Bad Advice from Fellow Professionals – There is No One Size Fits All Law

In this episode, John Ross and Lisa Shoalmire discuss common bits of bad advice from fellow professionals: lawyers, accountants, financial advisors…Like the infamous ‘Dresser Drawer Deed’.

Episode Transcript
John
Welcome back to Aging Insight everybody. This is your host, John Ross here live in the studio with Lisa Shoalmire. We bring ourselves up here because we believe that you can, if you want to. You can age on your own terms. You can avoid becoming a burden on others, and you can avoid losing all of your precious life savings as you navigate through the aging process. And we know you can do this, but we also know you've got to have information. You've got to know how to do it. You've got to not make any mistakes along the way. And if you've already made mistakes, hopefully maybe you find out about that on this show, and you can get out there and correct those mistakes.
John
So, we talked about it when I first started the show, I said, "Well hey, we're gonna... We want to give you information so that you don't make mistakes." But oftentimes, we see people who have already made mistakes and in some cases those mistakes have already blown up in their face, and they're coming in hopefully...
Lisa
Desperately.
John
Desperately, that maybe we can correct the mistake now that hit has already exploded in, and maybe we can put Humpty Dumpty back together again. And I would say in most cases, we can.
Lisa
That's true but... And John, another thing to remember is, when we say "mistakes," we know that many people act with the best of intentions. And they act on the best information and knowledge that they have. And so, these aren't purposeful errors, these are simply, you took some action, because you knew if you didn't do anything that that was a problem. But maybe filtering through all the advice that you received, you took some action. And it turned out, John, just to be the exact wrong thing.
John
Yeah, I know that's right. And so for example on Friday... Here's an example of some folks who were trying to avoid a problem later on. And some folks came in, and they're helping with a family member who is early on in a dementia... I visited with the lady that has dementia, she's wonderful, and she and I were joking the whole time. She is beginning to show some signs, but the family knows that this is gonna be a problem, that it's gonna progress. And they had talked to some other family members and one of those family members had gotten on the Internet, and ordered a package of pre-printed Powers of Attorney. And they were telling them that they needed to get these things signed. And here's some folks who... They knew they needed some Powers of Attorney.
Lisa
Right. So that was good.
John
So that was good. But they were about to make a big mistake by trying to do what they thought they needed, but ultimately these things were junk, they weren't going to accomplish their needs. The problem is, where they would have actually found out that this was a problem would be next year, year after that, year after that. When the person was incompetent, could no longer make decisions. And they tried to use that stupid, worthless, Internet, office supply store, Power of Attorney, and it got denied.
Lisa
Right. And then, when that happens, you're just stuck. The only out at that point is to file for a guardianship, and get court authorization to take steps that you need to protect your loved one and their property and finances. And John, what do we call that? We call the guardianship the "nuclear option."
John
Yeah. Court appointed guardianship is a long, expensive, time-consuming process.
Lisa
And we're expecting it to get more long, expensive, and time-consuming with some new laws coming up next year but we'll wait till then to talk about that. But this is one of those cases where people are trying to do the right thing. And John, some of our listeners, I just know, they're out there, sitting next to the radio, hopefully drinking a nice hot cup of coffee. And they're thinking to themselves, "Well, yeah. What are a couple of lawyers on the radio gonna say, except that that Internet stuff is junk, and they just want to make a buck, that's all this is about." [chuckle]
John
And you know what? That's certainly a fair... That's a fair assumption. But the funny thing is that, if I were a physician and I was saying, "Look, don't try to diagnose yourself by getting on the Internet and looking up your symptoms 'cause you might miss something that's important." I think most people understand that.
Lisa
Right. Yeah. I think they want the comfort of a live person, who can take in all their facts and circumstances and symptoms, and try to figure it out.
John
That's right. Because we all know that something can look one way to us and it can be something really bad to that doctor. Well, the same thing goes into something like a Power of Attorney, you have Power of Attorneys. In many cases, there are 40, 50, maybe 60, separate decision points that go into a properly drafted financial Power of Attorney. And yet, people have the tendency to think, "Oh well," It is just, "They're all the same."
John
Then, none of them are the same or they shouldn't be. Because if they are the same, then they're not appropriate for you, in your individual situation. But I guess, I think a lot of people though, they get that. There's some folks out there that would rather create a problem, if it means saving a buck now. And hey, there's nothing you can do about those folks.
Lisa
Right. Well, and frankly, when the problem rears its head and becomes apparent, that's when they're in our office, John, begging us to help them fix it. And it's always more expensive fixing the problem than just addressing it head on.
John
That is so true. It's so much cheaper to prevent a problem than it is the other way. But that's not actually what we were gonna talk about today.
Lisa
No.
Lisa
Actually, what we were gonna talk about is... Here you are, you know you need something, maybe like a Power of Attorney or something, but you need some advice. And so in this case, instead of doing something really ridiculous like trying to get that advice off the Internet, or from your friend at Sunday school who went through the same issue with their parents in 1948, instead you think, you'll actually, "You know what? I'm gonna go out and I'm gonna seek professional advice."
Lisa
Right. So you ask around and you end up visiting with an attorney or a CPA, or a financial advisor, or someone that you've gotten... Either that you've had as someone that you've already had a relationship with, or someone you've gotten some recommendations for from friends and colleagues. And so you do the best you can, you get that professional advice. And John, not all professionals are created equal.
John
Right. And so we, in our practice, not only do we often see people who have made mistakes by trying to go out on their own, do things on their own, or with the office supply store kinda...
Lisa
The pre-done documents, yeah.
John
Or the software that you can buy and things like that, all of that stuff's junk, by the way. But yeah, when we see those problems. But I'll tell you what, we see a lot of problems by attorneys, by CPAs, by financial advisors where they have given advice to somebody, and either they didn't know what they we were saying, or they were basing it on rules or laws that were significantly out of date.
Lisa
Yes. And John, I'll apply those same... So today, I guess, we're gonna talk about some of the things that we've seen come through our office, prepared by other attorneys. And so if we have some attorney friends listening...
John
Yeah. Don't be one of them.
Lisa
Yeah. [chuckle]
John
How about that?
Lisa
Maybe we're not talking about you. I don't know.
John
That's right.
Lisa
But we're gonna talk about some things that we've seen and it's really difficult. But one thing, I'm going to apply, John, the same standard to myself. And I'm going to say, If you catch me on the street, and you ask me, what should be done to assist your nephew in his really awful divorce case, family law case, child custody case. I could tell you something but what I know is outdated, the laws have changed.
John
Yeah, there was family law or a section of family law on the Bar exam, which I took about 15 years ago. So the last time I looked at some family law was about 15 years ago. And yeah, if you ask me about family law case, you're gonna hear right quick, "I don't know".
Lisa
Right, so I'm gonna apply the same standards to myself. So we're not just throwing our friends and colleagues under the bus here. It's one of those things that a lot of doctors and medical providers have got this figured out. And frankly, they have it figured out because Frank liability issues. A cardiologist, they may know some general things about orthopedics, from their medical school education. But they're not going to treat your orthopedic problem and they're not going to opine about what your orthopedic problem is, because they know better. But you know, John, for some reason attorneys just don't seem to have those same off-ramps.
John
And I think in large part this is because the practice of medicine shifted a long time ago in its complexity. Whereas the law has also shifted in its complexity, but it did so slower. And what you ended up with in many cases, particularly in rural areas, was one attorney who was trying to handle essentially the city's business.
Lisa
Yeah. Any general legal thing that could pop up in anybody's life.
John
And if you needed a specialist, there just frankly weren't any.
Lisa
Right, and it's a little intimidating. It's not like you get a referral to a specialist attorney in the big city, like you do with medicine.
John
If you've got cancer, everybody knows you go to MD Anderson, down in Houston, and go see the best cancer guys in the planet or whatever. You hear people talk about that sort of thing, and it's just not uncommon to see somebody from Texarkana go all the way down to Houston to get the best advice. But from a legal standpoint, you don't see that at all.
Lisa
So, yeah. We're gonna take a little break, but when we come back we're gonna talk about the "professional mistakes" that we see, frankly, some of our peers and colleagues make. That where clients have done what they should do, they've sought that advice, and it just turned out not to be the right thing. And so stick with us, we're gonna talk about some... Frankly some horror stories when we come back.
Lisa
Well, Welcome back everyone to Aging Insight. This is Lisa Shoalmire, and I'm here in the studio with John Ross, and today we're going to tell... We're gonna tattle. We're gonna tell on some of our colleagues and peers that we have seen jump in to an elder law issue, with not such great results.
John
Right.
Lisa
And we're not gonna name names.
John
No, no naming names, not even if you call us and ask us privately, we're not naming names.
Lisa
That's right. We're just gonna talk about some things that the papers, and the situations that float through our office that maybe there's already been an attempt to address by another attorney, another CPA, and we're gonna talk about that. So John, this is our little short segment, so what do we jump off with?
John
Well, I guess one of the first places to jump off with... I guess a lot of what you see in all of this, and I alluded to this earlier, is old, out of date information.
Lisa
Yes, old knowledge.
John
Things that... Times have changed, laws have changed, and particularly in the elder law context. You see things change almost daily, monthly, weekly. It just changes constantly.
Lisa
Right. And John, 10 years ago, elder law wasn't even a thing.
John
Right.
Lisa
So someone's who's been in practice a while, I guarantee you there was not a single class in law school about elder law.
John
No, there wasn't when I was there.
Lisa
And you were there 15 years ago, I was there 20 years ago, not a single class, seminar, lecture, nothing.
John
And you can still find that in many of the universities.
Lisa
Exactly.
John
Not a single class on the subject.
Lisa
Yes, because we've looked to hire associates who have... And we asked them about what they're taking in law school, and it's just not even available.
John
So yeah, it's misunderstood, it's not very well-known and so you get a lot of different things. And I guess one of the first ones, and we probably only get to talk about this for a second but it's probably a good one to start off the whole deal. And this is the... I think you call it the Dresser Drawer Deed?
Lisa
Yes, that's right. I call it the Dresser Drawer Deed, because I love alliteration, that's why [chuckle]
John
But I guess the idea here is that an attorney will tell a family, "okay... " They'll come in, for example, and they'll say, "Well I wanna deed my house to my kids". And if you've listened to our show you know, giving away property under any circumstance is generally a bad idea.
Lisa
Bad idea.
John
But people have heard, "Oh well, they're gonna take my house if I go to the nursing home." And so they go run off to the attorney that did their divorce in 1978, or their kid's DWI, or whatever it was. And they go in and they say, "Hey, I wanna give my house to my kids, because I've heard that if I go to the nursing home, they're gonna take it, or if it goes to probate, they're gonna take it, or somebody's gonna take it."
Lisa
And so, the attorney, who may not be quite as up-to-date on elder law says, "Hey, got a great solution for you." But they may say, "Hey, if you give that house away, you're gonna lose your tax exemption, your taxes are gonna go up. If the kids get in trouble and get sued, they might... That house doesn't get the homestead protections anymore."
John
All true.
Lisa
And hopefully, they've at least said that.
John
Hopefully.
Lisa
And so, what we continue to see is attorneys that recommend to clients that the senior or the homeowner, go ahead and sign a Gift Deed to the children, to where it's fully executed, signed, notarized, everything. And then, the attorney's advice is to the homeowner, "Hey, just take that deed, go home, stick it in the dresser drawer, don't file it at the court house, 'cause when you file it at the court house, your taxes are gonna go up and the kids are gonna be shown as the record owners, and we don't want that. But just go, take it home, put it in your dresser drawer and tell the kids where to find it. And when something happens to you, when you die, they can go get it out of the dresser drawer and then take it to the court house and file it." And that's the advice that's given, so hence the name, Dresser Drawer Deed.
John
And these are bad for so many different reasons, that in the 45 seconds we have left for this segment, we can't go into them. So, I guess we're gonna have to take a break and then come back.
Lisa
Yeah, we are. But John, I can tell you that I have seen this... This is not a one offender, I've seen several attorneys use the Dresser Drawer Deed method.
John
Oh, yeah. No. And I saw it when I first started practice and I saw it this week.
Lisa
And you're still seeing it. That's right.
John
So, yeah, it's out there and we can tell you... Oh, we're gonna tell you all the reasons, why it's bad in every case. So, just... I guess, you're gonna have to stick around, 'cause we gotta take this news break at the bottom of the hour. But we got lots of good information on all of this, so stick around, we'll be right back.
Lisa
Well, welcome back everyone to Aging Insight. I'm Lisa Shoalmire here with John Ross in the studio. And we're coming to our second half of today's Aging Insight, and the phone lines are open if you'd like to give us a call at 903-793-1071. These are our longer segments, we have nice leisurely time to visit with our callers and answer any questions you have, about today's topic or anything else that's in our area. Don't ask us about the DWI, we just don't know. But today, we're talking about some errors that we see are very common, that even our colleagues make in the elder law area. And the first one we see, and I just love saying this, is the Dresser Drawer Deed, the DDD threat, the Dresser Drawer Deed. We're gonna really work on that.
John
And typically, this is done on attorney's advice, where the attorney tells the family, "Okay, go ahead and sign this deed, deeding the property to your kids. Then, don't file the deed, but instead, stick it in your dresser drawer or your home safe, or your safety deposit box, or whatever and then tell the kids... " Or maybe they're just supposed to figure it out, or whatever, "that at some point in time, after you die, then they can go and record the deed that was signed and notarized 15 years prior, and complete the transaction."
Lisa
Or yeah, couple of years ago. Right. And of course, John, these Dresser Drawer Deeds come in some different flavors. Some of them, I have seen where the grantor, the homeowner, the landowner has signed the deed and it's been notarized. But there's no actual date filled in on the document. So that way, I guess, when you pull it out of the dresser drawer, you fill in the date. And you can make it three days before dad died or something and go file it, I don't know.
John
Right. Even though the notary's stamp probably expired two years before that date.
Lisa
Could've been.
Lisa
Yup. And so, the client's coming and asking the attorney, "These are my goals." Sometimes the homeowner comes in and says, "I'm not getting any younger, I've had some health issues and challenges, and I want my kids to get my house. I paid that 30-year mortgage and we've got the five acres. My kids live around there. I wanna make sure that that goes to them."
Lisa
So the client is expressing that desire to make sure that legacy goes to the children, make sure that if their healthcare needs are immense then they need nursing home care, that the house and all doesn't can't get caught up in all of that. And then of course, maybe they've been through a probate process or they realize that they don't want the kids to have to deal with that process. And so, yes, the client is expressing their desires, their goals to the attorney. And we're a service business. We like to bring solutions that meet our clients' goals and desires, but in this case, the Dresser Drawer Deed is going to likely backfire.
John
Right. And it can backfire in a lot of ways. Well, I'll give you a couple of examples. So, one, I had where they had done this kind of deed. They, again, at the attorney's instruction, told their two kids, son and daughter, that they had done this deed, that it's at the safety deposit box or whatever. Now, that was all fine. That was exactly how they wanted it at that point in their life. Now, at some point in time later, they've decided, "Well, maybe we don't want that." Let's just say, for example, husband has a new wife and she's not a big fan of her new in-laws. And so there's been less contact with the son and maybe daughter has been helping out more. And now they are thinking they wanna do it a different way. And there's health issues and things like that, and sure enough, that deed disappears out of that dresser drawer, or it goes and gets filed by somebody.
Lisa
Yes. Yes, we have seen that.
John
And so now, they don't have the ability to change it. Arguably a deed, when it is signed and if you tell somebody about it, then it could be argued that that's delivery.
Lisa
Yes, that's the legal transaction has taken place whether or not, the deed is actually filed at the courthouse.
John
Yeah. And so, you get into all kinds of title problems and essentially, you've set up a situation for family squabble in all of this.
Lisa
Right. And so, we get the personal side of it, the private side of it, the family squabble side. But then we also get what I call the third party or the public side. So a lot of times, people do these Dresser Drawer Deeds because they realize that it's likely that they'll need nursing home care and they don't want their home to get sucked up in all of that. And so, they do the Dresser Drawer Deed and then the homeowner does use Medicaid services and nursing home care and then passes away. And then the kids follow the advice they got from the attorney and they go and take the deed and file it of record.
Lisa
And now, John, the deal here is absolutely nothing that they were trying to accomplish has been accomplished because... I know certainly on the Arkansas side, we've seen a lot where DHS, the state funding agency that pays for Medicaid services, they watch the transactions. When you apply for Medicaid, you tell them whether or not you own a home and you own land.
John
That's right. And so they know it.
Lisa
So they know that you own it and under the law, you get to keep your home and everything while you're living, even if you're living at a nursing facility. But at your death, they're gonna be following back up and looking to file that lien against that home. And what happens is, all of a sudden there's a deed that appears that seems to indicate that the property was given to the kids three years ago, but it was just never filed. And, John, is DHS, do they honor this deed?
John
No. They see right through the sham and the laws are designed to protect the government's claim for their assets and for their reimbursement, the right to reimbursement. And there are ways to avoid that claim for reimbursement. But you've got to do it within the rules and this is not one of those rules.
Lisa
Yeah. Hiding a deed in the dresser drawer, does that just sound like it's within the rules? [chuckle] It just doesn't.
John
And it's not. And so at your death, even if they go and file that deed, essentially the state Medicaid agency that's in charge of making these claims, which in the Arkansas side is DHS. And on the Texas side is actually an independent contractor called MERP or...
Lisa
HMS.
John
HMS which does MERP, and they're gonna see right past this.
Lisa
Right. They're going to say basically that the now deceased person, had defrauded the government for Medicaid services because they had actually gifted the property away. And under the gift penalty calculations, had that gift been revealed, at the time they applied for services, they would have been ineligible, they would have had penalties.
Lisa
And so, that's one argument the government is gonna use is that they never should have received the services paid for because they made this gift. "It was just hidden from us, so that was a fraud." And then the other thing they're gonna say is, "Well, sorry, but we still get to file on the property because they represented they owned it and there's a fraud there."
John
Yeah. And, "At the moment of their death, our claim attaches to it and therefore, even though you recorded this deed a little bit later, our claim is still attached to it, so nanny nanny boo-boo... "
Lisa
"We still win."
John
"We still win." So that's the kind of stuff... So those things are just terrible. And I cannot believe that any attorney out there would still be doing this...
Lisa
Dresser Drawer Deed.
John
Dresser Drawer Deed. I've seen it go wrong, so many times and in so many different ways. It's just bad.
John
Well, and John, before we take our break, I'll tell you... Oops. I guess we'll take our break.
John
Yeah.
John
Whoops. All right. Now I got it. Now we're...
Lisa
See, we don't really do radio, people. We're novices.
John
That's right, I just push buttons and see what happens. So now we are really going to take our break. Did you want us to finish that off?
Lisa
Well, I guess, so we can talk about something else when we come back. But I just wanna tell you, just this past week I have seen a couple of these deeds come from attorneys that have been practicing a while, they're well respected, they've served their communities in so many ways and they're great people. There's no issues there. But when I see families that have used this attorney for 20 years, 30 years, and they bring in these Dresser Drawer Deeds. And basically, I get to look at them and tell them, it's not worth the paper it's written on and it's got a lot of problems. And they don't really believe me at first, until I go into all the details of how it's gonna go wrong, and how it has gone wrong for other families. And then it's...
John
It's awkward.
Lisa
It is awkward.
John
And, yeah, I don't care if they go to other attorneys and get it done correctly. I just want it to get done correctly by somebody out there, and so we don't have these weird little situations, it would help a lot. All right, stick around, we'll be right back.
John
Welcome back to Aging Insight, everybody. This is John Ross here in our last segment of Aging Insight. Today, we're talking about some common bits of bad advice that we see, some of our fellow professionals out there, lawyers, and in some cases accountants, financial advisors, make. Where somebody's actually doing their best to try to go and get good advice, and instead they end up getting the exact opposite.
Lisa
Right. And just a real quick one, John, I guess I'll throw out there is a lot of times I can't tell you how many families I've had in the conference room who have told me that last year, when dad's been in poor health... But last Christmas, dad gave brother and sister, and their wives, and their grandkids, and everything, all cash gifts in the amount of $14,000 each.
John
Right. Because he called his CPA and said, "Hey, how much can I give everybody without... "
Lisa
Without any...
John
Without any taxes.
Lisa
Without taxes. And the advice that's given by the CPA, that the annual exclusion for gifts is $14,000 per recipient. So that is correct advice.
John
Right. But that's not actually what he was asking.
Lisa
Right. A lot of times, when these families are going in, "Dad's not doing real well, he's got $150,000 in the bank, we might need to get some care later on, how much can he gift?"
John
Yeah, but what they're really saying is, "We've already decided what we're going to do, is give away assets so that they won't have to get spent at the nursing home next month when dad has to go in." Therefore, call the CPA and ask, "How much can we give away without paying any taxes?"
Lisa
Right. So the CPA has given the right answer to the question that was...
John
To the wrong question.
Lisa
Well, right. And so I was visiting a family just this week, and when I asked, "Had there been any gifts made?" And their answer was, "Well, yes, but they were all under the $14,000 amount." But it turns out they were... I think, nine relatives that were given nearly $14,000 a piece last year. And now, dad is in serious need of some support at a nursing facility and we're gonna basically have to recalculate all of the penalties with those gifts included, and the family never thought that was going to be an issue.
John
Yeah. And they don't realize that the gift tax law under the Internal Revenue Code is a completely different set of laws as it relates to the gift penalty law for Medicaid eligibility which says that, "For every 159 bucks that you give away, you are disqualified from one day of Medicaid assistance if that gift happened in the last five years."
Lisa
Right. So we've got to go back... And a lot of times, John, some of those family members, they've spent their gifts.
John
Yeah. It's amazing. You give them some money and it just, "poof."
Lisa
It's gone.
John
Just like that.
Lisa
So then we've got problems there, but... So that's another place where the family is seeking professional advice. And frankly, the advice in that case, to the gift tax question is correct, but they're not really asking about gift tax. They're asking about gifts, and gift for Medicaid purposes.
John
Yeah. And I think the other one that I've seen several here recently relates to issues revolving around probate. I had a lady come in this week and there's been a death. I think dad or somebody had died. And there's a piece of real estate and the real estate is supposed to go to one kid, while they're alive, and it's supposed to go to the other kid after that one dies. And this is all in a will, and they had talked to an attorney who said, "Well, don't bother probating the will. Let's just you two sign an agreement that says how y'all want this done, and then you two will know what you're gonna do and everything will be fine."
Lisa
Yeah, but that's not exactly how it works. Those agreements, do they have any validity?
John
Not really. Between the parties, and this is what I was explaining to her. I said, "Well, if you and your brother were to get into an argument about whose rights were involved with the property, you would have a binding contract. But let's just follow the path here. Your brother dies, it's now your property. You don't want it so you're gonna sell it. And so you come to me and say, 'Hey, John, you wanna buy this property?' I say, 'Sure, I'd love to buy that property', and the deed is still in your dad's name. And I say, 'Well, this is in your dad's name. I can't sign this. I can't buy this. You don't have good title.' And you say, 'Oh, but we have this agree... Look at this agreement between me and my brother.' 'I don't care about that agreement. What about your other brother?' 'Well, I don't have another brother.' 'Are you sure?'"
Lisa
Well, or what about...
John
Because I don't have a court order that says that.
Lisa
Well, you don't have a court order that says who heirs are. You don't have... If we've had a premature death here, are there nieces and nephews who were not parties to that agreement who now have claims and rights to their deceased parent's share of that property?
John
Yeah. Just that there's so many different issues in all of this. And again, this was an attorney that doesn't do a lot of probate. And the thing is is you can look at the probate rules and you can read what they say. And doing things like family settlement agreements are... They're actually well-respected in the court system as a way to settle family disputes and things like that. So family settlement agreements are great things to resolve issues in a probate case. But that doesn't have anything to do with title.
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