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November 5, 2023 by bob mason 1 Comment

Woman in hospital bed screaming

Don’t pull the plug!!

Not long ago, I was discussing health care advance directives with a client. When we began discussing health care powers of attorney she asked: “Is that the one where the person you’ve named can pull the plug?” I responded: “Well, they don’t really pull any plugs, but yes.” She asked: “What if I don’t want them to do that then?” I queried: “Like RIGHT then?” She said: “Yes, right then.” I assured her: “Sit right up in that bed and scream, ‘STOP!’” She asked: “So, I CAN do that.” Her lawyer (me) responded: “Of course. If they do it anyway it is called murder.”

Why Are Advance Directives Important?

Many do not understand how important Advance Directives and Health Care Powers of Attorney are until they need them; then they become VERY important. If you do not have either document, let’s take a look at who gets to make those health care decisions for you under North Carolina law.

First, a guardian, if one has been appointed.

Second, a spouse, if you have one. Even then, you may wish to avoid putting her through that. Or perhaps there is that impending divorce . . . .

Third, a majority of your parents and children over 18. “All in favor of pulling the plug on Ma, raise your hand!”

Fourth, a majority of your siblings. Bwahahaha!

What could possibly go wrong?

Are advance directives for older people only? Allow me to answer with a pop quiz:

Q: What did Karen Ann Quinlan, Nancy Cruzan, and Terri Schiavo have in common?

A:  Two things. They became famous (infamous) court cases. All three names belonged to young, healthy women without advance directives.

Types of Directives

In North Carolina the most commonly encountered directives are the Do Not Resuscitate Order (commonly called a “DNR”), the Medical Order for Scope of Treatment (“MOST”), the Health Care Power of Attorney (“HCPOA”), and the Advance Directive for a Natural Death (“Living Will”).

The MOST form, commonly printed in hot pink in order to standout, is used during a hospital stay if the patient or his representative, together with a physician, wish to map out types of life-prolonging measures that will be withheld in the event of a life threatening medical event. They may very well override any previously executed Living Will or HCPOA. You are NOT required to have such a form, and that is clearly stated on the form.

The DNR (also known as a portable DNR because, well, it is portable) is usually printed out in bright gold (again, to be conspicuous). Similar to the MOST it maps out the withholding of resuscitation during a medical emergency. Many people tape near the bed or on the refrigerator so the EMS crew will see it.

The MOST and DNR forms will only be issued after physician consultation with the patient, or if the patient is incapacitated, the Agent named under the HCPOA or (if there is no HCPOA) one of the priority persons named above.

Because these forms are rarely used far in advance and do not involve any input from yours truly, they will not be discussed further here.

On the other hand, the HCPOA and Advanced Directive for a Natural Death (“ADNDs” are also referred to as “Living Wills”) forms are commonly offered as part of our estate and asset protection planning engagements.

If you tell me you do not want an HCPOA, I will call you crazy. If you tell me you do not want an ADND, I will tell you it is entirely up to you.

I will walk you through these forms below.

Health Care Power of Attorney

The HCPOA (also called a Health Care Proxy in some states) is an instrument used to appoint other people to make health care decisions for you when a physician certifies that you are unable to make or communicate your own health care decisions.

North Carolina offers a statutory form that is guaranteed to comply with North Carolina legal requirements, although you may use alternate forms. You may download a form here and use it to follow along with this discussion.

Section 1:  Name and give contact information for the folks you are appointing to make health care decisions for you. These are called “Agents.” You can appoint Agents to serve in the order listed, or occasionally I will alter the wording to provide that someone will serve until another person (for example, an out of town kid) can arrive. I discourage naming joint agents or “either-or” agents. You are creating confusion at a potentially chaotic time.

Section 2:  Leave it blank! You may nominate a physician by name to make the determination that you’ve gone ‘round the bend. But why? What if Marcus Welby, MD is off big game hunting in Tanzania when the crisis comes?

Section 3:  Of course, you can revoke it!

Section 4:  This section blathers on for a page and a half to basically say, “My Agent may make any health care decision for me that I could make.” Why a page and a half? Lawyers wrote it.

The most important few words, however, are the opening clause of the section: “Subject to any restrictions set forth in Section 5 below, . . . “ In other words, if you trust your Agents to make the types of decisions you would make, and if you believe they have the emotional maturity and stamina to make those tough decisions, then you may leave Section 5 blank. On the other hand, if you want to give directions that or more specific, then you can plow through Section 5.

Section 5:  As discussed above, if you wish to fine-tune your Agent’s authority, this is where to do it.

  • Subsection A: Initial the first blank if no matter how dire things get, you want to keep getting fed. Of course, this isn’t a Big Mac and a side of fries – the key word is “artificial” (think “drip, drip”). Initial the second blank if you want hydration to continue, come what may (again, think “drip, drip”). Notice in the longer blanks under each you can fine tune or clarify your wishes.
  • Subsection B: Another place to add specific instructions. For example, a number of my clients have been Jehovah’s Witnesses with specific religious restrictions on the use of blood transfusions and other blood products. In fact, I keep that language handy, and this is where it goes.
  • Subsections C and D: These present an opportunity to fine tune or restrict your Agent’s authority to make mental health decisions and select treatment options. I do not recall any of my clients ever selecting this.
  • Subsection E: Under Section 4.I. (see above) you have authorized your Agent to make decisions regarding disposition of your remains (unless you have made other enforceable arrangements like a preneed funeral contract). You may make specific directives here regarding burial arrangements.

Section 6:  There are two parts.

  • The first regards organ donations. Leave this blank if you want to leave it up to your Agent. If you want to authorize your Agent to make any organ donations initial the first space (this is rather silly, because if you leave this blank the Agent still has the authority under Section 4.I). If you want to fine tune this authority, initial the second space and leave the first blank. For example, initial then write in “my Agent may donate my eyes only.”
  • The second part is similar to the first part, but relating to donation of your body for research. The first place to initial gives unlimited authority to your Agent (again, you’ve already done that under Section 4.I). The second space gives an opportubity to fine-tune the ability to donate your body. For example, “You may donate my body to Duke University Medical School, but never to Wake Forest School of Medicine.”

Section 7:  The Agents you have appointed will automatically be considered as candidates for your guardian if that should ever become necessary (I avoid guardianships as much as possible and believe that the HCPOA does the trick). By the way, the statute referenced says that you should be allowed to participate in decision making to the greatest extent possible, even if you have a guardian appointed.

Section 8:  This assures anyone relying in good faith on your HCPOA and the instructions of your Agent will not get sued.

Section 9:  Lawyer-written housekeeping.

For Mason Law, PC estate planning clients, if you do not have a HCPOA properly completed and in place you WILL receive one. If you wish to complete any of the fine-tuning provisions above, it can save time if you show up at signing with a draft HCPOA that you have been through and initialed. That way we can transfer it all to the “pretty” document we have prepared on bond paper, with witnesses named, and so forth.

Advance Directive for a Natural Death (“Living Will”)

The ADND is completely optional. Do not let anyone at the hospital tell you that you must have one. If you feel confident that your health care Agents named under your HCPOA are up to the task and you trust them (or don’t mind asking them to make some tough decisions), then you do not need an ADND.

But, if you do not have anyone you trust or you do not care to put a loved one through the wringer of making tough decisions, then the ADND is for you. I will walk you through the statutory form below and suggest you download one here to help follow along.

Another way to think of the two advance directives is that under a HCPOA you are appointing people to make health care decisions for you, and under an ADND you are directing health care providers what to do (or, not do).

Section 1:  Here you will select WHEN you want the ADND to apply. Three situations are provided, and you may choose any or all of them. Option #1 is when the docs say that you are terminally ill and do not have very long. Option #2 is when the docs say you are unconscious and will remain so (I was behind someone on I-85 the other day who I believe fit this definition). Finally, Option #3 pertains to “advanced dementia” (I guess they know it when they see it) that to a high degree of medical certainty will be permanent.

Again, choose any one option, any two, or all three.

Section 2:  Here you either give health care providers the option of withholding life prolonging procedures (initial blank one) OR directing them to withhold (initial blank two).

Section 3:  This is where you can basically say, “But WAIT! I still want a few things.” Even though you may have reached one of those milestones outlined and selected in Section 1, you can specify that you wish to receive BOTH artificial hydration and nutrition (initial blank one), or just hydration (blank two), or just nutrition (blank three).

As I mentioned under my discussion of HCPOAs, artificial nutrition and hydration does not, in this context, refer to a Big Mac, fries, and a shake (although I do have my personal opinion regarding the status of those American delicacies). Think of it more as a “liquid diet.”

Section 4:  If you are a masochist, the ADND form is not for you. This section says you want to be made as comfortable as possible. There is no way to edit this section, so I guess this is a default setting.

Section 5:  You are simply stating that you understand what you’re doing.

Section 6:  OK. This is a bit crazy. If you initial the first blank, it means that the ADND overrides any end-of-life decision your HCPOA Agent may want to make. Your health care providers will simply ignore your HCPOA when the ADND applies. BUT, if you initial the second blank, its says the HCPOA Agent controls. If that is so, THEN WHY ARE YOU MESSING WITH THIS FORM IN THE FIRST PLACE?

Sections 7, 8, and 9:  Your health care providers may rely on the ADND without worrying about being sued, you state that you want the ADND to be effective anywhere, and you have the right to revoke the ADND. Section 9, does give a bit of commonsense advice: It says you should “try to destroy all copies of it” (you don’t want copies of your now-revoked medical exit plan floating around if you decide you’d like some additional heroic measures taken).

Finally 

With respect to both the HCPOA and the ADND, you will need to sign before two witnesses and a notary.

Filed Under: Advance Directives, Reader Favorites, Uncategorized Tagged With: Advance Directives, Health Care Power of Attorney, north carolina

January 22, 2023 by bob mason Leave a Comment

You’ve worked hard your whole life to get to where you are now. However, earning an income is just half the battle—how can you protect and hold onto your hard-earned assets during your retirement years? How can you protect your legacy and ensure your loved ones receive the support they need to enjoy a bright and stable future, even after you are gone? Although thinking through these topics may not seem pleasant, taking a proactive approach to estate planning can give you the confidence and reassurance you need to feel optimistic about the future, no matter what it may hold. Let’s take a look at what aging individuals and couples should know about the estate planning process in North Carolina and what steps to take to keep the future bright.

Getting Organized

A good place to start would be to download the Mason Law, PC preplanning checklist.

First, you will need to understand your financial situation, such as identifying your assets and any debts you owe. If you’ve kept your financial records and other essential documents in an organized filing system, this aspect of estate planning will move forward more quickly than those who need time to sort through various bank statements, stock portfolios, and other documents. This organizational task may seem daunting, but you do not have to go through it alone. Enlist the guidance of a trusted and friendly elder law attorney to help you identify exactly what information you need to start developing your estate plan.

To help with this process you can download the Mason Law, PC, quick financial overview form.

Customized Estate Planning Services to Suit Your Needs

Many people assume that estate planning is a one-size-fits-all process. While there are certain documents that most estate plans should include, estate planning is actually a highly customizable process. It may be tempting to use online forms to establish an estate plan on your own, but these generic documents usually include overly broad language that leaves room for legal disputes later on. Working with an estate planning attorney who can help you articulate your goals and develop a personalized plan is the best way to protect your estate and your legacy.

Planning for What the Future May Bring

While we can’t predict the future, we can anticipate various scenarios that could arise. Creating an estate plan that offers guidance in the case of physical incapacitation or mental deterioration is key to protecting your and your family’s best interests. Your estate planning attorney can help you designate a power of attorney to handle financial decisions on your behalf, document your wishes regarding end-of-life care, establish a living trust to help your beneficiaries avoid probate, and explore other estate planning options designed to safeguard your legacy. It’s never too early to start working on your estate plan, so reach out to a caring and friendly Charlotte elder law attorney today to discuss your goals.

 

Contact Mason Law, PC, today to discuss your estate planning options. Call our Charlotte office at (704) 276-6446 to get started with a dedicated and friendly elder law and estate planning attorney.

Filed Under: Estate Planning

January 15, 2023 by bob mason Leave a Comment

As we age, we face several challenges and uncertainties. Whether we are coping with age-related health conditions, making decisions about our finances, or thinking about the legacy we’d like to leave behind, it’s natural to feel overwhelmed at times by these weighty matters. While it may never feel like the right time to face these questions head-on, neglecting to take action today can lead to significant complications for you and your loved ones in the future. Working with a caring and experienced elder law attorney is the best way to ensure that you enjoy the legal support you need to keep your future bright and secure. Let’s take a look at some of the qualities you should look for when selecting an elder law attorney who will best serve your needs.

Experience Matters

First of all, you will want to trust that your attorney knows what they are doing. When you meet with a prospective lawyer, ask about their experience in the field of elder law and what draws them to this area. Do they work in several legal fields besides elder law, or have they dedicated their practice to this area? Try to find an elder law attorney who has mastered the necessary technical skills (by working with a mentor or attending specialized training, etc.) and seems proud of their track record serving aging people and their loved ones. You should also make sure the attorney is a member of the National Academy of Elder Law Attorneys (NAELA), as this membership proves that the attorney cares about the latest news in the field and is truly invested in this practice area. Head to the NAELA website to find out.

They Treat You Like a Person

Some law firms and attorneys tend to focus on solving your legal problems, but they fail to listen carefully to your concerns. When searching for an elder law attorney, remember that you will entrust this person with highly sensitive information. Many people become emotional or vulnerable when discussing estate planning or Medicaid matters, so make sure you feel safe and supported in the presence of your lawyer. Look for someone who expresses genuine concern for you as a person.

Clear and Consistent Communication

When you meet with potential elder law attorneys, ask about their communication styles. It’s helpful to know how long a lawyer will take to respond to your questions or return your call. You may also enjoy finding an attorney with an approachable personality and a sense of humor. The topics you will cover in estate planning and aging discussions can be heavy, so working alongside a friendly and relatable attorney can give you the reassurance and confidence you need to move through this process with greater ease.

 

Call Mason Law, PC, today at (704) 276-6446 to speak with an experienced and friendly Charlotte elder law attorney.

Filed Under: Elder Law

January 4, 2023 by bob mason 3 Comments

Annuity stick figureThe annuity guy dropped off the proposal and it has occurred to you that you don’t really know what an annuity is. Or you left my office, and I suggested that a Medicaid Compliant annuity (we’ll get to those later — see below) might be a good strategy.

And you still don’t know what the heck an annuity is!

Let’s take a couple of posts and clear up some confusion. Also, if you are an annuity expert . . . chill! I’m explaining the basics.

The Stick Figure Version of Annuities

Stripped of all the gee-whiz terminology and extra bells and whistles, an annuity is really rather simple.

Someone transfers a pile of cash to another (usually, but not always, an insurance company). The person transferring the cash is called the “owner,” and the entity receiving the cash (the “issuer”) promises to pay the money back in some form or fashion. The cash transferred by the owner to the issuer is called a “premium.” The contractual arrangement between the owner and the issuer is called an “annuity.”

In reality the transferor/owner is lending money to the issuer. Yep! Daddy has loaned the company money.

The company/issuer promises to pay back the money in some form or fashion. With interest. The company is betting that it will be able to play around with Daddy’s money and make more with it than what it will have to pay back to Daddy or whomever he directs.

If the issuer promises to start paying right away (or pretty soon), the annuity is called an “immediate annuity.” If the issuer promises to pay starting (maybe) in 3, 4 or 5 years (or maybe more) or over the life of some designated person then the annuity is called a “deferred annuity.” “Immediate annuity” and “deferred annuity” are ways of describing when benefits will be paid.

The amount of time over which the annuity will payout is called the “term.” If the term of the annuity is pegged to the life of an individual that individual is called the “annuitant.” Often, if not usually, the annuitant and the owner are the same person.

That’s basically “it.” The issuer may dress it up with fancy trade names like the “Flex Golden Years Express American Hero” annuity . . . but stripped down to the stick figure version that will be the basic structure.

Other Fancy Terms

The owner may pay the premium to the issuer in a single lump sum (a “single premium annuity”) or perhaps over some other time and in varying amounts (a “flexible premium annuity”). Those terms have to do with how an annuity is purchased.

Other ways of looking at an annuity have to do with how the cash value of the annuity is invested. If the issuer promises the owner that his cash investment will not be subject to any market risk, it is a “fixed annuity.” If the issuer and the owner agree that the premiums can be invested in the market and that the owner will come along for the ride (whether smooth or bumpy!) it will be called a “variable annuity.” A variable annuity payout will . . . vary . . . depending upon how well the investments have performed.

But Wait . . . Taxes! 

How an annuity is taxed will depend upon what sort of money the owner used to pay for the annuity (I know, I know: “’mericun money, Bob!”). If the annuity was paid for with money that had already been taxed (for example, money that Daddy had laying around in an investment account he had been accumulating) the annuity will be a “non-qualified annuity” to differentiate it from a “qualified annuity,” which will be an annuity purchased with IRA or qualified retirement plan money.

Non-Qualified Annuities

Daddy has a $100,000 CD maturing and wants to buy an annuity. He doesn’t want to tie the money up for too long, but he sees that a deferred annuity will pay him more than an immediate annuity (which makes sense because the issuer gets to play with Daddy’s money longer before it has to start paying back). So, he selects a 3-year deferred annuity with a 5-year term. In other words, in 3 years the issuer will begin paying him back (an annuity stream) over 5 years.

For the sake of mathematical simplicity, the annuity will pay him 10% or $22,000 for a total of $110,000 over the 5-year term.

Over the 5-year term the issuer is returning the owner’s original investment . . . that part is not taxed because it doesn’t represent any income . . . it was the owner’s money to begin with. The $10,000 paid over the original investment represents income (“that’s my profit,” according to one client).

For income tax purposes, each annuity payment will represent a partial return of the original investment (not taxable) and a partial payment of the “profit” on the annuity.

In the example, each payment of $22,000 will represent a $20,000 return of the original investment and a $2,000 payment of taxable income.

From a tax standpoint, Daddy is deferring the tax liability over a period of years while the annuity is accumulating (the first 3 years) and spreading the tax liability out over the period that the annuity is in payout status (5 years). Which is why many annuities are called “tax deferred” . . . not to be confused with “tax qualified” or “qualified” annuities.

Qualified Annuities

Many people have Individual Retirement Accounts. The IRA may have been funded as the owner deposited funds to the account over many years, or it may have been set up when the owner retired or changed employment and rolled a profit sharing or 401(k) plan balance into an IRA.

Think of an IRA as a “tax qualified” wrapper or container that can hold all sorts of investment assets (with some restrictions). All IRAs have the advantage of allowing tax deferred growth and traditional IRAs usually allow tax deductible contributions. Of course, the trade-off comes in the form of complex rules regarding when distributions must begin and how much those distributions must be.

One of the many types of assets an IRA may invest in is an annuity. In fact, some annuities can be structured as both the “wrapper” and the investment, and these are called Individual Retirement Annuities.

In any event, the complex rules that apply to IRAs also apply to annuities structured as IRAs.

Unlike the “non-qualified” annuity Daddy bought in the example above, where a portion of an annuity payment will be tax free and another portion will be taxable, ALL of each annuity payment from an IRA will be taxable.

Clients are often puzzled when I quiz them about their annuities during an initial meeting. What I am doing is trying to determine if we are dealing with a qualified annuity or a nonqualified annuity. The answer tells me which set of tax rules to apply.

Up next: How Annuities Can Help With Medicaid.

 

Filed Under: Annuities, General, IRAs & Retirement Plans, Tax Issues Tagged With: annuities, annuity, annuity explanation, IRAs and annuities, VA and annuities

January 4, 2023 by bob mason 9 Comments

 

ShockedA power of attorney is an overlooked and under-loved document . . . with all the potential of saving your posterior and avoiding a Class A Mess-up! Even if you DO have a power of attorney it may not have what it takes to avoid the Unpleasantness I just referred to.

For a simple example of usefulness, you can read what I wrote earlier on how a power of attorney is an important way to avoid a common banking error.

You can read about these make-or-break documents in less than 3 minutes right here.

What Is A Power of Attorney?

A power of attorney (or a POA) is an instrument in which a person called a “principal” appoints a person called an “agent” or an “attorney in fact” to manage some or all of the principal’s financial affairs.

By the way, an “attorney in fact” need not be (and usually isn’t) an attorney. The word “attorney” comes from the old French Norman word “attourne” meaning “one appointed.”

Is A Power of Attorney Really Necessary?

Without a power of attorney, if a person becomes incapacitated many of her affairs may be unmanageable without a court-appointed guardian or conservator. This will likely involve paying a licensed Appointed One (ok, ok . . . an attorney) to bring a guardianship petition, court supervision of the guardian, likely payment of a bond, and add all sorts of additional pressure on the family.

And that is if everyone is getting along. It becomes much messier if there is not peace in the land.

It doesn’t matter a bit that the incapacitated one is married because the ability of a spouse to manage many affairs is limited.

In fact, as I have written, if a principal is concerned with managing money if she becomes incapacitated, a power of attorney is a much better way to manage money than setting up a joint account with someone else (perhaps a child).

Broad? Or Narrow?

A power of attorney can be very narrow. “I hereby appoint Joe to manage my checking account while I am out of the country through next month.”

A power of attorney can be very broad. “I hereby appoint Joe to do anything and everything I could for myself until further notice.”

“Durable” confuses many. In some states a POA will become invalid after the incapacity of the principal unless the POA specifically states that the POA continues in effect after the incapacity of the principal. In any event, to use quaint terminology, a POA designed to last beyond the incapacity of the principal is said to be “durable.”

In North Carolina, a POA is by default “durable” — a POA must specifically “opt out” of durability if the principal wants it to be revoked after incapacity.

Now? Or Later?

A Principal may wish to appoint an Agent with immediate authority to act, but subject to a mutual understanding that the Agent will not do anything until needed. Thus, an “immediate” power.

On the other hand, the Principal may be a bit nervous about vesting too much power too soon in the Agent and might prefer to specify that the POA does not become effective until after the incapacity of the Principal. Thus, a “springing” POA.

The problem with a springing power of attorney is the task of convincing ever suspicious banks and financial institutions that the POA has “sprung” — that the conditions triggering the effectiveness of the POA have, in fact, occurred.

My usual question to a client wanting a springing POA is: If you don’t trust the Agent NOW, how can you trust her LATER when you won’t be able to do anything about it?

Is It Christmas Yet?

By the way, unless the POA specifically allows for gifting, the Agent won’t be able to make gifts, even if the POA is otherwise broad. Gifting, by the way, isn’t referring to Christmastime, it is referring to the ability to move assets around for planning purposes . . . which could be critical.

Back to the old trust issue. Restrictions can be put on gifting. Perhaps written permission from a sibling, a trusted advisor or friend.

POAs are important. And tricky. The best approach is to have an attorney draft one for you.

Filed Under: Banking, General, Powers of Attorney Tagged With: durable power of attorney, elder law, estate planning, estates, financial power of attorney, general power of attorney, powers of attorney, revocable trusts

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