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NOTES and Updates - Fall
2002
"No
Spring, nor Summer beauty hath such
grace as I have seen in one Autumnal
face."
--John Donne
The leaves may be falling, but our spirits are flying high! No matter the season,
Carney & Sugai thrives on providing you with quality legal assistance,
tailored to meet your needs. What a pleasure it is to serve loyal and discriminating
clients whose trust and confidence continue to mean so much to us.
CLIENT SEMINAR
November 7th, 7:00 p.m.
"Fiduciaries: Yes or No? How To Tell When You Need A Pro"
Fall is a metaphor for change, which is especially true for Carney & Sugai
this year. As we proudly introduce Sue Sipes, Leslie's new legal assistant,
we must also bid fond farewell and the "luck o' the Irish"
to Maggi Tiernan, who recently purchased a home in Oregon and refuses to commute!
Needless to say, Maggi will be missed, but we are delighted to welcome Sue and
the years of experience she brings to the firm.
Our Fall Seminar, entitled "Fiduciaries: Yes or No? How To Tell When
You Need A Pro," will enable you to meet with a highly qualified
expert in that field, Richard Lambie. After Janis and Leslie discuss the circumstances
under which a professional fiduciary might serve you best as executor, trustee
or conservator, Richard will answer whatever questions arise. Join us November
7th at 7:00 pm for an enlightening, entertaining event.
Federal Tax Law Changes
Last year, we explained The Economic Growth and Tax Relief
Reconciliation Act of 2001 (The Act) and its impact on estate, gift and generation
skipping transfer taxes. One area which has received little attention in the press
is the effect The Act will have on income taxes. As you know, The Act is designed
to reduce estate taxes by increasing the estate tax exemption and reducing the
estate tax rate over the next few years. Absent additional legislation, estate
taxes will be repealed in 2010, although they are scheduled to be reinstated in
2011.
Beneficiaries of an estate, under pre-Act law, receive assets inherited with a
basis (i.e. the adjusted cost of an asset for capital gains computations for income
taxes) stepped up to the fair market value at the date of death. However, under
The Act, only a limited amount of assets will receive a basis step up. The executor
will be able to increase the basis of assets transferred to beneficiaries by $1.3
million, and for assets transferred to the surviving spouse, by an additional
$3 million. All other assets will pass to the beneficiaries with the decedent's
basis, called the "carryover basis." Therefore, it will be critical
for the executor/trustee of the estate to know the basis of the decedent in each
asset passing at death. Because carryover basis may result in large capital gain
taxes due when the assets are sold, and since (unless the basis can be substantiated)
the IRS may deem the basis to be zero, basis will become the major issue for estates
in and potentially after 2010.
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California Law Changes
Perhaps one of the most misunderstood estate planning documents
is the Durable Power of Attorney for Property Management (DPAPM). This power of
attorney is typically used upon the incapacity of the principal to handle financial
affairs, but can also be used to amend an estate plan or gift assets in the event
circumstances warrant such action. Recent changes in California law require that
more specific language be included in DPAPM's; otherwise, some powers you
might have assumed would be included are not.
For instance, the attorney in fact (agent) under the power of attorney needs to
be given specific authority to create, modify or revoke a trust, if this is your
desire. Specifically included must be the authority to fund any trust created
or in existence, as well as authority to name beneficiaries under any estate planning
documents. Failure to include any of this specific authority may leave your agent
in the odd position of being able to create a trust, but lacking power to name
a beneficiary or fund that same trust.
Gifting authority must also be specifically included. No attorney in fact can
make or receive a gift unless authority is specifically granted in the document.
For clients who desire broad gifting powers, with the authority to gift up to
the whole of the estate in the event they enter long term care, that language
must also be included in the document. Broad gifting powers, while not desirable
for every client, should be reviewed and discussed to ensure that the gifting
power in your document is right for you.
In short, the DPAPM's we draft today do contain more specific language than
those drafted previously, which may necessitate revisions to your document. To
discuss your power of attorney and additional provisions which should perhaps
be added, please give us a call.
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Elder Rage
What Do I Need to Know?
In a culture where high stress levels have become the
norm, it's not surprising that anger and frustration are on the rise.
A healthy person will most often find acceptable outlets for these feelings,
but viable options become more limited as health and energy fail. The result?
Our elders may be liable to outbursts of temper far more volatile than they
exhibited in earlier years.
One rather extreme example cites a father and mother in their 80's. Adult daughters,
fearing for their mother's life, removed her from the family home. Dad
had always been difficult, but in recent months verbal abuse had increased and
threats were made. When Mom left, taking slightly over half the money from a
joint checking account, Dad was enraged. His response was to escalate the negative
behavior by embarking on a smear campaign, writing slanderous letters about
his wife and sending them to friends and neighbors. At the present time, she
insists that he is stalking her.
What kinds of issues are at play in this scenario? The man has no diagnosis
of dementia and no history of physical abuse. He appears coherent when speaking
to neutral parties, making the prospect of conservatorship less viable. At the
same time, he is clearly not himself. Perhaps he is in the early stages of dementia
and needs treatment; however, he resists medical help. Left alone, his rage
will probably continue to escalate. He may sense that he is slipping, then act
out his fear through anger. His rage could also be fed by a belief that his
wife, who is aging herself and may not respond to his needs as she once did,
bears him ill will. She may even be in early dementia, neglecting to do things
he once liked or relied upon. Undiagnosed, forgetfulness can look like indifference,
even rejection.
Whether the problem lies with him, her, or (as is usually the case) both, this
man's wife can and should call Adult Protective Services if she fears
for her life. She could also report his behavior to her doctor, establishing
a paper trail. Applying for a restraining order would be another good step,
as would seeing someone to discuss her fears and try to get a handle on them.
Keeping an eye on her physical and mental health would be important as well,
perhaps even testing for dementia to evaluate any role she might be playing
in the conflict. Hopefully, resolution could be achieved.
Everyone is more prone to emotional problems as age progresses. Depression is
a common disorder among the elderly, and while some people withdraw as a result
of that condition, others become aggressive. Anxiety, apathy, and agitation
are also seen. Naturally, those who displayed mental health issues through their
lives will be at even greater risk, but no one is immune. Because unfamiliar,
overwhelming feelings can translate to elder rage in anyone, caretakers and
others need more awareness. Coping skills and self mastery diminish with mental
acuity, and fury which erupts unbridled (and unexpected) can be dangerous.
A major difficulty in regard to deaths occurring after January 1, 2010 will
be the substantiation of the basis of the asset in question, which will be the
task of your trustee and executor. Keeping good records of the basis of each
asset owned is crucial. For most assets this will mean documentation of the
original cost, but for assets such as real property, records must illustrate
the original basis and show the costs for improvements. Therefore, for every
asset currently owned by you, financial records relating to the basis of that
asset should be maintained indefinitely.
It is hard to anticipate how the estate tax debate will be decided. Whether
we end up with a complete repeal of the estate tax system or simply a one-year
repeal, basis information will be a necessary component of the administration
process. Aid your trustees and executors by maintaining income tax basis information
for every asset. Even if this data is not needed for estate purposes, at least
it will be organized for income tax purposes if you wish to sell the asset!
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Elder Law
Want to know what
the con artists are thinking? A look
into the mentality of those who target
the elderly was provided by a recent
Wall Street Journal article (July 2,
2002, p. C1). Believe it or not, there
are training films and manuals that
teach these disreputable people and
firms how to prey on the elderly. Devious
marketers are taught to manipulate the
feelings of seniors by "tossing hand
grenades into advice." The hustlers
are counseled to "solve the [elderly
clients'] problems, but...to create
those problems first." Other manipulative
ploys include "Use words like protect,
safety, and guarantee," and "Make
them feel they are the most important
persons in your life." The manual stresses
that seminars where food is served are
a good means of attracting business,
as senior citizens "like freebies."
Trainees are told that seniors "buy
based on emotions...fear, anger, and
greed."
Unethical marketers profit by exploiting
the trust of the elderly, whom they
pretend to serve. One training session
advised students to sell to seniors
by treating them "like they're
blind 12-year-olds." Incredible,
isn't it? Seniors can put these people
in their places by using 20-20 vision
to look them over with all the wisdom
age affords. Those found lacking can
be dispatched in short order! (And they
can be reported, too...see Elder Law
Corner, below.)
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Last Spring we listed several trust mills which operated
to the detriment of consumers, particularly the elderly. The Attorney General
recently took action against several of these, and the Court entered a permanent
injunction. Additionally, a judgment in the amount of one million dollars was
set aside to partially compensate those who were duped. Names associated with
this misconduct are Alliance for Mature Americans, Alliance for Mature Americans
Membership Advantage Corp., Adams Marketing Associates, Inc., and Stephen and
Victoria Adams.
Those who purchased living trusts and/or annuities from Alliance for Mature
Americans should be warned that other con artists are now contacting people
and claiming to be "authorized" by the Attorney General to take
over for the Alliance. Do not be fooled by anyone making these claims. The Attorney
General has made no such endorsements. He has, however, made some recommendations
to avoid being victimized by dishonest vendors of this type:
• Be aware. Sales presentations made in churches
or other places of trust are not necessarily legitimate. Facilities are frequently
rented out to groups or individuals who have no connection to organizations
usually housed there.
• Never sign documents on the spot. Have them
reviewed by a third party. If a salesman refuses to leave them with you, curtail
all negotiations immediately.
• Get promises in writing, dated and signed
on behalf of the company by your salesperson
• Refuse to allow a salesperson to rush your
decision. Take whatever time you need.
• Discuss any transaction with a trusted advisor
before committing yourself to it.
• Make a point of "comparison shopping."
If you have a complaint against a company, have been
defrauded, or have been contacted by someone claiming to be the successor of
the Alliance for Mature Americans, please write to the Office of the Attorney
General, Public Inquiry Unit, PO Box 944255, Sacramento, CA 94244.
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