Q.  My wife and I own a vacation cottage, and we were wondering whether there would be any problem if we left it to our descendants in perpetuity, in our trust?

A. Yes, there would be a problem, at least if your cottage is located in California or in most (but not all) of the other states in the union. The reason: The Rule Against Perpetuities (“RAP”).

The RAP is a legal rule which comes down to us from old English common law, where it originated in the 17th century. It was designed to prevent the tying up of large, landed estates over many generations, as England moved from an agrarian  economy into a more mercantile economy.  Its purpose:  1) to facilitate the buying and selling of property by future generations, unencumbered by claims of antecedent ownership by a distant family of origin, (2) to avoid the “dead hand” of the original owner(s) from controlling ownership and use by future generations, and (3) to prevent large estates from being divided up and applied to their highest and best use as that appeared over time.  In effect, it was designed to facilitate economic growth as the basic economy changed.

If a gift of an interest in property—whether made in trust or otherwise– were deemed to violate the RAP, then the gift would be deemed void, and would then devolve to the recipient(s) with a present income interest in the property.  The RAP has been stated in its most pristine form by legal scholar, John Chapman Gray, in his 1886 treatise, as follows:

“No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest”.

Those few words, seemingly simple at first reading, are one of the most difficult concepts encountered by students in law school, because of the many layers of complexity buried therein. I, myself, recall spending no less than six (6) weeks in one class studying the meaning of those few words.  The RAP in application is, in fact, so complex that the California Supreme Court, in 1961, actually ruled that it is not legal malpractice for an attorney to inadvertently violate the rule!

Nonetheless, most attorneys—at least in California—always include in their trusts a “savings provision”, such as the following”

“Notwithstanding any other provision of this instrument, every trust created by this instrument shall terminate no later than twenty-one (21) years after the death of the last survivor of the settlor’s issue who are alive at the creation of the trust”.

You might wonder where the age of 21 years comes from?  We may remember that that used to be the age of majority in California and many other states, but my bet is that few, if any, readers would know where that number comes from.  Here’s my answer: many years ago I learned that it came from old English common law as the age at which a young man were deemed to be big and strong enough to bear armor!  Try that one on your friends at the next meet-up.

So, sorry that you won’t be able to restrict ownership of your California vacation cottage down through the generations, but know that, in being thus restricted, you are furthering the interest of the law and our economy by not tying up enjoyment of your property for more than, approximately, two (2) generations.

References: CA Probate Code re: RAP Rules

Q. I hear there has been a change in the state Homestead Law. Can you comment?

A. Yes, indeed. A new Homestead Exemption went into effect at the beginning of 2021, and it is good news for California homeowners. But first, a bit of background for those readers who might not be familiar with the “Homestead”.

The Homestead is the amount of protection available for home equity as to homeowners who might be faced with claims by unsecured creditors seeking to enforce payment of an unpaid debt. Unless the homeowner’s equity in his or her home is greater than the amount of the applicable exemption, the creditor cannot force a sale of the home to collect that debt. Similar protection is available to homeowners who file Bankruptcy.  This protection is called the “Homestead Exemption”.

Until January of this year, the homestead exemption was quite low: $75,000 for an unmarried individual, $100,000 for a married couple, or $175,000 for the disabled or those over age 65. Now, under AB 1885, signed by Governor Gavin Newsom on September 18, 2020, it has been increased dramatically, as follows: the new minimum is now $300,000, but this may rise to as much as $600,000 in your own county, based upon the countywide median sale price for a single-family home in the prior calendar year in which you claim the exemption.

While the new law does not specify the index from which to ascertain the median sale price, one might do a simple internet search and pull up the data from any local association of realtors.  I just did this and, from at least one data base, the median sale price for homes in Alameda County as of December, 2020, was $1,174,488.  Thus, it is clear that, at least in Alameda County, the exemption would clearly be available at the current maximum of $600,000. One can pull up the same information for other California counties.  Further, this $600,000 upper limit will be further adjusted each year by an inflation index, i.e. the California Consumer Price Index for All Urban Consumers,  published by the Department of Industrial Relations.

So, in California Counties with high home values, the current exemption is as high as $600,000, and this cap will be adjusted annually for inflation in subsequent years.

There are two ways to claim a Homestead Exemption: (a) via an Undeclared, sometimes called an ‘automatic’, exemption, or (b) by a recorded or “Declared” Homestead Exemption. The difference is that the latter will protect you for six months after you sell, so as to protect your home sale proceeds and allow you to transition into the purchase of another home, where you can then also claim the exemption.  Thus, the better plan for folks concerned about this protection in the event of sale is to record a Declared Homestead in the county in which your existing home is located; upon sale, promptly record it again for the new home.

There are some items to note:

1) This new Exemption will not protect against forced sale by secured creditors, e.g. the lender who gave you a loan to help you buy or refinance your house, or a lender for whom you put up your home as collateral for a loan.

2) An undeclared Homestead won’t protect you if you choose to voluntarily sell your house. The protection only applies in the case of a forced sale, i.e. by judicial foreclosure. But a Declared Homestead will give you 6 months of protection, as noted above;

3) This new state exemption will not protect you from federal actions, e.g. by IRS efforts to collect back taxes owed.

I hope this helps.

References: AB 1885

Q.  My wife and I would like to set up a basic estate plan. What are the essentials?

A. Many people believe that if they have a will, their estate planning is complete. But, actually, there is much more to a good estate plan. A good plan should be designed to avoid probate, minimize estate taxes, protect assets if you need to move into a nursing home, and appoint someone whom you trust to act for you if you become disabled.  Here is a list of the basics:

(1) Will: The most basic document is a will. A will directs who will receive your property upon your death and who will be your executor to see that your wishes are honored.  If you have minor children, it may also nominate guardians for them. But a will usually requires a probate proceeding, and only controls property that is part of your probate estate. Indeed, many people own assets which are not part of their probate estate, such as joint tenancy assets, life insurance policies, retirement plans, IRA’s, 401K’s, and annuities. The disposition of these non-probate assets is controlled by the form of title or by the associated beneficiary designation, and not by your will.  For example, property held in joint tenancy goes to the surviving joint tenant, regardless of what the will says.

(2) Durable Power Of Attorney (“DPOA”): In a DPOA you designate a person to act in your place for financial matters when you are unable to act for yourself.  The DPOA is usually considered a better alternative than a court supervised conservatorship, which can be cumbersome, public, and expensive. A DPOA can, if properly drawn, also authorize long-term care planning on your behalf.  But the DPOA ceases to exist upon your death, and therefore cannot function as a will-substitute.

(3) Advance Healthcare Directive: By this directive, you nominate someone to make health care decisions for you in the event you are unable to do so yourself. It usually also expresses your wishes about end-of-life matters, burial and autopsy, and will authorize your agent to access your medical records and select physicians for you.

(4) Trust.  If you have a home or other significant assets, you should also consider creating a trust. Unlike a will, a trust is designed to avoid probate and, upon your death, pass your trust  assets to your beneficiaries in a manner which is usually speedier and less costly than a probate proceeding. Also, if you become incapacitated, a trust typically appoints a successor trustee to step in to handle your financial affairs during your lifetime. Unlike the DPOA, a trust does not suddenly cease to exist upon your death, but remains in effect long enough to distribute your trust assets as you have directed.  In larger estates, trusts may also include provisions to minimize estate tax.

(5) Beneficiary Designations.  At the same time that you create an estate plan, you should also review all beneficiary designations on assets such as insurance policies, retirement plans,  annuities, and bank and brokerage accounts. This is because these beneficiary designations override your will or trust, and you should make sure that they reflect your wishes and are current. Example: a Pay-On-Death (“POD”) designation on a bank account will, upon your demise, distribute the funds therein to the POD beneficiaries, without probate or trust administration.

A good estate plan should also be customized to your particular circumstances.  For example, if you are concerned about future long-term care expenses, you may wish to integrate long-term care planning into your estate plan, so that you or your spouse may access available government benefits (e.g., Medi-Cal) to help pay for that care without depleting a lifetime of savings or impoverishing the survivor.

Q. Our grandson is graduating college and we would like to get him a gift which recognizes the beginning of his adult life and career. We thought of something of a “legal” nature and wondered if you have any ideas?

A.  Great thought and indeed I do. Why not arrange through your attorney to provide him a basic estate planning package, which would include an Advance Health Care Directive, a Durable Power Of Attorney and a Simple Will.  The message, of course, is that he has now formally entered the world of adulthood and needs to take prudent steps to protect himself and his loved ones from the unexpected.  He would also learn that these essential “life planning documents” need to be kept up-to-date as circumstances change, e.g. when he marries, has a child, purchases a home or acquires wealth.

Understandably, his focus will most likely be upon other things, such as deciding where he will live, beginning a new career, and perhaps finding a life partner.  But your thoughtfulness can also teach him that these new adventures come with a certain responsibility.  What if, for example, he were in an accident or suffered serious illness and became unable to manage his own affairs or direct his medical treatment.  This happens!

In our own family, while our son was away at college, he suddenly had to undergo emergency surgery.  I can assure you it was quite unsettling to have to scurry around to prepare and arrange the remote signing of an Advance Health Care Directive while, at the same time, make emergency travel plans to be with him.  Fortunately, everything turned out fine, but one never knows.

While your grandson’s own parents may feel that, should anything happen, they can always make decisions for him, they may be surprised to learn that the law does not agree.  Once he  turned 18, he became an adult in the eyes of the law, and his parents no longer had the legal right to make decisions for him or direct his medical care.  Instead, if suitable legal documents were not in place, they could only acquire that legal authority through a court ordered conservatorship, a public, cumbersome, time-consuming and expensive legal proceeding.

Your grandson need not worry that his parents will take over management of his life.  The Advance Health Care Directive and the Durable Power Of Attorney can be “springing powers”.  This means they would only spring to life and become operational when and if he became incapacitated and could not make those decisions for himself.  Also, he need not feel obliged to name his parents as his agents.  Instead, he could name whomever he wishes, such as his siblings or even a very good friend to serve as his agent or successor agent.

One of the other benefits of this gift would be his introduction to a professional with whom he might build a relationship, and who might be able to assist him over the years as he matures.  You might also consider introducing him to your banker or stockbroker, help him establish a contributory IRA and discover the wonders of compound interest.  Indeed, you might be able to show him how– with regular contributions– he could be a millionaire by the time he is your age.

 

Q.  I hear that HUD just made some important changes for borrowers of Reverse Mortgage loans to protect the borrowers’ spouses. Do you know anything about that?

A. Yes, indeed, and you heard correctly. On May 6, the Department of Housing and Urban Development (“HUD”) issued new rules to govern all Home Equity Conversion Loans (“HECM”). These added new protections for Non-Borrowing Spouses when their borrower spouse either died or moved out of the home to receive long term care outside the home. It also eliminated the burden formerly imposed upon the Non-Borrowing Spouse to establish an ownership or beneficial interest in the home within 90 days of the borrowing spouse’s death. These changes are very significant. To understand their import, here are some key Questions and Answers:

Q. What is a Non Borrowing Spouse?

A Non Borrowing Spouse (“NBS”) is a spouse who did not join on the HECM loan as a co-borrower. The typical reason was that he or she was under the threshold age of 62 at the time of the HECM loan.

Q. Under the former rule, what happened when the Borrowing Spouse died?

A. The NBS formerly had a very short window, 90 days, to establish her ownership or beneficial interest in the home, a window that was often too short to permit compliance, especially if the home of the deceased spouse went into probate. This left many NBS’s without the ability to remain in the home, even with the modest 60 day extension sometimes granted under the former rule. If she could not refinance the loan, she was either forced to sell or faced foreclosure. In either event, her right to remain in the home was in serious jeopardy. By contrast, under the new rule there is no longer any requirement that the NBS formally establish her ownership or beneficial interest in the home. She need only continue to reside in the home as her principal residence and meet other conditions of the HECM loan, e.g. pay property taxes, homeowners insurance, and HOA fees (if any).

Q. Under the former rule, what happened when the Borrowing Spouse did not die but, instead, just moved out of the home to be cared for in an Assisted Living Facility or Nursing Home?

A. Since this was not a “death”, but a move-out, there were no protections; the NBS was either forced to refinance the home (if she could), sell the home or, again, face foreclosure. None of these events were what either spouse contemplated when the Borrowing Spouse took out the original HECM loan, and was perceived as unfair in the lead up to the current rule. The new rule adjusts for this disparity in treatment, and now grants the NBS the right to remain in the home, just as if the borrowing spouse had died and without the need to establish her ownership or beneficial interest in the home in any formal way. The former 90 day window is now irrelevant.

Q. Must the spouses have been married at the time of the HECM loan?

A. Yes, and this is one shortfall of the new rule. A later marriage does not elevate the new spouse to the role of an “Eligible Non-Borrowing Spouse”. In the event of a later marriage, the only resolution is to try to refinance with a new loan, wherein both parties are co-borrowers.

Q. Under the new rule, after the death or moved out of the borrowing spouse, can the NBS continue to draw upon the available loan balance?

A. No, and again this may be another shortfall of the new rule.

We anticipate that these changes will have a positive impact upon couples faced with the death or move-out of the borrowing spouse and hope that this information helps.

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ReferenceHUD Mortgagee Letter 2021-11, issued May 6, 2021;

Article in the “Reverse Mortgage Daily“.

 

Q.  My late Uncle set up a safety deposit box at a local bank and named me as both executor under his Will and trustee under his Trust. In order to follow his wishes, I need access to his original estate planning documents, which I understand are held in his safety deposit box. How can I do that?

A. Assuming that the safety deposit box was held in your Uncle’s name, alone, here is what you would need: (a) a key to the safety deposit box, (b) proof of his death (either a certified copy of his death certificate or a written statement of death from the coroner, his treating physician or hospital where he died), ( c) proof of your own identity, such as by a California drivers license, and (d) a signed Affidavit attesting to your right to access the safety box on your Uncle’s behalf, which may need to be notarized; the bank should have a form.

Access to the box will be under the supervision of a bank representative, who will make and retain a copy of the Will and/or Trust found in the box, while allowing you to remove the originals so that you can begin administering your Uncle’s estate. The bank will also let you remove any written instructions for the disposition of his remains, so that you can handle his final wishes in a timely manner.

If you do not have a key, access will likely be more difficult. At a minimum, you will need to persuade the bank to have a locksmith drill the lock to open the box, most likely at your own expense, in addition to providing the other items mentioned above.  The bank may also require that you first initiate a court probate proceeding to secure Letters of Administration or Letters Testamentary before permitting access.

If there were another co-owner on his safety box, designated as a joint tenant, then the joint tenant would have access so long as he or she had a key.  If not, then again the box would require drilling and the bank would likely need the other items listed above.

Sometimes a person will designate his or her Trust, itself, as the owner of the box. If this is the case, then the Successor Trustee under your Uncle’s Trust could access the box, again assuming that he has a key and can provide the other requirements noted above.

In order to entirely avoid the bank access issue after death, I generally advise clients to retain their original Wills and Trusts in readily accessible places in their own home or other safe place, and to so advise the person(s) whom they have named as Executor or Successor Trustee. This can facilitate swift access following death. Even if one has a cooperating bank, remember that banks are not open after hours or on major holidays, and have limited hours on weekends.  Swift access can be essential, especially if one needs immediate access to burial instructions following death. Delays and obstacles in accessing these important items after death can be upsetting to next of kin following the death of their loved one, so give them a little assist and keep them in a safe place that is both known to, and accessible by, your designated successor(s).

Q, I know that Congress and President Biden recently approved a new law that adds significant money into improving vaccinations and other COVID-19 outreach, but I wonder what other provisions are in the new law that might help seniors.

A. Good question. The AMERICAN RESCUE PLAN ACT of 2021 (“ARPA”), R. 1319, was narrowly passed on party lines in Congress and then signed into law by President Biden on March 11, 2021. It directs a massive $1.9 Trillion Dollars into the economy to fund these stimulus payments and to provide other much needed help. It is a massive document that runs into hundreds of pages, and provides benefits covering families, employers, health care, education, and housing.

Here are some selected provisions that may be of interest to seniors:

Stimulus Payments. The ARPA provides $1,400 direct payments to individuals with up to $75,000 in annual income, and couples with incomes up to $150,000, with phase outs for higher earners. These payments will not affect eligibility for Medicaid or Supplemental Security Income as long as any amount that pushes recipients above the program=s asset limits is spent within 12 months.  Many of these payments have already been direct-deposited into tax-payer accounts.

Medi-Cal (Medicaid) Home Care. The Act provides more than $12 billion in funding to expand Medicaid Home and Community‑Based Waivers for one year. This funding will allow states to provide additional home‑based long‑term care services, which will help seniors from being forced into nursing homes. The additional money will also allow states to set up programs to increase care-givers- pay.

Nursing homes.. The Act supports the deployment of strike teams to help nursing homes that have COVID‑19 outbreaks. It also provides funds to improve infection control in those facilities.

Pensions. Many multi‑employer pension plans are on the verge of collapse due to under-funding. The law creates a system to allow plans that are insolvent to apply for grants in order to keep paying full benefits.

Medical Deductions. The law permanently lowers the threshold for deducting medical expenses. Taxpayers can now deduct unreimbursed medical expenses that exceed 7.5 percent of their income. The threshold was otherwise set to increase to 10 percent under the 2017 tax law.

Older Americans Act. The ARPA provides funding to programs authorized under the Older Americans Act, including vaccine outreach, caregiver support, and the long‑term care ombudsman program. It also directs funding for the Elder Justice Act and to improve transportation for older Americans and people with disabilities.

Housing Assistance: It increases funding for housing assistance, with targeted assistance to low-income communities. Notably, it provides homeowner assistance to prevent foreclosures.

Utility Assistance: The law provides energy assistance through the Low-Income Home Energy Assistance Program (LIHEAP), and water subsidies through a related program.

SNAP: It provides a 15% increase in SNAP food assistance benefits through September 30, 2021. 

Child Tax Credit: The law expands the child tax credit so that qualifying families will receive a tax credit of up to $3,000 per child aged 6B17, and $3,600 for children under 6. This will benefit Agrand-parent@ families who are raising their grandchildren. 

COBRA Health Insurance: The ARPA provides a new 60 day enrollment period and 100% coverage of COBRA premiums for individuals who lost (or lose) employment through September 30, 2021.

HCBS: It increases Medi-Cal (Medicaid) funding for Home and Community-based Services to enable more seniors in need to receive care at home.

Unemployment: It makes the first $10,200 of unemployment insurance received in year 2020 tax free for households with an adjusted gross income under $150,000.

COVID-19:  It provides vaccines and treatment under Medicaid and CHIP without cost-sharing.

References:  Here is the full text of the “American Rescue Plan Act of 2021” (H.R. 1319);

Kaiser Family Foundation. “Medicaid Provisions in the American Rescue Plan Act”

Q. My wife and I were wondering whether we would need more than a Last Will for each of us to cover what happens upon death. Is a Will usually enough?

A. Good question.  The simple answer is “No”. Usually more planning documents are necessary, or at least strongly advisable.

While a Will is an important estate planning document, there are things that it won’t cover or cannot do. Consider the following:

Wills Do Not Cover All Property:  Although a Will is one way to direct who gets your property on death, it does not cover everything. The following are examples of property you cannot distribute by Will:

Jointly held property. Property that is co-owned with another person is usually not distributed through your Will. If held in Joint Tenancy, then upon the death of a joint tenant, his or her interest goes to the other joint tenant(s) and not according to the deceased joint tenant’s Will.

Property in Trust. If you place property into a trust, the property passes to the beneficiaries named in the trust, not according to your Will. Sometimes there may be a dispute as to whether the property is in your Trust or in your Will, and this may have to be decided by a probate judge.

Pay on Death accounts. With Pay on Death, or “Transfer upon Death” accounts, the account owner names a beneficiary (or beneficiaries) to whom the account assets pass automatically upon the death of the original owner, and are not governed by your Will.

Life insurance. Life insurance passes to the beneficiary you name in your life insurance policy and is not controlled by your Will.

Retirement plan. Similar to life insurance, assets in a retirement account (e.g., an IRA or 401(k)) pass to the named beneficiar(ies). Under federal law, a surviving spouse is usually the automatic beneficiary of a 401(k), although there are some exceptions. With an IRA, you may be able to name your preferred beneficiary, but subject to your spouse’s consent if the assets are community property.

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A Will is also not well suited to address these other matters:

Funeral instructions. A Will is not the best place to put your funeral instructions. Wills are often not found until days or weeks after death. It is better to leave a separate letter of instruction that is located in an easily accessible location.

Management Of Assets During Incapacity: A Will only “speaks” at death, so if you wish someone whom you trust to take charge of assets if you become incapacitated, you will need other estate planning documents, e.g. a Trust and/or Durable Power Of Attorney.

Facilitating Eligibility for Care Subsidy: Many elders need long term care in their later years, which is usually expensive. To help with that expense, their family may seek a public benefits subsidy under the Medi-Cal program. However, doing so often requires that certain steps be taken with assets in order to qualify. To facilitate qualification, the elder must have delegated certain legal powers over assets to a trusted child or other family. Wills, which only take effect at death, do not address this need.

Probate Usually Required. Property distributed via a Will usually requires a probate, which is the formal process by which the court supervises the distribution of your property as instructed in your Will. Many people prefer to avoid probate, and hence their reliance upon Trusts or other devices.

Food for thought?

Q.  My father was discharged from the hospital into a nursing home, has been there only about 2 weeks under MediCARE, and now they are pressing us to bring him home. But, he’s not ready and still needs care. Is this right?

A.  No, it is not. Unfortunately, many nursing homes are concerned about whether MediCARE will continue to pay for care after the initial 20 days, and so often pressure the family to bring their loved one home, or move to another facility for further care. This is not right and is not in compliance with either the federal Nursing Home Reform Act (“NHRA”), nor California State law.  Assuming the facility is licensed as a “Skilled Nursing Facility” (fancy name for Nursing Home, and often abbreviated as “SNF”), it cannot force your loved one out if he or she still needs care.

Under the NHRA and later Regulations, there are only six (6) reasons that a SNF may use to discharge patients. If none apply, it cannot discharge the patient so long as that continued stay is paid for, whether by MediCARE, Private Pay, Private Insurance, or Medi-CAL. Those reasons are:

(1) The transfer or discharge is necessary for the resident’s welfare and the resident’s needs cannot be met in the facility;

(2) The transfer or discharge is appropriate because the resident’s health has improved sufficiently so the resident no longer needs the services provided by the facility;

(3) The safety of individuals in the facility is endangered due to the clinical or behavioral status of the resident;

(4) The health of individuals in the facility would otherwise be endangered;

(5) The resident has failed, after reasonable and appropriate notice, to pay for (or to have paid under Medicare or Medicaid) a stay at the facility; or

(6) The facility ceases to operate.

Further, as part of any discharge, the SNF must make suitable arrangements in writing for care elsewhere.

If a resident has applied for a Medi-CAL subsidy, and that application is pending, the SNF may not transfer or discharge a resident while that application (or any  appeal therefrom) is pending.

Still further, the resident has a right to appeal a Notice of Transfer or Discharge, and may request an actual hearing before a judicial officer, to be held at the SNF, itself, or another place convenient to the resident. At the hearing, the resident has the right to be represented by a family member or an attorney, the right to review documents ahead of time, the right to cross examine witnesses and/or to bring his own to the hearing.

If your loved one is not ready to be discharged, or even transferred within the facility to another room, I would suggest the following:

1) Advise the Administrator that continued care is needed and that your loved one does not intend to leave. Confirm that advice by a follow up letter;

2) Request a formal hearing by contacting the “Transfer Discharge and Refusal to Readmit Unit” of the Department of Health Care Services at 916-445-9775;

3) Arrange to review all of your loved one’s medical records and any additional records that the SNF intends to offer at the hearing;

4) Contact the Long Term Care Ombudsman for assistance. The Phone # should be conspicuously posted in the lobby of the SNF. If not, call 1-800-231-4024 or 510-638-6878 for Alameda, Contra Costa and Solano Counties;

5) Consider arranging for your loved one’s doctor to write a letter affirming your father’s continued need for care or, better yet, ask the doctor to appear at the hearing in person or by telephone;

6) Consider engaging an attorney for assistance.

Good wishes to you and your loved one.

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References:  CANHR’s “The Epidemic In Nursing Home Evictions“; and “Transfer and Discharge Rights”;

List of discharge reasons per Federal Law in 42 CFR § 483.15(c)(1)

 

Q.   My father is in a nursing home and could really use a Medi-Cal subsidy to help with the cost, which is running about $9,500 per month.  He has dementia and cannot manage his own finances.  Years ago he signed a Power Of Attorney naming me as his agent.  Can I use it to make gifts of his excess assets to his family in order to help him qualify for Medi-Cal?                                                      

A. Whoa!  Not so fast.  There are a couple of real concerns here: (1) whether the Power Of Attorney legally authorizes gifts, and (2) whether making gifts of excess assets will help or hurt his eligibility for Medi-Cal. 

The POA: in California, a Power Of Attorney (“POA”) must expressly authorize the agent to make gifts.  Gifting powers cannot be implied from other clauses, no matter how comprehensive they appear.  This requirement often comes as a surprise to clients, as many assume – especially if the POA was prepared by an attorney – that the POA authorizes virtually any action that the agent desires to take, including the making of gifts.  Quite the contrary: an agent under a POA is a fiduciary and cannot just give away the principal’s assets, no matter how well intended the act, unless the power to do so is expressly authorized in the POA document.

A companion concern is that you, as agent, cannot include yourself as a gift recipient unless the POA expressly authorizes you to “self deal”.  The phrase “self deal” means acting in your own self-interest.  In the absence of the right to “self deal, the making of gifts to yourself would be viewed as acting in your own self- interest and breaching the higher duty you owe to your father, the maker of the POA.  Further, those unauthorized gifts to yourself could be viewed as theft and/or as elder financial abuse. 

Of course the POA must also be “durable”, meaning that it survives your father’s incapacity and remains valid even though he is no longer competent.

The Medi-Cal issue: as you apparently know, in order to qualify for a Medi-Cal nursing him subsidy, an applicant’s countable resources must be under certain limits.  For a single individual, the resource ceiling is $2,000, and for a married couple it is $130,380 (for 2021).  Against that backdrop, many clients believe that the way to help a loved one qualify for Medi-Cal is to simply help them transfer away excess assets to other family members.  However, unless handled in a very special way, gifting away a loved one’s excess assets could backfire: the transfers could potentially disqualify them from a Medi-Cal subsidy, perhaps for a lengthy period going forward. 

In summary: your father’s POA must first be evaluated to determine if it includes broad gifting powers and self-dealing powers, and next whether it is a “durable” power. Note: Many POA’s impose limitations on gifting, sometimes by reference to a tax code section, a limitation which is not usually obvious except to an attorney or tax professional.

If gifting otherwise appears appropriate under the POA to accelerate your father’s eligibility for a Medi-Cal subsidy, then you should seek professional guidance from an attorney skilled in Medi-Cal Planning to develop an appropriate divestment plan that is compliant with the Medi-Cal rules.  If those rules are not strictly observed, the making of gifts could result in a long period of ineligibility from the very Medi-Cal subsidy that you seek.