All Set Up - or All Screwed Up?

I attended my wife's company picnic on Sunday and, as often happens when people learn what I do, the conversation drifted to an estate issue.  Bob (not his real name) had "it all set up."  He was agent (under a power of attorney) over his 90+ year-old Aunt's modest middle-class estate: a home (owned outright), and two $100K CDs.  Easy enough.  Aunt needed some in-home care and one of the CDs (at Washington Mutual)was about the expire.  His issue (hint: not the issue):  whether to roll the CD from WAMU to Wells Fargo or another bank because of the problems he had been hearing about WAMU.  So how does one respond?

Its a little bit like the driver of an unregistered vehicle leaning out the window and asking a police officer whether it is time to change the oil.  Several errors in perception need to be corrected: (a) the person you are asking is not really authorized to answer; and (b) the first thing you need to do is register your car.

I had just started my turkey burger, so I figured it was time to ask an open-ended question and shut up, which is, when it comes down to it, what I do for a living.  So I asked, "tell me what planning your Aunt already has in place."

It turned out, over the course of lunch, that his Aunt owned the house outright, still had capacity (which tells a lawyer the power of attorney is "immediate," not "springing"), and was physicially and mentally deteriorating.  Her liquid net worth included the $200K in CDs and some other funds in checking and savings, and her California house was owned outright and specifically bequeathed (to be left to) her late husband's 88 year-old niece, who did not need the house or the money it was worth because she already had inherited money from others.  He wanted to either sell or take a loan on the house for the Aunt's continuing care.

Mind you, Bob considered it "all set up."

I cannot tell Bob, "you need to see me right away." The State Bar calls that solicitation and it is a violation of our Rules of Professional Conduct.  Nor can I tell Bob what to do.  That would be giving legal advice to a non-client, which my malpractice carrier would call a violation of the covenants and conditions under my errors and omissions policy, which says that I have a policy to give advice only to clients and then only pursuant to a written engagement.

Now readers, is Bob's situation set up or screwed up?

I can tell you.  In this forum I am allowed to say what I think, because none of you could contend this is advice for you and your 90 year-old Aunt.

I think her situation (and his) is screwed up.  Actually totally screwed up.  Here's why:

As an agent under a power of attorney, he owes her a fiduciary duty.  A duty to care for her and, to the extent he is aware of it, a duty to carry out her wishes.  She wanted the house to go to the niece.  By borrowing against the house to fund her care, he was defeating that purpose, and of course preserving his own inheritance, the CDs (which very well may be what his Aunt would want, but now we would need to document that, right?)  Further, if she needed long-term care, we could qualify the Aunt for MediCal, although the techniques to do so are not something you could find in Nolo Press.  We could get Bob the $200K in CDs, get the niece the house with a full stepped-up basis at Aunt's death, and care for Aunt for the rest of her life.  But of course he would have to ask me to be his lawyer first, and that did not occur.

However, the way it is set up, what is going to happen if Aunt continues to deteriorate with the existing power of attorney (assuming it looks like 99% of the powers of attorney written in California) is that $6,000 to $10,000 per month will be spent on Aunt's nursing home care for as long as she lives (do the math - if she makes it 5 years or so her entire estate will be gone).  For an estate lawyer, we would consider this "screwed up."

Now, let's return to Bob's original oil-change question:  what about the $100K CD at Washington Mutual?  The irony is that the first $100K in deposits at a federal bank (like WAMU) is insured by the Federal Deposit Insurance Corporation (FDIC).  So the thing he thought he needed to worry about was not at all that troubling, but rather the thing he thought was "all set up" was actually a lot worse than he thought.

The estate plan Bob's Aunt has set up unnecessarily exposes $600K or more to loss.  Under any definition, that is screwed up.

Comments

[Jim Stiner]

I am not a lawyer and don't play one on tv, but if I were and found myself in your shoes, I would explain to Bob in front of a witness that I cannot give you legal advice because it voilates our rules of professional conduct, nor can I advise you what to do becasue you are not my client, but I can tell you what I would do, if I ever found myself in a similar situation.

Then I would say what you wrote in your blog and end it by saying and I would find a competent lawyer that handles similars cases and hire him or her to take of everything for me so I would know that it was done right.

Telling someone how you would handle it does not violate your code.

Also, Bob might have then asked you to handle it for him, which would not be you soliting for business, but him soliting you.

By the way, why do you say exposes her estate to $600,000 or more in losses when her estate is less than $600K?

Thanks

Jim Stiner

[kineaoguVd]

achat antibiotiques sans ordonnance achat antibiotique ligne antibiotiques en ligne, amoxicilline zydus 500 amoxil 1g comprimes dispersibles amoxil bd 400mg 5ml; flagyl posologie prix metronidazole metronidazol 75, monohydrate de doxycycline prix doxycycline biogaran 100 mg doxycycline cystite zomax azithromycine azithromycine 2000mg acheter azithromycine!