Proper Planning to Avoid the Health to Housing to Financial Crisis Scenario

In this episode John Ross and Lisa Shoalmire discuss what it takes for any of your wishes to have a legal impact after your passing.

Episode Transcript
John
Welcome to Aging Insight. I'm John Ross, your host here with Lisa Shoalmire, my co-host and we're here on Aging Insight to talk to you about issues related to people as they get older, people with disabilities. One thing that we see a lot of is that people will have a health crisis, maybe it's a stroke or Alzheimer's, but what they find from this health crisis is that they just don't know where they're gonna live any longer. Maybe they need home care, maybe they need assisted living, maybe they need nursing home care and so their health crisis has caused a housing crisis.
John
And then they find out how much all of those housing options cost; that in home care, that assisted living, that nursing home care and so their health crisis caused a financial crisis which now has... Caused a housing crisis which then became a financial crisis. Well, what Aging Insight is here to do is to provide you the information so that you can solve those financial crisis, so that you can solve those housing crisis, so that you can solve that health crisis by having the kind of knowledge and information that relates to getting older, staying independent, not becoming a burden on others, that's what we're here to do and that's what this program is all about.
Lisa
John, we deal with day in and day out seniors and their families. And what I like is being able to help people as they're in that perhaps facing a crisis and we can give them some tools that they can use to address it and that's a great feeling. But sometimes we're visiting with families after that loved one has passed away and there's now become some family drama, which we see that from time to time as you might imagine. And so what we wanted to talk about today are some of the common things that we see come up that people get very upset about, righteous about, but ultimately, legally, just doesn't matter and the drama and the broken relationships was all for nothing. So we wanted to inform you about some of these things so that you can hopefully avoid some of this drama. [chuckle]
John
That's right. So when we talk about these sort of things, and again, a lot of times, we have folks coming in very difficult situations. There's already a situation where maybe somebody has passed away and now on top of the emotional struggle with that, there has become a fight essentially. There's people arguing about this or that and maybe it's a piece of property. And here's what will happen is maybe it's their... Somebody's dad who's passed away and he's left a will and that will leaves everything to his wife who is the step-mother of the child that's talking to me. And so this person that's talking to me, this child of the deceased man and they're saying, "Well, I know the will says everything goes to the wife, but dad promised me that I could have his pickup," or "He promised me that I could have the land," or "He told me that he didn't want this to happen," or whatever it is. But lots of telling, lots of talking.
Lisa
Yes, lots of talking and not a lot of doing. And the doing in a situation like that would have been to put it in writing, in a will or a trust or go ahead, and frankly, if there's a piece of property you wanna make sure someone gets, you can have just gifted it right then. But instead, just countless times have we had people come in and upset, "Because dad or grandpa promised me that hunting rifle and it means so much to me. That was where I killed my first buck with." And it's very emotional. And so a lot of times, the property being discussed, a lot of times the value just really... We're not talking about a lot of monetary value, but sometimes quite a bit of sentimental value and the problem is, is telling just doesn't get you there legally. So we get to be the sad bearers of the news to tell someone if grandpa promised you from the time you could settle his knee, that that 30 ought six was gonna be yours someday, it just doesn't matter. [chuckle]
John
Right. And not unless it's put into writing. And not just put into writing, but put into writing correctly and well and maintained. So what if grandpa puts in his will and he says, "Well, you know what? I leave the 30 ought six deer rifle to my grandson Timmy." But some time between when he wrote that will and the time he dies, he traded in that 30 ought six and bought him a.270. So, he still has a deer rifle, but it's not the same deer rifle. Little Timmy's gonna be standing there saying, "What grandpa meant was any deer rifle he had, not just that one." But again, it's not what you meant, it's not what you intended, it's what you said. And if that will said that he gets that rifle and that rifle doesn't exist at the time of death, well then that bequest goes away. It's what's called a lapse or an ademption, which means that basically the property that was being given is no longer there. And so, you can have some hurt feelings there and you know, I bet little Timmy is saying, "Well, John, that's just not fair." You're not gonna find fair out there either. When you're thinking about these sort of things, keep in mind that what you say, and what you mean, and what you want to happen is not what's important. What's gonna be important after you die is what you have put in writing.
Lisa
It's a lot of families that I have... A lot of times if I'm meeting with a senior I've had this, "I've written on the inside cover of my Bible who I want to have certain things." Or, "I know my family will honor my wishes." I hope that that's true, but the bottomline is, sometimes when that senior passes away, up 'til then, everybody's on their best behavior. But when that senior passes away, sometimes the drama comes out and the respect that that senior of the family got when they were living sometimes goes away at death, and the family is still fighting about these things. Yes, if what is said to other members of the family... I don't care if you told your preacher and you announced it at the family reunion, things that you said do not have a legal impact. So, we're gonna take a little break and when we come back we're gonna talk about some other things that we've heard through the years in our practice that people are convinced have a legal meaning, but in fact do not. So, we'll be right back.
John
Welcome back to Aging Insight. I'm John Ross, this is Lisa Shoalmire. And today we're talking about issues that we see in our practice as elder law attorneys, where folks have come in typically because something has happened and they're unhappy with the result. They're unhappy with the way things are going, typically somebody has passed away, and maybe what they thought was going to happen is not happening. A lot of times, they'll tell us things that to them seem important. Seem like they ought to have some impact on the situation, when in fact from a legal standpoint, they really don't mean anything at all. We started out by talking about when you say, "I want this to happen." Well, just because you say it doesn't mean that it's gonna happen. When dad or mom promised you that you were gonna get the car, or the boat, or the house, or the gold watch, if they didn't put that in writing, then that doesn't mean... That promise just doesn't matter. It matters what's in writing and what the law says. Now, another situation that we run into a lot Lisa is unintended consequences. People who don't realize the difference between what a will controls and what a will doesn't control, like for example, a joint account.
Lisa
Right. That joint account situation is the most common situation we see. And the joint account, what I'm talking about is maybe mom has gotten up there in years and she might need a little help making sure her bills are paid on time. Maybe she has two children. One lives here in town and one lives out down in Houston. She brings the child who lives here in town to the bank or credit union and says, "You know what? I need a little help with my bills and I trust my daughter here and I want her to be able to help write my bills." And oftentimes the financial institution suggest, "Great, just add that daughter to your account and she can write cheques and take care of your bills and there's just no problems. Sign here, sign here." And now we have a joint account with mom and daughter.
Lisa
Alright, so everything rocks along and it works exactly how mom intended during her life, daughter keeps her bills up, everything's fine and then mom passes away. Well, mom's will says "I want all of my property to be equally divided among my two children at my death." And so that child who lives out of town, who lives in Houston, as he's going through with the sister about mom's property, there's this bank account that comes up. And the son thinks that because the will says they equally take in all of mom's property that this should apply to that joint account as well. And John, the legal effect, is that's just not the case.
John
That's right. Again, wills only control property that passes through your probate estate. And when you die, many times your assets pass automatically, what are called non-testamentary transfers. In fact, there's a whole section of the probate code related to non-testamentary transfers. And these are things like, for example, naming a person on a life insurance policy, naming a beneficiary on an IRA, having a transfer on death or payable on death, maybe on a CD or a bank account. And it also includes something called joint tenant with right of survivorship.
John
And oftentimes when somebody is placed on an account, so where you have two people that are on that account, buried in all of that paperwork at the bank is the statement that says that that account is owned as joint tenants with right of survivorship. And what that means is if one account holder passes away, that account automatically belongs to the surviving joint owner. So in Lisa's example, with mom and daughter on the account, and mom passes away, that account belongs to daughter, the very second mom took her last breath. So it's not part of her probate estate and therefore that provision in her will that said she wanted to divide everything between her two kids, well it doesn't include that bank account and unless that daughter is willing to share, and in my experience sometimes they are, sometimes they aren't, she doesn't have to. It's her account and that's an unintended consequence that a lot of people don't realize.
Lisa
Yeah, so and that's a big one because a lot of folks as we get older, a lot of times we get out of owning real property and our main assets are tied up into accounts, that we may have joint owners that we've added through the years onto and so the bulk of our estate ends up in that joint account, which can create some bad feelings between the heirs.
John
Right. Now, one question you might be asking is, "Well how do I... I still am gonna need that child to pay bills and stuff for me?" Well, if you've been watching, one of our first episodes on Aging Insight was about powers of attorney. What you want is to give that person the ability to write cheques and pay bills, you do that by giving them a power of attorney so that they can do those sort of things for you, without having to actually be an owner on those accounts. And then, if you do want that account to pass automatically, name beneficiaries but do it in a way that you want to happen.
John
I had somebody a while back and they had three kids and they have three CDs, each one was $10,000. And so you know what they said? "Well, this is easy. I'm gonna name one child as the beneficiary on one CD, the other child as the beneficiary on the second CD, and that third child is the beneficiary on the third CD, and that way they'll all share equally." Well, as time went on, and they needed a little money, they were right before death, they ended up having to cash one of those CDs out. Well, then when they passed away, it was clear that they wanted everything to go equally, but that's not what happened. Here we had a situation where the two children that were named as beneficiaries, they got their CDs. The third one divided equally between the three kids, which meant two of 'em actually made out quite a bit better than that third one. So you wanna make sure you realize these unintended consequences because if you're coming into our office and saying, "Well you know, what mom meant to happen," you know what? That's probably not gonna go very far. It's not what you mean to happen, it's what the law says is gonna happen, and those can be two different things, so you need to understand how that impacts your situation. Now, we're gonna keep talking about some of these issues about unintended consequences and things that people say when we come back from this next break, so stick around.
Lisa
Welcome back to Aging Insight. I'm Lisa Shoalmire and I'm here with my co-host John Ross and we're elder law attorneys based here in Texarkana, and this program, Aging Insight, is to provide you with information and to get you to thinking about things you may need to do to plan for yourself or your family as you get older or potentially face disabilities. We want you to remain independent, to remain in your home if that's what you desire, and to be able to make your own choices fully informed. So, today we've been talking about some of the things that we see that are unintended consequences from decisions or lack, frankly, of decisions made along the way. And we've talked about a situation, John, where a family member has verbally told someone, maybe on multiple occasions, that they are to receive a certain piece of property or asset and if it's not written down, if it's not in a will or trust somewhere, the oral promise, just doesn't make any difference. It's not legally enforceable.
Lisa
We've talked about if a joint account holder dies, then all of that money in that account belongs to the surviving owner regardless of what the will says. So, the third situation I want to talk about today is, we often have the situation where, we have brothers and sisters and, you know how it is, there's one kid, one of those brothers and sisters that has struggled a bit more than the others, has been less independent than the others, has even through their adulthood depended on that parent to help make a down payment on a house, to help start a business. Maybe there's that one child who seemed to always get a extra special help from mom or dad. Well, while mom and dad are living, the other kids, they just step back and say, "Hey, mom's doing what she wants to do." But this is what I often see, John. When mom and dad pass away, and a lot of times, mom and dad have set their wills up to were each child is... The assets of the parents are divided equally among the children, but often there might be a child who has borrowed quite a bit of money from mom or dad, [chuckle] and the children who haven't borrowed the money, their thought is, "You know what? My brother or sister who's borrowed all that money, they shouldn't take the same amount under mom or dad's will that I am, because they never paid back all that money." There's a loan outstanding and so they shouldn't get an equal share of the property. Now what happens there? [chuckle]
John
We certainly see this pretty regular. The fact is, is that in the real world, if a bank or a financial institution gives you a loan, there's paperwork, there's security agreements, there's schedules of payment and interest and all of these things that you would typically think of related to a loan at a bank. In a family situation, a lot of times a parent might say, "Well hey, I'm gonna give you this, and I want you to pay it back," and they might call it a loan, but just because you're dealing with family doesn't mean that you still don't have to put all of that paperwork in place in order to make it a valid enforceable loan. And so, when you've got this situation where one kid has received a lot of money, whether it's gifts, or whether it's loans, or whether it's just helping the child out, when the parent dies, all of those prior gifts or loans or whatever you really wanna call 'em, they really just don't matter, because they're not enforceable. They're not actually real debts, and so since they're not real debts, they don't get paid. And so, you know what? It's gonna end up where the three kids are gonna split the estate equally and even though one of those children got a bunch of extra loans during lifetime and a bunch of extra money during the lifetime, that's not gonna change the fact that upon the parent's death, everything gets divided three ways.
John
Now, there's actually a flip side to this as well, a lot of times we'll see where one child is providing all the care, and the other kids aren't doing anything. And they're driving mom around back and forth, they're using their own gas. I've even had kids who were paying for mom's assisted living, or paying for their nursing home care out of their own pocket. Paying for care givers out of their own pocket, while their brother or sister, maybe even who live in town, but they don't come around, they don't see mom. They don't help, they don't contribute anything financially, and when that parent dies, a lot of times that child, who's been spending all of this money will say, "You know, can't I get some of that back?"
Lisa
Right. So at that time that that parent passes away, we have again, we've got an emotionally distraught family, particularly that care giver child who has invested so much of their time, their emotions, their money, in caring for that aging parent out of their sense of duty and respect and love, and you know what? That child who's been caring for mom and dad is very resentful of the brothers and sisters that could have done more, that they believe should have done more, but just didn't. And so, out of that resentment comes, that care giving child saying, "You know what? I don't care that mom or dad's will says all of the assets are to be split equally among the children. My brother didn't lift a finger, didn't even give me a break when I asked, and shit. I should be entitled to all this, and be reimbursed, because if mom would have paid somebody for the level of care that I provided, and the errands, and all the things that I did for her, there wouldn't even be any assets left." And, while I sympathize with that care giving child's position, legally, the result is, the will still controls, those assets are still gonna get split equally among all of the children, regardless of the expense and effort that that care giving child has put in to caring for that parent.
John
That's right, so hopefully with today's program, what you're getting... You're getting the idea that we don't want to have to be the bearers of bad news. And we don't wanna have to tell your child that because you didn't put something in writing, your wish isn't gonna get carried out. Or, that because they put it in writing, but they didn't do it right, that that wish is not gonna get carried out. Or that the family's gonna have all these problems because it wasn't put together correctly. So, plan ahead, and try to think through some of these things, and realize that what's legal may not necessarily be what you intend.
Lisa
That's right, so, you know, that's what Aging Insight is all about, so I hope you've gotten something out of today's program, and if you will come back and visit with us next week, it's our intention to be here and be a resource for you, as you age, and take care of a aging family member. You can catch us on the radio, 12 noon on Saturdays, and you can call us with your questions, and we'll see you next time on Aging Insight.
John
Bye.

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