Posts Tagged ‘Nebraska’

When You Might Want to Open an ABLE Act Account

SEPTEMBER 13, 2016 VOLUME 23 NUMBER 34
Now that ABLE Act programs have been set up in several states, you might wonder if it’s time for you to set up an account for yourself or a family member with a disability. How can you figure out whether ABLE is right for you? We’ll try to help.

The Achieving a Better Life Experience Act (ABLE Act) was passed in 2014. It permitted people with disabilities to have a separate account, usable for disability-related expenses, that would not be counted as an available resource for Supplemental Security Income (SSI) or Medicaid eligibility purposes. States were encouraged to set up ABLE Act programs, and people with disabilities were permitted to open an account with any state — provided that the state permitted non-residents to participate.

So far, four states have opened their ABLE Act programs. One of those (Florida) permits only Florida residents to participate. The other three (in Ohio, Tennessee and Nebraska) are open to anyone who qualifies.

ABLE limitations

There are a number of concerns about ABLE Act accounts. First, no more than $14,000 per year can be put into an account. Second, any funds left in the account at the death of the participant — regardless of where the money originally came from — will be paid to the participant’s state’s Medicaid program. Those two limitations make ABLE Act accounts unattractive for most family members who might otherwise think of giving or leaving substantial assets to a loved one who happens to have a disability.

There is a lot of misunderstanding about one other item: are ABLE Act accounts like investment accounts, or more like checking accounts? In some cases they might look like one or the other, but thinking of ABLE Act accounts as terrific investment opportunities for people with disabilities is, well, just misguided. Earnings will be limited, expenses are likely to be somewhat higher than similar accounts for other purposes (like education accounts, on which the ABLE Act accounts were modeled), and any account that does grow to more than $100,000 will cause suspension of SSI benefits anyway. We believe that, in most cases, ABLE Act accounts will most resemble checking or savings accounts.

ABLE uses

That doesn’t mean that the ABLE Act won’t provide terrific opportunities, however. There are a number of situations in which we imagine the ABLE Act will be a great boon for beneficiaries. A sampling of the most likely beneficial circumstances for ABLE Act accounts:

  1. The capable beneficiary. Are you the person with a disability? If you could handle a savings account yourself, but have been unable to put anything away because of the $2,000 asset limit for SSI, then the ABLE Act was written for you. You can now save any money you don’t need from your SSI each month, and park it in an ABLE Act account. You can save for vehicle repairs (or a new vehicle), for tuition, or even for the property taxes on your home. There are more uses you can consider, and you probably see the possibilities.
  2. The housing shortfall. Do you (or a family member) get assistance with your housing expenses? And when you do, does that reduce your SSI benefit? If so, you might explore the ABLE Act account as a way to pass the housing assistance through a sieve that makes it perfectly permissible — and removes any reduction in your SSI payments. Your bottom line might be to increase your SSI benefit to the highest possible amount, while still getting assistance from family members with living expenses.
  3. The small inheritance, or personal injury settlement. If you have less than $14,000 coming to you from an unrestricted inheritance, or settlement of a personal injury lawsuit, you probably already know that it could interrupt your eligibility for SSI (and, perhaps, for AHCCCS, Arizona’s Medicaid program). ABLE makes it possible to take the proceeds — so long as they are less than $14,000 net — and have no negative effect on your benefits. Even slightly larger amounts can be handled this way, depending on timing, other expenses and the particulars of each situation. But one obvious way to increase the number somewhat: in addition to the $14,000 put into an ABLE Act account in any given year, an SSI recipient is permitted to have up to $2,000 in a regular bank account — provided that it’s the only account. So a person who has no assets at all can settle a $16,000 lawsuit without having any effect on SSI.
  4. The Special Needs Trust beneficiary. This one may not always be available (trust language can differ), but it might be a great option: the trustee of a special needs trust, who has been unable to give any money directly to the beneficiary, may now be able to put money into an ABLE Act account. That could give the beneficiary control over the funds, and the ability to pay at least some bills directly. The ABLE Act could give new flexibility to trustees of special needs trusts.

We’re confident that there are other ideas out there, and we even have a few ourselves. Another time perhaps we’ll try to compare the available ABLE Act accounts.

In the meantime, we have one other suggestion: if you have created a special needs trust for your child (or other person) with a disability, you might want to consider modifying it to explicitly permit the trustee to put money into an ABLE Act account. We’re happy — eager, in fact — to talk with our clients about this idea.

Court Sets Aside Agent’s Transfers to Self Using Power of Attorney

JUNE 13, 2016 VOLUME 23 NUMBER 22
John Richardson was 86, living on his family farm in rural Nebraska, when he became ill enough that he could no longer take care of himself. His long-time companion Elaine had been living with him and providing care, but she could no longer handle his care, either. John’s nephew Larry moved in to help with care.

As is our usual practice, the names of most of the principals in this story have been changed.

Within about a month of his arrival at the farm, Larry had been named as agent on a power of attorney signed by his uncle John and prepared by John’s long-time lawyer. The power of attorney included language allowing Larry to do anything John could have done for himself, “including but not limited to the power to make gifts.”

John had no children. He did have four nieces and nephews, including Larry. He had signed several wills over the years, each one leaving most of his property to his nieces and nephews and naming his attorney to be the personal representative of his estate. That was the status of his estate planning as of the time he gave a power of attorney to Larry.

As Larry took care of John, he learned from John’s companion Elaine about a brokerage account in John’s name. Larry used his power of attorney to get more information from the broker, and then used it again to liquidate the account. He transferred some of the account to John’s other nieces and nephews, and put one portion of the proceeds into his uncle’s checking account. He then used John’s checking account to pay some of his own bills.

Two months after that, Larry used his power of attorney again — this time to sign a deed transferring his uncle’s farm to himself and the other nieces and nephew. The transfer deed did retain a life estate for John.

At about the same time as the deed transferring the farmland, John’s companion Elaine moved out of the farmhouse. Several months later Larry was arrested and charged with abuse of a vulnerable adult and theft by deception.

Meanwhile, John contacted his attorney once again, and asked him to prepare a new will. This will left nothing to Larry or the other nieces and nephew; instead, the bulk of John’s estate would go to a charitable foundation.

Shortly after the new will was signed, John’s attorney decided that it would be better if he had not prepared John’s last will. Accordingly, he arranged for another attorney to meet alone with John, and prepare a second new will. That document substantially mirrored the other will, leaving the bulk of John’s estate to charity.

John died about a month later, and his last will was admitted to probate. As personal representative, his attorney sought return of the farm property and the brokerage account transferred by Larry. The probate court agreed with the attorney’s position, and ordered that a “constructive trust” be imposed on the properties for the benefit of John’s estate.

The Nebraska Court of Appeals reviewed the decision, and concurred. According to the appellate court, the key question was whether John’s power of attorney expressly authorized Larry to benefit himself. Since the general rule is that an agent may not transfer assets to himself, any evidence that Larry had done so would be viewed closely and could support a presumption of improper behavior by Larry.

Interestingly, the appeal was filed not by Larry but by John’s other nieces and nephew. They argued (among other things) that the presumption of breach of fiduciary duty by Larry did not apply to them — after all, they had not taken any steps to transfer anything to themselves, and should not be penalized as if they had done so. The Court of Appeals, however, was unimpressed by this argument, and upheld the probate court’s order reversing the transfers.

The appellate court also responded to John’s nephew and nieces’ argument that he was aware of the transfers signed by Larry, and did nothing about them. The fact of his knowledge (or lack of knowledge) was irrelevant, ruled the judges — the transfers exceeded Larry’s authority and were void regardless of John’s knowledge. Stehlik v. Rakosnik, May 17, 2016.

Since the events involved in John’s case, Nebraska has adopted a uniform multi-state law governing powers of attorney (the Uniform Power of Attorney Act). The Court of Appeals decision takes pains to note that it addresses only the general common law principles in place before the adoption of that Act, and the rules might now be different. The uniform law has now been adopted by almost half of the states (not including Arizona).

 

©2017 Fleming & Curti, PLC