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Legal Notes

The risk of real estate transfers

It has been a challenging month for several of the families with whom I am working. In each case, an elderly person transferred real estate to protect it from nursing home expenses and, in each case, it created a mess! Sadly, their stories are common.

Louise was 95 years old, frail, and had no liquid assets, but still lived at home. Last fall, she decided to sell her house to her niece and, since her niece was having financial difficulties, Louise offered to give her a $14,000 discount on the sale price and hold the mortgage. The attorney they met with agreed to prepare the deed and mortgage. The problem? Only a few months later, Louise needed a nursing home and was ineligible for MassHealth benefits, because both the discount and the 30-year mortgage (considering Louise’s life expectancy) were considered gifts. MassHealth imposes a period of disqualification for gifts made within sixty (60) months prior to application, which would jeopardize Louise’s ability to receive care.

Bob had transferred his home to his daughter many years ago, reserving a life estate for himself. The transfer would not jeopardize his eligibility for MassHealth because it happened more than sixty (60) months ago. However, his daughter lives in the house and, earlier this year, wanted to refinance the mortgage. The attorney they met with recommended that Bob, now 85 years old, give up his life estate to simplify the financing process. The problem? Bob is now in a nursing home, has no cash resources, and his release of the life estate will be treated as a gift for MassHealth purposes. His application will be denied.

Last year, Mary and Frank, a married couple, were both in their 90s and Mary was showing signs of significant cognitive decline. They told their attorney that they wanted to add their son to their deed, as a joint owner. The problem? Mary is now in a nursing home and adding their son to the deed is considered a gift (1/3 of the value), so any MassHealth application will be denied.

In all of these cases, there were alternatives which would have ensured that the elder would qualify for MassHealth to pay for nursing home care. It is critical that anyone who is considering sale or transfer of real estate or cash assets inform themselves about potential consequences of the action they are considering, including the impact on MassHealth eligibility. Attorneys knowledgeable about estate planning options, particularly for homeowners, are an important resource to avoid future problems.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.

Vehicle titles

Pam OddyAttorney Pamela OddyMany people assume that adding another name, such as a daughter’s or a son’s, to the title of their vehicle will automatically create a joint tenancy. The purpose of establishing joint ownership of the vehicle is to avoid probate upon the death of the parent.

Unfortunately, the DMV (Department of Motor Vehicles) does not consider a second name, other than a spouse, on the vehicle’s title to be a co-owner. Therefore, if a parent adds a child’s name to the title, the vehicle will not automatically revert to the person whose name is listed second on the title. Instead, the vehicle will be considered to be owned by the parent in his/her name alone and will have to go through probate upon the death of the parent.  After the parent has died, the task of transferring the vehicle becomes the responsibility of the (probate) court appointed Personal Representative.

On the other hand, the DMV considers a vehicle which is titled in the names of two spouses to be jointly-owned. And a vehicle owned by one spouse in that person’s name alone will be easily transferred, upon death, to the surviving spouse by providing specific documents, including a form certified by the insurance company that insures the car, even though the surviving spouse’s name is not on the title.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, online or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online.

Foreign lottery “sweepstakes” – no winners in this far too common scam

Last August a Massachusetts federal district court judge sentenced a New York man to more than four years in prison and to repay more than $733,000.00 to his victims, one a Massachusetts man, in a foreign lottery scam. Foreign lottery scams are all too common. Some victims of these scams lose their entire life savings.

The scam begins with a mailing or telephone call informing the victim that they have won a foreign sweepstakes. Scammers then inform their victims that they first need to send a certain sum of money for “fees” and/or “taxes” on these “winnings.” Once a person responds and sends money, the scammers continue to repeatedly request more funds, with each request giving differing types of bogus reasons to release the funds. The scammers may also send a victim a fake, authentic-looking check that they claim is to pay for the fees or taxes. The victim is instructed to deposit this check into their bank account. That “check” will bounce. By the time it is discovered that this check is fraudulent, the funds have already been collected by the scammers from the victim’s account, and the victim has not only lost the amount of the check, but is also responsible for the bounced check fees. Many of these foreign lottery scams originate from Nigeria and other African countries, Canada, some Central American countries, and Jamaica and other Caribbean countries.

These scammers are excellent con artists and can be very charming and very convincing. They may send very official looking documentation complete with legitimate looking stamps and seals. There may also even be a call from someone claiming to be a legitimate governmental authority. Their victims are not necessarily people who suffer from cognitive impairments. Many are competent adults, who are well-educated, well-read, and intelligent. Victims of these scams can be anyone of any age, but senior citizens are usually targeted. Family and friends can become estranged from these victims because they were unable to convince the victims that they were scammed. Victims may also become angry and distrustful of the very people who are trying to help them.

Other scammers also purchase the contact information of victims. To prevent being a victim, never respond to any correspondence or phone call that claims you won a foreign lottery or any contest that you never legitimately entered. If you already had phone contact with a scammer, hang up when called again. It is not rude to hang up on a criminal.

Foreign lotteries are illegal in the U.S., and playing a foreign lottery is a violation of federal law. Furthermore, winners of legitimate contests or legal lotteries are never required to pay any fee or pre-pay taxes on any winnings.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.

Updating Durable Powers of Attorney

Pam OddyAttorney Pamela Oddy, Athol, Mass., 978-249-7511At a recent conference for seniors, I was told by a member of the audience that a lawyer had suggested to this person that the Powers of Attorney that were signed eight years ago should be updated. The question from this person was essentially asking whether or not this recommendation was a valid one. The answer is yes; it is a valid suggestion.

Durable Powers of Attorney are, theoretically, valid until the person who has signed the Power has died or the Power has been rescinded or revoked or supplanted by a guardianship/conservatorship process.

Unfortunately, I am finding that financial institutions, such as banks, are wanting the Power of Attorney to be no older than five years. To compound the problem, other financial institutions such as those that handle stock sales or transfers are not comfortable with a Power of Attorney that is older than six months.

Some individuals may have become incapacitated since the Power of Attorney was signed and if the document was a “durable” Power of Attorney, it remains in force even if the principal (person who signed it) has become incapacitated.  Another way to satisfy the concerns of entities such as financial institutions is to have the agent appointed by the durable power of attorney sign an affidavit in the presence of a notary, assuming these statements are true, that states: 

  1. The attached copy of the Durable Power of Attorney document is a true and accurate copy of the original.
  2. The power granted is in full force and effect and has not been revoked.
  3. The Grantor, (name of principal), is alive.

Although updating Powers every six months is not feasible, if the principal remains able to do so, I do recommend to my clients that they update their Powers every five to six years. Incidentally, that is also a good time to glance at your Will to be sure it is the way you want it to be.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.

Qualified charitable distributions

Seunghee Cha ProfileAttorney Seunghee ChaAre you over 70.5 years old? Are you charitably inclined? Do you have an individual retirement account (IRA)? If so, you can give up to $100,000 annually to charity directly from your IRA without the distribution being treated as part of your adjusted gross income (AGI) or taxable income. This type of charitable donation is called a Qualified Charitable Distribution (QCD).

Through the Consolidated Appropriations Act of 2016, Congress made the QCD permanent. Normally, distributions from your IRA are attributable to your AGI. If you make a charitable donation with funds after withdrawing them from your IRA, the donation reduces your taxable income (which is distinct from AGI) by the amount of the donation up to 50% of your AGI; however, your AGI is not reduced by the donation, because the IRA distribution is still added to your AGI. By contrast, if you give to charity directly from your IRA and meet the requirements for such donation to be treated as a QCD, the amount of the donation does not increase your AGI.

The exclusion of your charitable contributions from your AGI is significant, because the AGI affects your itemized deduction, credit, and exemption phase outs, Roth contribution eligibility, the net investment income Medicare surtax, Medicare premium costs, and taxability of Social Security retirement income. You can take advantage of QCDs even if you don’t itemize deductions: You can exclude your QCD from taxable income and take the standard deduction. Charitable giving is deductible if it is less than 50% of your AGI, and QCDs reduce your AGI even if the total amount would be otherwise greater than 50% of your AGI. Moreover, QCDs count toward the minimum required distributions from IRAs, which is attractive for those who continue to work and do not depend on IRA distributions or are in a higher income tax bracket.

Individuals over 70.5 years old who would benefit from QCDs:

  • You are charitable and do not itemize deductions.
  • Your IRA distributions push you into the 15% federal capital gains bracket. QCDs are excluded from taxable income, thus you continue to enjoy 0% federal capital gains tax.
  • Most of your assets are in an IRA(s).
  • You do not need your minimum required distributions.

President Trump’s proposed tax plan would reduce or eliminate certain taxes, deductions, and rates that affect the AGI and taxable income; however, minimum required distributions from IRAs and charitable deductions would not be affected under his plan. With the permanence of the QCD, for people over 70.5 years old who are charitably inclined, incorporating QCDs into your IRA withdrawal strategy can yield tax savings to leverage greater payout to charities.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.