Legislature Tinkers With Power of Attorney Form

As noted in other articles I have written, Maryland changed its Power of Attorney law effective October, 2010. If an individual uses one of the form Powers of Attorney in the statute, or a power of attorney that is in substantially the same form, and a bank refuses to accept it, then the individual can have the refusing party pay her legal fees if she goes to court to force that party to accept the Power of Attorney.

Because the form documents are not sufficiently comprehensive, lawyers, including William M. Gatesman and Michael G. Day & Associates, with whom Mr. Gatesman is associated, have created Powers of Attorney that are sufficiently comprehensive and which also are “substantially in the same form” as the statutory document. These Powers of Attorney are designed to be comprehensive enough to meet the client’s needs and to also qualify for the attorney’s fees remedy provided for in the new law.

Perhaps to keep everyone on their toes, but in fact to remedy a significant omission in the statutory form, Maryland’s legislature has amended the new Power of Attorney law in recent months. This amendment changes the “Banks and other financial institutions” section of the Personal Financial Power of Attorney form in the statute, which now reads, in pertinent part, as follows:

Banks and other financial institutions – With respect to this subject, I authorize my agent to: continue, modify, transact all business in connection with, and terminate an account or other banking arrangement made by or on behalf of the principal; establish, modify, transact all business in connection with, and terminate an account or other banking arrangement . . . .

Therefore, in order to have a Power of Attorney for which one may rely on the legal fees remedy in the statute after the effective date of the recent amendment, the Power of Attorney should have the language quoted above in the “Banks and other financial institutions” section of the Power of Attorney.

Please contact us for a complimentary review of your existing Power of Attorney.

May a Personal Representative Represent an Estate in Court Without a Lawyer?

Several lawyers have been pondering whether it is illegal for a Personal Representative to bring a legal action without a lawyer because doing so would be considered the unauthorized practice of law.

This office was involved in a case a few years ago in which the Maryland Court of Special Appeals ruled that a Personal Representative (who was not also an estate beneficiary) may not pursue a legal action in Circuit Court without a lawyer. The Appellate Court ruled that doing so constitutes the unauthorized practice of law. The Court ruled also that an estate is not a person who can pursue a legal action “pro se”.

When an individual goes to court without a lawyer, such person is said to be acting “pro se”. Only individuals are allowed to pursue legal actions in court on a pro se basis. Parties who are not individuals, such as corporations, may not do this, but rather, must be represented by a lawyer.

According to the Court of Special Appeals in this unpublished opinion, an estate likewise must have a lawyer to pursue a legal action in Circuit Court.

You may click here to read the case.

Medicaid Waiver and the Young

Some people require skilled care services even at a young age. For example, some people in their early 50’s with advanced Parkinson’s Disease or Multiple Sclerosis find that the only way to afford needed services is to reside in a nursing home where Medical Assistance will cover the costs of care.

Unfortunately, while such people need intensive physical care, they often do not suffer from dementia and are decades younger than most other nursing home residents. Consequently, a nursing home would not to be the most appropriate care environment from a socialization point of view.

The good news is that in Maryland and other states, the Medicaid program sometimes will waive the requirement that one reside in a nursing home to obtain Medicaid benefits for long term care costs. These programs are known as Medicaid Waiver programs. However, there is a vast waiting list for the Medicaid Waiver program in Maryland, and it can take three or four years before one’s name rises to the top of the list.

Fortunately, there is a shortcut to the top of the Medicaid waiver waiting list. If an individual is receiving long term care in a nursing home and applies for and is awarded Medicaid, for which there is no waiting list, then, once Medicaid is established, such person could transfer to assisted living, or even return home and receive home care, and have the Medicaid dollars follow him out.

In other words, the Medicaid eligible nursing home resident can move to another care environment and immediately qualify for the Medicaid Waiver program, bypassing the waiting list altogether.

Thus, relatively young people who suffer from advanced debilitating disease may be able to obtain Medicaid dollars to cover the care costs in an appropriate care setting. However, such person may first have to undergo a less appropriate nursing home stay in order to secure such benefits.

The Gatesman Law Office assists clients in obtaining public benefits to cover essential and prohibitively expensive health care coverage which otherwise would be unavailable.

Unorthodox Asset Preservation Strategy

Mother, who received Medicaid for day care during her lifetime, died. While her will states that the house should remain available for any child of hers who cannot afford a place to live, the creditors in a probate estate take priority. The Maryland Medicaid program was the sole creditor, filing a claim in the estate for $65,000 to cover the Medicaid benefits paid for mother’s benefit during her lifetime. Hence, the Medicaid claim took precedence over retaining the house for any of mother’s heirs.

Nevertheless, the personal representative of the estate did not want to pay the claim because one of mother’s daughters, who is not disabled, but is an underemployed single mother making $5,000 per year, cannot afford another place to live. So the personal representative of the estate denied the claim, and Medicaid filed a petition in the Orphan’s Court to have the claim allowed.

Maryland regulations allow the state, in its discretion, to elect not to pursue a claim in cases where a dependent child of a Medicaid recipient is living in the home. However, the state is required to forego the claim only if such child is disabled, and such was not the case in this instance.

Based on the facts, it appeared that the claim would be affirmed. Nevertheless, William M. Gatesman persuaded the Orphan’s Court that the Medicaid department should have given the personal representative an opportunity to appeal. Because it had not, the court reviewed the statutory criteria upon which the state could have forgiven the repayment obligation and concluded that the circumstances warrant letting mother’s adult child live in the house. On that basis, the Orphan’s Court denied the claim.

While the state could have appealed the Orphan’s Court decision and might have argued that no such appeal right existed, it did not do so. Consequently, we were successful in eliminating the $65,000 payment obligation for mother’s estate.

While it is more typical for lawyers to assist clients in asset preservation strategies before death, this case illustrates an unusual circumstance in which intervention by legal counsel resulted in a substantial savings to the client when, at first blush, all appeared lost.

Probate to Remove a Cloud on Title

William M. Gatesman and the Michael G. Day Law Office recently assisted a client in the following situation. During her husband’s lifetime, the client and her husband transferred their real estate to various trusts using deeds that identified the trust as the recipient or grantee of the property, specifically using the name of the trust without including the name of the trustee.

Deed to Trust Must Name Trustee
Under current Maryland law, such a deed would be effective to convey the property to the trust. However, at the time the deed was signed, Maryland law required that the trustee of the trust (i.e. an actual person) be listed as the grantee in order for the deed to be effective. Listing the trust itself as grantee without also listing the trustee by name was ineffectual. Consequently the client’s deeds were not effective and there was a “cloud on title”, meaning that the property could not be sold until the problem was resolved.

In this case, because the original deeds to the trusts were not effective, we needed husband and wife to sign confirmatory deeds that included the name of the trustee as grantee. However, because husband had died, he could no longer sign a confirmatory deed. And even though his wife held his power of attorney, a power of attorney is no longer effective when the principal dies.

Ancillary Probate
To complicate matters further, while the real property is located in Maryland, the couple had since moved to another state. Since all of their other property had effectively been conveyed to the trusts, no probate proceeding was necessary in such other state even though their wills were on file with the court in that state.

Typically, in cases were an individual is domiciled in another state and dies owning real property in Maryland, one first opens an estate in the state of residence and then undertakes a streamlined “ancillary administration” in the Maryland probate court.

No Clear Procedure
While our office resolved this matter some time ago, it is evident from inquiries by other probate lawyers in an email discussion forum that some lawyers wonder whether a Maryland probate can be opened to address such an issue if there is no probate in the state of domicile.

In fact, Maryland’s rules of procedure and the statutes addressing the jurisdiction of Maryland’s probate court do allow a family member to open a probate estate in Maryland in such circumstance. On that basis, we were able to have a Personal Representative appointed in Maryland for husband’s estate for the sole purpose of executing the confirmatory deed which wife also signed. In this way, we were able to remove the cloud on title that affected the marketability of the properties.

This is one example of the type of complex situation we are called upon to resolve on behalf of our clients on a day to day basis.

Durable Power of Attorney

Maryland’s new General and Limited Power of Attorney Act changed the law of Maryland relating to powers of attorney effective October 1, 2010. Up to that point, there was a presumption that any power of attorney executed in Maryland was durable unless it stated otherwise.

A durable power of attorney is a power of attorney that grants authority to an agent and such agent’s authority continues even when the principal becomes incapacitated and unable to manage her affairs. If a power of attorney is not durable, the agent’s authority ceases upon the disability of the principal.

Unfortunately, the new power of attorney law eliminated the presumption of durability for those certain specialized types of powers of attorney that were not governed by the new law. However, many believe that the legislature did not intend to eliminate the presumption of durability for such specialized powers of attorney.

Maryland House Bill 247 is the legislature’s attempt to fix this problem. Hence, if House Bill 247 is passed by the Maryland Legislature and signed by the Governor, then there once again will be a presumption of durability for all powers of attorney executed in Maryland unless the document itself provides otherwise.

You may read House Bill 247, which provides other amendments to the new power of attorney law as well, by clicking HERE.

Article on New Power of Attorney Law

Maryland General and Limited Power of Attorney Act
In November, 2010, William M. Gatesman spoke about the 2010 Maryland General and Limited Power of Attorney Act at a Continuing Legal Education program for lawyers and in January published an article about this new law in the Maryland Bar Association Bar Bulletin, which article was a shortened version of Mr. Gatesman’s comprehensive article on the topic. You may read Mr. Gatesman’s article by clicking the link below.

Click here to read the comprehensive article

New Power of Attorney Law

As of October 1, 2010, there is a new law governing Powers of Attorney in Maryland. In order to be effective, any power of attorney executed in Maryland after October 1, 2010, must be signed by two witnesses and notarized. The notary may be one of the witnesses.

Moreover, if one uses one of the form powers of attorney set forth in the statute and a financial institution refuses to accept the power of attorney, one could sue the bank and, contrary to the usual rules of court, get a court order commanding the bank to pay your legal fees.

However, the form documents provided by the statute are woefully inadequate for some purposes, particularly for those people who wish to ensure that appropriate asset protection planning can be accomplished should they ever require long term care in a nursing home.

While the statute allows for powers of attorney with added provisions to be considered statutory forms with the same benefits as the bare-bones form set forth in the law, Maryland estate planning lawyers have been struggling for months with how to devise powers of attorney with significant additional provisions that nevertheless comply with the new law.

The Gatesman Law Office has developed just such a Power of Attorney. For a limited time, we will offer to our existing clients a special discount to obtain the new power of attorney plus get a complimentary review of their estate plan in light of their current situations.

I am pleased to offer the same discount to readers of this website who contact us by October 31, 2010. Be sure to mention this offer when you call or email us. To reach us, simply click Contact Us for further instructions.

Family Loans

It is not unusual for parents to lend money to their adult children in times of need. Often the funds are simply given to the younger family member with the understanding that the recipient will return the funds when his or her situation improves.

For seniors, lending money in this way could be a recipe for disaster. If a parent loans money to a child, or to any other person, without documenting such loan with a promissory note, such loan may foreclose the opportunity for such parent to obtain Medical Assistance if future nursing home care should be required.

Even if the loan is memorialized with a promissory note, Medicaid ineligibility still may arise. This is because the Medicaid rules impose strict requirements on the structure of a loan and on the form of a promissory note in order for the note holder to obtain Medical Assistance.

An example of how this might affect a married couple is instructive. Jenny, a single mother with two small children, suffered a reduction in hours at work and needed help with her house payment. Jenny’s parents, Bob and Mary, helped Jenny by loaning her $10,000 to tide things over until she could find another job. Two years later, while Jenny is now able to make her mortgage payments, she has not been able to save enough money to repay the loan.

Bob and Mary have fallen on lean times themselves. They own a house and $20,000 in the bank. Bob has a stroke and now must reside in a nursing home for the remainder of his life. Under the Medicaid rules, Bob and Mary can keep about $20,000. They also can make home improvements and can prepay their burial costs. If you count the loan to Jenny as one of their assets, Bob and Mary have $30,000 in assets, $10,000 of which they can use to improve their house or prepay their burials. Or Mary can use an annuity to save the entire amount. After making such payments, Bob would meet the financial eligibility requirements for Medicaid so that his nursing home costs could be paid by the state.

As long as the loan to Jenny is properly documented, Medicaid would be allowed. If it is not, however, then the $10,000 transferred to Jenny two years ago will be treated as a gift causing Bob to be ineligible to receive Medicaid benefits for one and a half months. The tragedy of the situation is that Bob and Mary will be required in that instance to spend about $12,000 of their saved funds to pay the nursing home for that one and a half month period thereby substantially depleting their meager savings.

The way to avoid such dire consequences is to structure the loan so that it complies with the Medicaid rules. Such loan must be “actuarially sound”. While that word as used in the Medicaid rules is somewhat nebulous, it presently is applied so as to require that the term of the loan must allow for full repayment within the life expectancy of the lender. Life expectancy is determined by using standardized life expectancy tables set forth in the Medicaid rules.

In addition, such loan must provide for equal, regular, periodic payments, and there must be no deferral of payments. Also, the promissory note must specifically state that the loan is not cancellable at death. Unfortunately, most promissory notes prepared by lawyers and most preprinted promissory note forms do not prohibit cancellation at death. Indeed, under general commercial law, a valid promissory note, even if it does not expressly prohibit cancellation at death, would nevertheless survive the death of the borrower. In other words, there would not be an automatic cancellation of the note. This legal principle, however, is not sufficient to salvage a promissory note in the eyes of the Medicaid rule makers who will look to see whether the promissory note specifically prohibits cancellation.

As is the case in many areas of life, when seniors enter into financial arrangements with family members or others, great care must be taken to ensure that such arrangements do not have unintended adverse consequences or prevent future eligibility for public benefit programs.

Thank You Note

I received a nice letter from a client recently. It reads as follows:

Dear Mr. Gatesman,

You may recall that we met during the blizzard in February. My main question at that time was how to get my mother into a nursing home on Medicaid without losing her house.

During our meeting, you pointed out that my mother should be eligible for a Veteran’s Administration Aid & Attendance pension. The whole time I was completing the application and assembling all the supporting documents, I assumed that the application would be automatically denied and we would have to launch a lengthy appeals process.

You can imagine my shock when our application was accepted within about 3 weeks of receipt! It was received by the VA on May 21, and they sent my mother a notice dated June 17, that arrived on what would have been my parents 69th wedding anniversary, June 22.  The notice says she will receive $1056 per month as of June 1.

I did not know that this pension even existed before consulting you.

Thank you again!