1. Court-appointed guardian
  2. Spouse
  3. Adult children
  4. Parent
  5. Adult siblings
  6. Grandparents
  7. Grandchildren
  8. Close relatives
  9. Close friends
  10. A religious superior.

In all cases, it is crucial that individuals make their own choice of health care decision maker before they become incapacitated so this hierarchy does not need to be invoked.  No one wants to have their adult children, for example, arguing over the proper course of medical treatment or end of life decisions.  However, by law, without health care directives, each adult child has the same authority as all other adult children. 

Finally, there have been some modifications to the POST form.  “POST” stands for “physician order for scope of treatment.”  Individuals who are suffering from an advanced chronic progressive illness, such as late stage cancer, or from a condition where death will occur within a short period of time are eligible to fill out a POST form with their health care provider.  The individual can indicate their wishes about CPR, comfort measures, extent of medical interventions, antibiotics, and artificial nutrition.  The statutory modifications focus on allowing nurse practitioners and physician assistants to complete the form with individuals in addition to physicians.

Case Study: Probate Code Does Not Apply to Pre-Mortem Agreements

In 2008, Gary Kent executed a Last Will and Testament that left the majority of his estate to his daughter, Cindy Kerr, and one of his sons, David Kent. On December 16, 2015, at the request of their terminally ill father, Cindy and David signed an agreement to formalize how their inheritance would be divided. Gary signed the Agreement to indicate that it conformed to his wishes. David attempted to rescind the agreement while the father was still living.

After his father’s death, David filed the 2008 Will with the Court. Cindy challenged the probate of the Will requesting the Agreement be enforced either as a codicil or a settlement agreement pursuant to Indiana Code § 29-1-9 (the Adjudicated Compromise Chapter). A trial court found the Agreement was neither a Codicil nor a settlement agreement pursuant to the Compromise Chapter. The trial court found that since the Agreement was executed before Gary’s death, it did not fall within the scope of the Compromise Chapter. It ordered that the Will be admitted to probate without reference to the Agreement. Cindy appealed.

The court of appeals reversed and remanded, concluding that the Compromise Chapter did not clearly prohibit pre-mortem family settlement agreements. It thus instructed the probate Court to enforce the Agreement. However, the Indiana Supreme Court vacated the court of appeals opinion and affirmed the trial court’s order. The Supreme Court held that the Compromise Chapter was intended to only apply to agreements entered into after the person’s death. Therefore, it ruled that Cindy could not use the Compromise Chapter to enforce the pre-mortem agreement with David. The Court declined to address the validity of David’s rescission of the Agreement or the enforceability of the Agreement according to general contract law.

Source: In the Matter of the Supervised Estate of Gary D. Kent v. Cynthia Kerr

Senate Approves $425 Million Increase for Alzheimer’s Research

Recently, the U.S. Senate voted to approve a $425 million increase for federal Alzheimer’s and dementia research funding at the National Institutes of Health (NIH) for the 2019 fiscal year. The U.S. House of Representatives is expected to vote on this budget increase soon. If signed into law, this would mark the fourth consecutive year that the U.S. Congress has approved an increase in funding research for the growing Alzheimer’s crisis. The past five years has seen monumental increases in Alzheimer’s and dementia research funding at the NIH.

More than 5 million people in the United States are living with Alzheimer’s, and it is projected that as many as 14 million Americans could be living with the disease by 2050. Every 65 seconds someone in the United States develops Alzheimer’s. It is the most expensive disease in the country and threatens to bankrupt Medicare.

“Thanks to increased NIH funding American scientists are now advancing basic disease knowledge, ways to reduce risk, new biomarkers for early diagnosis and drug targeting, and developing the needed treatments to move to clinical testing,” says Harry Johns, Alzheimer’s Association and Alzheimer’s Impact Movement (AIM) President and CEO.

The Alzheimer’s Association and AIM championed for the passage of the National Alzheimer’s Project Act (NAPA), which has moved the federal government to take decisive action in the fight to end Alzheimer’s. In addition to the increase in research funding, critical care planning services are now available through Medicare for individuals with cognitive impairment. Also, the Department of Health and Human Services is developing a plan to address the needs of family caregivers.

“We are grateful to the Senate for taking this bipartisan action which will allow the NIH to continue to accelerate research on this devastating and fatal disease,” says Johns. “We appreciate Senator Roy Blunt (R-Mo.) and Senator Patty Murray (D-Wash.) for their continued leadership to secure the funding the scientific community says is needed to address Alzheimer’s.”

Alzheimer’s Association and AIM advocates held thousands of meetings with elected officials, calling on Congress to increase research funding at the NIH. As Congress finalizes the 2019 fiscal year budget over the coming months, the Alzheimer’s Association and AIM will continue to work with Congress to ensure the highest possible research funding amount for Alzheimer’s and dementia at the NIH.

Source: Alzheimer’s Association

Walk to End Alzheimer’s 2018

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Alzheimer’s is a progressive disease that destroys memory and other important mental functions. It is the only cause of death in the top 10 in the United States that cannot be prevented, cured, or even slowed. Currently, more than 5 million Americans have Alzheimer’s and that number is expected to grow to as many as 16 million by 2050.

What can be done about Alzheimer’s? The Alzheimer’s Association endeavors to raise awareness and funds for Alzheimer’s care, support, and research through the Walk to End Alzheimer’s event. This event is the largest like it in the world. It calls on participants of all ages and abilities to unite in ending Alzheimer’s.

Our local Fort Wayne Walk to End Alzheimer’s will be held at Parkview Field on Saturday, October 6, 2018. There is no fee to register but fundraising is encouraged in order to contribute to the cause and raise awareness. The Alzheimer’s Association provides free, easy-to-use tools and staff support to help participants reach their fundraising goal.

Do you want to help end Alzheimer’s? Join our fundraising team. The Walk will be held at Parkview Field, 1301 Ewing St., Fort Wayne, IN 46802 on Saturday, October 6, 2018. Registration begins at 10:00 a.m. and the ceremony at 11:30 a.m. with the Walk immediately after. If you can’t make it to the Walk, you can donate to our team in support of Alzheimer’s. Your funds will be used to further the care, support and research efforts of the Alzheimer’s Association.

Thank you for joining the movement! The end of Alzheimer’s disease starts with you.

Reducing Taxes with Charitable IRA Distributions

Retirees who want to reduce their income tax liability can do so by using some or all of their Required Minimum Distributions to benefit their favorite charities.

What is a Required Minimum Distribution?

A Required Minimum Distribution (RMD) is the minimum amount that you must withdraw annually from your retirement account. Generally, you must start taking withdrawals from your qualified accounts, such as IRAs, SEP IRAs, or SIMPLE IRAs, when you reach 70 1⁄2 years old. The RMD rules do not apply to Roth IRAs during the account owner’s lifetime. However, Roth IRAs do require withdrawals by the beneficiaries after the death of the owner.

Account owners are responsible for taking the correct amount of RMDs on a timely basis each year from their accounts or face stiff penalties from the IRS. You can always withdraw more than the minimum amount if you wish. Your IRA distributions will be included in your taxable income if the funds being distributed were deductible at the time you contributed them to the account.

Taxes and Your RMDs

When you put money into your retirement account on a pre-tax basis, you have not yet paid taxes on it. Your account continues to grow tax-deferred until you start to take distributions. To ensure that taxes are eventually paid on this money, the IRS requires you to start taking RMDs (and pay income tax) by April 1st of the year following the year you turn 70 1⁄2.

Of course, not everyone needs their annual RMD for living expenses. For those individuals who are also charitably inclined, up to $100,000 of the RMD from may be distributed directly to a 501(c)(3) public charity each year, which enables you to avoid paying income taxes on the amount. This is known as a qualified charitable distribution (QCD). Employer-sponsored plans do not allow for the QCD option. Also, donor-advised funds, private non-operating foundations, and supporting organizations cannot currently accept QCDs because they are not categorized as 501(c)(3) public charities.

Requirements of the QCD

IRA owners must be 70 1⁄2 years or older to make a tax-free charitable contribution. You can transfer up to $100,000 per year directly to an eligible charity without paying income tax on the transaction. If you file a joint tax return, your spouse can also make a charitable contribution of up to $100,000 per year, meaning couples can exclude up to $200,000 of their retirement distributions from income tax if they donate it to charity. QCDs must be made by December 31st each year in order to exclude the distribution from taxable income. If you transfer more than the maximum allowable amount, the excess distribution is considered income and subject to income tax.

Charitable contributions can only be made from IRAs, not 401(k)s. You would need to roll over funds from a 401(k) to an IRA if you want to make tax-exempt charitable contributions part of your retirement plan. You don’t need to itemize your deductions in order to make an IRA charitable distribution. It is critical, however, that the funds are transferred directly from your IRA to an eligible charity in order to qualify for the tax break. If you first withdraw the money and later donate it, it will not qualify as a tax-free QCD.

Advantages of Charitable Contributions

A $100,000 charitable contribution from your IRA can save you tens of thousands of dollars in taxes, depending on your tax rate. Using even a portion of your RMD for charitable giving can offer huge tax breaks, especially if you already donate to charity. For example, a retiree in the 25% tax bracket who makes an IRA charitable contribution could save $1,250 in taxes. Even a $1,000 contribution could save $250.

Your QCD can come from part or all of your RMD. Also, you can distribute your RMD to multiple charities in the same year. To report a QCD on your form 1040 tax return, you usually report the full amount of the charitable distribution on the line for IRA distributions. Then, on the line for the taxable amount, enter zero (if the full amount was a QCD) and put “QCD” next to it.

QCDs are a great way for retirees to benefit their favorite charities while also significantly reducing their own tax bills.

Source: IRS and Fidelity

Options to Consider When Planning for Long-Term Care Expenses

Photo via Pexels

The need for long-term care is shared by as many as 12 million Americans today. Many of these seniors find it difficult to finance the high costs of long-term care, particularly in nursing homes or assisted living facilities. Although Medicare can help seniors pay for expensive medical services and treatments, it does little to help cover the expenses of daily living assistance. Even if you never anticipate needing long-term care, it’s an excellent idea to be prepared. Plan ahead to cover the costs so you can support a high quality of life for you or your loved one.

Aging in Place Safely

The majority of seniors who receive assistance choose to remain at home rather than in an institution. This can easily be managed by making some simple home upgrades to increase the safety and functionality of your space. This might mean installing grab bars in bathrooms to reduce the risk of falls or widening doorways to accommodate walkers and wheelchairs. You should consider removing loose carpeting to prevent trips and slips. Adding extra lighting to entrance ways and staircases will also help prevent falls by increasing the visibility of steps and other hazards. If you can, move your essential rooms to the ground floor of your house to minimize the number of times you need to use the stairs. Installing railings on both sides of staircases can also make a huge difference when it comes to safety. The idea here is to make your home safe, more enjoyable and easier to live in.

Understanding Your Insurance Options

Long-term care insurance is invaluable to seniors who end up requiring assistance with daily tasks. You have a couple of different options for this. Long-term care insurance will cover the costs associated with care that are not covered by Medicare. For many, however, the premiums required by long-term care policies are too high, causing Americans to look elsewhere for help with coverage. Another, newer option is to get a hybrid life insurance policy with a long-term care option. If you end up needing long-term care, this policy will help you cover the expenses. If you don’t, your family will receive your death benefit. Just note that these hybrid policies are often more expensive than traditional long-term care insurance.

Government Programs That Can Help You

Although Medicare does not cover the costs of ongoing personal care, Medicaid may be able to help you out if you’re a low-income family. Your eligibility for Medicaid will depend on your assets and the specific requirements of your state, but the program generally covers costs for nursing homes, assisted living, and care at home. Some states have PACE, a program that can provide at-home care to people who would otherwise have to move into a nursing home. You should also take advantage of any veterans benefits or Social Security disability income that you may be eligible for. Check out for more information.

Receiving Income from Your Investments

Another option is to supplement your retirement pension by using your assets to produce an income. PayingForCare recommends seeing if you can fund long-term care yourself to avoid paying insurance premiums. For example, if you’re moving to a nursing home or assisted living facility and your house will remain empty, you can rent it out to help pay for your care. If you choose to sell your home, you can invest the money into bonds and shares that pay out regular returns. Both of these options allow you to hold onto your assets while using the money they generate to fund your care. This may not be able to cover the full expense of long-term care, but it can certainly help you out.

Seniors can still have a meaningful life regardless of any decline in their physical or mental functions. Long-term care allows people to receive the individualized support they need to retain their dignity and age with grace. Since long-term care can be quite costly, anyone over 50 should seriously consider planning for the expense, even if you don’t think you’ll need it.

Source: Marie Villeza of ElderImpact