Friday, June 15, 2012

Finders Keepers? Arizona Court Says Not So Fast

An Arizona appellate court recently held that the estate of a man who hid $500,000 cash in the walls of his dilapidated house, rather than the subsequent homeowners, was entitled to the money.  In Grande v. Jennings,  the court held that the original homeowner, Robert Spann, had not in fact abandoned the cash that he had hid in the walls of his home.  Apparently Mr. Spann had made a habit of hiding cash and other values throughout  the home where the cash in dispute was found, as well as other homes that he had owned.

Sometime after his death, Spann's daughter, Karen Spann Grande, as personal representative of her father's estate, sold the home to a couple, Sarina Jennings and Clinton McCallum.  During the course of renovations undertaken by the new homeowners, the $500,000 in cash was discovered hidden in various walls throughout the home.  The contractor initially failed to tell the homeowner's about the cash, but he was eventually ratted-out by one of his employees. After Jennings and McCallum  sued the contractor seeking to recover the cash, Grande sued Jennings and McCallum, claiming that her father's estate was in fact entitled to the money.

After the cases were consolidated, Grande won at trial.  On appeal, the appellate court agreed with the trial court that under Arizona law, to be deemed to have abandoned personal property, "one must voluntarily and intentionally give up a known right."  In this instance, the court ruled, no such voluntary and intentional relinquishment of the cash had been proven, and thus the estate was entitled to the money.  

While the estate ultimately prevailed in this case, Mr. Spann's "method" of estate planning surely left something to be desired. 

Click here to read the decision in its entirety.

Friday, June 8, 2012

GAO Recommends Imposition of Asset Transfer Penalties for VA Pensions

After a year-long investigation, the United Stated Government Accountability Office ("GAO") is recommending that Congress enact legislation that would impose asset-transfer penalties for veterans applying for VA pensions.  Presently, there are no asset-transfer restrictions for the VA pension program

Under current law, veterans who served during war time (they need not have served in combat or even in a combat theater) and who have high medical-related expenses (including the costs for home health aids or assisted living) may be eligible for a VA pension that can pay up to $2,019 per month.  The key requirements are that (i) the monthly out-of-pocket medical expenses must exceed the household income, and (ii) the veteran's assets (and his/her spouse's, if applicable) cannot be "excessive". Unlike the Medicaid program, which has a defined maximum resource limit of $14,250, the VA pension program has no fixed number.  Rather, a "safe" range is often considered to be $20,000 to $50,000, although the VA examiner has wide discretion in determining asset eligibility.

The GAO report claims that over 200 organizations have been identified that claim to assist veterans to obtain a VA pension.  The report alleges that many of these organizations sell veterans unsuitable products in order to become pension-eligible.

While there are almost certainly abuses among certain organizations or companies that purport to assist veterans in navigating the VA pension system, in my view the report unfairly lumps skilled elder law attorneys with the "snake oil salesmen" that produce the worst abuses of the system.  Nonetheless, it appears that there is growing bipartisan support in Congress to implement asset transfer penalties similar to the transfer penalties currently imposed for other means-tested programs such as SSI and nursing home Medicaid.

Click here for the New York Times story on the GAO report.

Thursday, June 7, 2012

Forbes Article Highlights Key Estate Planning Mistakes

Rob Clarfeld, a CPA and Certified Financial Planner who writes periodically for Forbes, recently highlighted seven major estate planning errors.  In my view, he couldn't be more on point.   Number two on his list is the ever-increasing use of "do it yourself" estate planning through LegalZoom and similar websites.  As he says, doing your own estate planning "is a recipe for disaster."

Clarfeld also underscores the importance of ensuring that your beneficiary designations and asset titling must be consistent with your estate plan; far too often the client's planning documents (e.g., wills and trusts) provide for a particular result, but the assets are titled incorrectly (e.g., often jointly titled with another owner), and the beneficiary designations listed on the clients retirement accounts, annuities and life insurance are inconsistent with the client's planning goals.

Clarfeld's final "major" error -- "Leaving assets outright to Adult Children" -- parrots what I have been advocating for the past 13 years; namely, that one of the best gifts we can provide to our adult children is to leave their inheritance in trust.  These lifetime trusts need not at all be restrictive or otherwise prevent the children from having use and access of the inheritance.  To the contrary, a child's trust can be designed as a "beneficiary controlled trust" that allows the child to serve as his or own trustee having access to the trust assets.  If, however, the child were to someday go through a divorce or have creditors knocking at their door, the trust assets -- assuming the trust is properly structured and maintained -- would be deemed off-limits to those "creditors and predators."