More Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseriesThe New Maryland Supported Decision Making Law Explained The 2022 Miracle in Annapolis – “It’s a Start”
[et_pb_section fb_built=”1″ admin_label=”section” _builder_version=”4.16″ global_colors_info=”{}”][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Text” _builder_version=”4.22.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”]By: Stephen R. Elville – Managing Principal and Lead Attorney – Elville and Associates, P.C.
This spring the Maryland General Assembly delivered a long-overdue victory to persons with disabilities across Maryland, one that will forever change countless thousands of lives. Not unlike Rich Strike’s astounding 80-1 odds come from behind heart-stopping victory in the Kentucky Derby, the Supported Decision Making bill, starting at the back of the legislative pack, survived apathy then eventually tough scrutiny, then in an electrifying turn of events and sentiment down the stretch, crossed the finish line with the approval of the Senate and the House, and by default (no veto by Governor Hogan) will become law on October 11, 2022 – all thanks to the proponents of the Bill, including its driving force, Megan Rusciano, Esq., of Disability Rights Maryland, the lawyer whose tireless and long-standing herculean efforts over most of the last decade has now resulted in a landmark change in Maryland law. Congratulations to Megan from all of us at Elville and Associates!
The New Maryland Supported Decision Making law (“SDM”) is simply astonishing considering the huge impact it will immediately make (effective October 1, 2022) and the 180-degree paradigm shift it represents. Not only can the foregoing sentence not be overstated, but nothing this writer can convey here can adequately describe the profound nature of this change and what it represents in terms of its effect(s) on the rights of persons with disabilities in Maryland. Simply put, the new SDM law takes everything we have ever known or become accustomed to about the treatment and consideration of persons with disabilities and their right(s) of self-determination and turns that upside down. If you are reading this article and are a person with disabilities or the parent or other loved one of a person with disabilities, you can now feel free to turn down a glass to mark the beginning of a new era in human rights for your loved one and for the persons (and organizations) like you who support them.
The following is a complete overview of Supported Decision Making, including the highlights of the new Supported Decision Making law. I provide this following information knowing the risk of providing too much information – but with the hope that by doing so you the reader will have the opportunity to realize and appreciate the profound nature of this ground-breaking news.
What is Supported Decision Making (“SDM”)?
- SDM is many things, including the following: a tool where a person with disabilities can be empowered and supported in the process of making their own decisions – to whatever extent possible; a written or oral agreement representing a formalization of authority for the supported decision maker to be recognized as such; an alternative to adult guardianship or a tool to be used as part of adult guardianship; a potential addition to a financial power of attorney and advance medical directive; part of a paradigm shift and a new world of self-determination for the disabled, young or old.
Why was Supported Decision Making needed in Maryland?
- Prior to the passage of SDM, Maryland was behind many states, including its neighbors in Delaware and the District of Columbia, in the sense that there was no good alternative to guardianship versus a power of attorney; no formalized way for a person with disabilities to be supported; no annual review of private guardianships; no clear way for all alternatives to adult guardianship to be explored and implemented; inconsistency in judicial application of existing law; old notions of traditional guardianship were clearly inequitable and no longer needed; and a culture of paternalism and risk minimization was prevalent, thereby hurting the potential of persons with disabilities.
Prior to Supported Decision Making, the following were generally considered the alternatives to guardianship in Maryland (lesser restrictive alternatives).
Guardianship of the property; guardianship of the person; then alternatives to guardianship, including consent orders (settlement agreements) in guardianship proceedings; appointment of financial agents under financial powers of attorney; appointment of health care agents under an advance medical directive; Representative Payees (Social Security); joint ownership of financial assets; surrogate decision making (health care)
Now we are no longer constrained by only this traditional paradigm.
What Supported Decision Making is not:
- SDM is not a financial power of attorney and not a way for a third party to make decisions for a disabled person, and not a mechanism giving authority to a third party to do what they deem appropriate for a person; not a mechanism by which a person with disabilities gives up their rights; and not adult guardianship
By comparison, what is adult guardianship?
- Adult Guardianship is: the removal of a person’s rights to their property (guardianship of the property or estate); removal of a person’s rights to their person – place of abode; health care decisions; right to vote; person has no legal choices; represents the paradigm of protectionism – no recognition of an individual’s right to take risks – fear of and prevention of failure; no review (private guardianships); and an unspoken consensus of permanency.
What is Supported Decision Making as compared directly with guardianship?
- No removal of an individual’s rights; facilitates the potential for restoration of rights (for persons now under guardianship); rights to property and person remain vested in the individual; paradigm of individual risk – person has the right to fail; can be part of guardianship if necessary; an addition to an individual’s financial power of attorney; an addition to an individual’s advance medical directive.
What is the difference between Financial Powers of Attorney and Advance Medical Directives versus SDM?
- In a financial power of attorney and/or advance medical directive, the principal (the individual) appoints an agent who acts on behalf of principal according to the powers provided to the agent; the power of the agent becomes effective as set forth in the document; the agent acts when principal can no longer act for themselves; the agent has fiduciary responsibility and accountability; the authority of the agent can be terminated by the principal in writing; and as mentioned above these documents are substitutes for guardianship of property and person.
- With SDM there is no agency relationship and the power of principal remains vested in them; the principal alone makes decisions (their own) with help from supporting decision maker (the supporter); there is no authority for supporter to act for or on behalf of the agent; the supporter has to be accountable – the extent depends on the jurisdiction; the supporter’s role can be changed or terminated; and SDM is a substitute for guardianship (a new substitute to be added to the list of lesser restrictive alternatives above.
With the above explanations and references as background and context for our new understanding of SDM and how it differs from the old paradigm of guardianship and its alternatives, here are excerpts from the new Supported Decision Making law. I strongly urge you to sit and contemplate this information. As you do, I predict that you will have a series of epiphanies that will collectively result in your amazement at the scope and extent of the change this legislation has brought. As you read, you will realize that like many things that seem to happen overnight, the world has now changed forever concerning the rights of persons with disabilities in Maryland.
Summary/excerpts from the new Maryland Supported Decision Making legislation:
- Supported Decision Making (defined):
- Can be “with or without SDM written agreement”
- Can be a “series of relationships”
- “to make, communicate, or effectuate the adult’s own life decisions”
- Supported Decision Making Agreement (defined):
- Plural – “arrangement with supporter or supporters”
- Describes “how the adult uses SDM to make their decisions”, “rights of the adult”, “responsibilities of the supporter”
- Supporter(defined):
- “individual selected by adult”
- “to provide support”
- “to provide support in making, communicating, or effectuating the adult’s own life decisions
- Purpose
- To assist adults:
- “by obtaining support – in making, communicating or effectuating decisions – corresponding to the will, preference, and choices of the adult”
- To prevent:
- Appointment of substitute decision maker for the adult, including a guardian
- To assist adults:
- Application
- Adult may use SDM to:
- “Increase the adult’s self-determination”
- “Prevent the need for a substitute decision maker” (agent or guardian)
- “Limit of terminate the use of a substitute decision maker”
- ALL adults are presumed capable of making an SDM agreement
- TO BE CONSTRUED LIBERALLY!
- Manner of communication – “not ground for determining the adult’s capability for making, changing, or revoking an SDM agreement”
- SDM agreement cannot be used as evidence of incapacity (no risk in signing), and cannot restrict the adult from acting independently or accessing their personal information
- Guardianship:
- Person under guardianship may enter into an SDM agreement
- Court may limit or remove guardianship due to existence of SDM agreement
- Guardian cannot prevent without “good cause”
- “Support” is defined as:
- Gathering information
- Understanding and interpreting information
- Weighing options
- Understanding consequences pro and con of a decision
- Participation in conversations with third parties
- Providing support to the adult in implementing a decision
- Responsibilities of the Supporter:
- Support the will and preference of the adult – without insertion of supporter’s opinion about reasonableness of the adult’s wishes, preferences, or choices
- Act honestly, diligently, and in good faith
- Act within the scope of the SDM agreement
- Maintain records and make them available regarding:
- Supporter’s actions
- How the adult communicates and expresses opinions
- Records and information obtained
- Maintain safety and security of such records
- Relationship is one of trust and confidence
- A supported decision maker may NOT:
- Make decisions for the adult
- Exert undue influence on the adult
- Coerce the adult
- Obtain information about the adult without the adult’s consent
- Enforce decisions made by the adult outside of the adult’s presence, unless authorized by the adult to do so
- Act outside the authority of the SDM agreement
- Who may NOT be a supporter:
- A minor
- A person against whom the adult has obtained a peace order
- A person who has been convicted of financial exploitation
- Resignation of Supporter:
- Must be orally given or in provided in writing to the adult, and to all other named supporters and third parties who have the Agreement on file
- Authority of supporter ends upon their incapacity or death
- Requirements of Form of SDM Agreement:
- Any form consistent with the Statute is acceptable
- Must be:
- Documented, dated, and witnessed by two adults who are not the supporter, an employee or agent of the supporter
- Name at least one supporter
- Describe the decision-making assistance the supporter (or each supporter) may provide the adult
- Describe how supporters may work together
- Describe any potential conflict(s) of interest and how they might be mitigated
- Requirements of Form of SDM Agreement (cont’d):
- Document how the adult selected the supporter(s)
- Be approved by the Court if adult has a guardian and the SDM agreement affects the authority of the guardian
- Contain an attestation about the adult’s independence in decision making
- Adult can revoke SDM agreement orally or in writing and can obtain support from an individual of the adult’s choosing to revoke the agreement
- Third parties may rely on the SDM agreement in good faith
- Third parties may also decline to comply with an SDM agreement on the following grounds:
- Actual knowledge of invalidity, revocation, or abrogation; or coercion or undue influence of a supporter
- Third parties may be held liable for the following:
- Causing personal injury as a result of negligent, reckless, or intentional acts
- Failing to give effect to an adult’s decision made in accordance with a valid SDM agreement
- Failing to provide information to eh adult or supporter of the adult that would be necessary for informed consent
- Actions otherwise inconsistent with the SDM law
- Adult may use SDM to:
So in summary, how will persons with disabilities benefit from the new Maryland SDM law?
- Persons living with disabilities will no longer be strictly limited by their disability or diminished capacity;
- The new paradigm of risk should encourage the ideal of independence;
- Persons living with disabilities will have new empowerment and recognition of their rights of self-determination;
- There is a new and legally articulated role for supporters;
- A new legal path forward exists – a psychological shift;
- The new SDM legislation is very broad and not limited – it should interpreted and applied as such and never “pigeonholed”;
- For persons living with disabilities, the ideals of independence and rights of self-determination are now not diminished by any real need for guardianship;
- For persons living with disabilities, there are now new protections from and alternatives to guardianship.
Remember that Maryland SDM legislation is extremely subtle, yet powerful. Most importantly, it is not complicated. Perhaps the latter is the most important advice I can provide in this article – that SDM is a simple concept and should not be confused or complicated beyond its simplicity. SDM is simply the idea that persons with disabilities can make their own decisions to whatever degree possible, provided that they have the support to do so.
In closing, sometimes if you live long enough or wait long enough, and if you’re lucky, you witness a miracle, such as the fall of the Soviet Union and the tearing down of the Berlin Wall in 1989; or the first female Speaker of the House of Representatives in 2007; or the election of the first African-American President in 2008; or the nomination of the first female African-American Justice of the Supreme Court in 2022; and now this fulfillment of the United Nations mandate on human rights in the form of Supported Decision Making law for Maryland. Are there unanswered questions about how SDM will work in Maryland? Yes. Are there many questions about supporters and their responsibilities, rights, and liabilities? Are there concerns about the SDM being fully utilized in the years to come so that it is not minimized or pigeonholed into limited use? Yes. Is the SDM law likely to evolve and change over time? Yes. Are there risks? Yes. But as one smiling person with disabilities (who is also a ward under guardianship) recently stated concerning SDM in front of a large event audience where I was the presenter, and I quote, “it’s a start”.
Managing Principal and Lead Attorney Stephen Elville’s work is centered in special needs planning, elder law, and estate planning with special emphasis in the areas of tax planning and asset protection. As a member of the Academy of Special Needs Planners, the National Academy of Elder Law Attorneys, and the National Network of Estate Planning Attorneys, he works to bring peace of mind to clients by creating solutions to their needs through counseling and education using the very best legal-technical knowledge available. He is a seasoned speaker and each year presents at dozens of webinars, workshops, conferences, and continuing education events. Steve has also been named to the Maryland Super Lawyers list seven times, including the past six consecutive years. Steve is also the founder and president of the firm’s charitable organization, the Elville Center for the Creative Arts, in 2014, a 501(c)(3) organization that partners with school music programs and other organizations such as the Annapolis Symphony Orchestra to give the gift of music to children who want to participate in music but don’t have the means to do so on their own. Steve may be reached at steve@elvilleassociates.com, or by phone at 443-393-7696 x108.
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If you want to pass money to future generations without having it subject to gift and estate taxes, then a dynasty trust may be right for you. A dynasty trust allows trust assets to be used for the benefit of multiple generations while keeping the assets out of the grantor’s and the beneficiaries’ taxable estates.
The main benefit of a dynasty trust is the avoidance of estate and gift taxes over many generations. In 2022, federal estate tax exemption is $12.06 million ($24.12 million for couples). Estates valued at more than the exemption amount will pay federal estate taxes, at a rate of between 18 percent and 40 percent. The lifetime gift tax exclusion – the amount you can give away without incurring a tax – is also $12.06 million in 2022. Note that you can give any number of people up to $16,000 each per year (in 2022) without the gifts counting against the lifetime limit. In addition, the generation skipping transfer (GST) tax affects assets passed to grandchildren. The tax is imposed even when property is left in trust for a grandchild. The GST exemption is the same as the estate and gift tax exemptions. If you transfer more than the GST exemption, the tax rate is 40 percent.
Assets transferred to a dynasty trust are subject to estate, gift, and GST taxes only when initially transferred and only if they exceed federal exemption thresholds. While estate and gift tax exemptions are currently very high, in 2026 the exemption is set to drop to the previous exemption amount of $5.49 million (adjusted for inflation).
Another benefit of a dynasty trust is that the assets in the trust are protected from the beneficiaries’ creditors or in the event a beneficiary divorces. If the trust is properly structured, creditors cannot go after trust assets to pay the beneficiaries’ debts.
How a dynasty trust works
A dynasty trust is an irrevocable trust, which means once it is created it cannot be changed. Funds transferred into the trust will be taxed if they exceed the lifetime gift tax exclusion. However, once funds are transferred to the trust, beneficiaries of the trust can pass assets to the next generation without those assets being subject to estate, GST, or gift taxes. In addition, the assets placed in the trust are removed from your estate and can grow outside of it.
The trustee of the trust can be a beneficiary, but because the trust is designed to last for generations, it may make sense to have a professional fiduciary, such as a bank or other financial institution, serve as trustee. The trustee manages and distributes the assets in the way you set forth in the trust agreement. Usually, the trust provides for the beneficiaries’ support during their lifetimes. For example, it could direct the trustee to pay out income regularly, make periodic principal distributions, or make distributions contingent on the beneficiary’s need.
The length of time the dynasty trust can continue to exist depends on state law. Some states allow trusts to run for hundreds of years or indefinitely, while others place limits on how long the trust can operate. Traditionally, the rule against perpetuities states that a trust can last 21 years past the death of the last beneficiary. However, many states have opted out of the rule, allowing trusts to continue for many generations.
The downside of dynasty trusts is that they are inflexible. Once the trust is created, you lose access to the assets. Because dynasty trusts last for generations, they require guesswork about what will be best for your descendants.
Dynasty trusts are complicated instruments that must be designed correctly in order to provide benefits. Set a time with Elville and Associates’ Managing Principal and Lead Attorney Stephen Elville to talk about your situation and planning needs to determine if a dynasty trust is right for you.
#elvilleeducation
Understanding Maryland ABLE Accounts and How They Benefit Your Loved One With Special Needs
More Webinars from Elville and Associates
The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
#elvilleeducation #elvillewebinarseriesBy: Charles A. Borek – J.D., CPA, MBA, Founder of the Borek Group, LLC – Guest Contributor
Business expenditures generally may be recovered through a deduction against income at some point in time. The critical issue is “when?” If a business expenditure mut be capitalized, its deduction is delayed; the cost is recovered either over its depreciable life or when the business finally sells or otherwise disposes of it. This timing issue can have dramatic tax impacts, as entrepreneur Tamara Yapp can attest.
Tamara had been introduced to probiotic supplements during her efforts to find treatments for medical conditions suffered by her son. For this reason she decided to establish her own health food business. She entered into a distribution agreement with A.G.M. Foods under which A.G.M. would help her develop her own line of probiotic products. To this end she formed Real Food Real Life, LLC and worked to formulate new recipes that incorporated A.G.M.’s supplements to achieve products with better taste, texture, and shelf life. Tamara took steps to launch her product line commercially and hired designers to create a logo, slogan, and product labels. She researched options for shipping her products and solicited and received pre-orders of products.
All of this, as you might imagine, consumed a lot of money and resulted in a large loss for the business during its first couple of years. Unfortunately, as the IRS pointed out to Tamara, the tax law requires that “start-up” business expenditures be capitalized and deducted over 15 years rather than being deducted immediately. This mistake resulted in Yapp owing over $475,000 in unexpected tax liability, in addition to a $95,000 penalty imposed by the IRS.
The rules for capitalizing an item as opposed to expensing it can be complex. In 2014 the IRS issued extensive regulations that apply to all taxpayers, regardless of size. While navigating the rules can be challenging, it’s not all bad news. The regulations permit certain “safe harbors” that allow the immediate write-off of purchases under a certain dollar amount, regardless of whether such business expenditures would have to be capitalized under the normal rules. To learn more about this important issue, be sure to tune into my webinar, “Expense vs. Capitalize: Tangible Property Regulations” on Tuesday, August 23rd at 10 a.m. To register for the webinar, please click on its title above or here.
Mr. Charles A. Borek is Special Counsel to Elville and Associates and Founder of The Borek Group, LLC. He is a business and tax attorney with 30 years of experience representing individuals, small businesses, and nonprofits. He has taught law students as a visiting and adjunct professor of law at American University and the University of Baltimore and has lectured at Dickinson Law School of Penn State University. Chuck also holds a graduate degree in theology and literature from Wesley Theological Seminary and is pursuing doctoral work at Pittsburgh Theological Seminary. Additionally, Chuck presents seminars to CPAs and lawyers around the country though The Borek Group, LLC, including presentations to “Big 4” accounting firms and Fortune 500 companies. Mr. Borek may be reached at chuck@elvilleassociates.com, or 443-393-7696 x129.
Inheritance Tax
By: Shannon K. Mumaw – Associate Attorney
Just as there are taxes owed during life, there are taxes owed upon death. One such tax imposed after death is inheritance tax. Inheritance tax is imposed on any property passing from a decedent to a beneficiary, except for property passing to those beneficiaries who are statutorily exempt from inheritance tax. It is seen as a privilege to receive an inheritance, so naturally a tax will follow.
The tax is imposed on the beneficiary who receives the property; however, the personal representative or trustee who is making the distribution is ultimately liable until the tax is paid. A will or trust may shift the burden of payment and provide that the tax shall be paid from the estate or trust funds, but the tax is still imposed on the individual who receives the distribution. This tax is determined at the time the property is received. Therefore, if at the time of receipt the property is subject to a lien such amounts are deductible.
Persons Exempt from Inheritance Tax
Under Maryland Code, Tax-General § 7-203, the following persons related to the decedent are exempt from inheritance tax: a spouse of the decedent; a child of the decedent; a grandchild of the decedent; a great-grandchild of the decedent (and further lineal descendants of a child of the decedent); a parent of the decedent; a grandparent of the decedent; a spouse of a child of the decedent or a spouse of further lineal descendants of a child of the decedent; a sibling of the decedent; or a charitable organization. For the purpose of determining exemption status, a “child” includes a stepchild or former stepchild and a “parent” includes a stepparent or former stepparent.
Persons subject to inheritance tax include friends of the decedent, nieces and nephews, aunts and uncles, cousins, and more distant relatives.
Property Subject to Inheritance Tax
What property is subject to inheritance tax? The quick answer is all property having a taxable situs in Maryland. Any real property located outside of Maryland is not subject to Maryland inheritance tax, rather the laws of the state in which the property is located will apply. All other property is deemed to have a taxable situs in Maryland if the decedent was a Maryland resident at the time of his or her passing. This includes – but is not limited to – tangible personal property such as personal effects, vehicles, and jewelry, retirement and non-retirement assets, stocks, and bonds.
However, there are a few limitations that help narrow the broad application of inheritance tax on all property deemed to have a taxable situs in Maryland. One such limitation applies to income earned after the decedent’s date of death. This tax does not apply to the income, including gains and losses, that accrues on probate assets after the decedent’s death. However, it is important to note that this limitation is only applicable to probate assets.
The value of the property itself may also affect whether the tax will be imposed. If the total value of the property passing to any one person does not exceed $1,000, inheritance tax will not apply, regardless of that individual’s relation to the decedent. Additionally, this tax will not be imposed on the receipt of property that is distributed from a small estate.
Another exception exists for life insurance proceeds. This tax is not assessed on the receipt of life insurance proceeds, regardless of the individual’s exemption status – unless the proceeds are payable to the decedent’s estate. If life insurance proceeds are payable to the decedent’s estate, the proceeds will ultimately pass to the individual designated under the decedent’s will or by the laws of intestacy, and the individual’s relation to the decedent will thereby determine whether inheritance tax is imposed.
Common Misperceptions
It is a common misperception that placing an asset in a trust will shield the asset from inheritance tax at death. Inheritance tax applies to both probate and non-probate assets. In other words, nonexempt transfers from a decedent’s trust are subject to inheritance tax just as all other nonexempt transfers after death.
It is also a common misperception that inheritance tax and estate tax are one and the same. Inheritance and estate taxes are both assessed after death, but each are assessed differently and independently – perhaps this will be our topic of discussion next time.
Should you have any questions or matters related to inheritance tax or estate and trust administration, I can be reached at smumaw@elvilleassociates.com, or 443-393-7696.
Shannon K. Mumaw is an Associate Attorney with Elville and Associates and the leader of the firm’s busy Estate and Trust Administration Department. Through her guidance, she partners with clients as they address the sometimes complex matters of the administration of loved ones’ estates from start to finish, including helping navigate the probate process, inventory and information reports, accountings, and much more. She also addresses clients’ needs as they relate to the estate planning process. Shannon may be reached at smumaw@elvilleassociates.com, or by phone at 443-393-7696 x116.
The Power of the Power of Attorney
By: Renee Q. Boyd – Associate Attorney
Introduction:
When most people think about Estate Planning, they think about planning for how their assets (the estate) will be distributed when they die and how to facilitate smooth administration. But Estate Planning encompasses much more – it is also planning for and deciding who will manage your assets during your lifetime, if and when you are incapacitated. It is equally important for you to prepare for a time when you are still living but may be unable to make decisions for yourself — for your health care and financial matters. Whether you are just starting out in your career or preparing for your retirement years, it’s never too early to consider how you want your health and financial affairs to be managed if something happens to you and you are not able to exercise control over your affairs for one reason or another. This is known as incapacity planning. For your health care decisions, incapacity planning is addressed with an Advance Medical Directive. Planning for your financial decisions is addressed with a Power of Attorney document.
What is a power of attorney?
Powers of Attorney are extremely significant tools to help you prepare for your future, and are perhaps the most important of all planning documents. A Power of Attorney is a legal document you sign to grant someone you trust with authority to make decisions on your behalf. The “principal” is the person who creates the power of attorney and the “agent” (aka the attorney-in-fact) is the person who is receiving power by way of the document. This agent, or attorney-in-fact, has the legal authority and right to make certain decisions that you would make if you were able. You, as the principal, have not given up your own power to perform these same functions, but rather have granted legal authority to the agent to perform various tasks on your behalf if you are not able to do so.
Why do I need one?
A Power of Attorney arrangement is important, even essential, to managing your financial affairs in the event you become unable to manage things on your own. Planning for the future with a power of attorney can minimize complications to achieving your financial goals. This important document:
- Provides the ability to choose who will make decisions for you (rather than having a court decide).
If you sign a Power of Attorney document and later become incapacitated and unable to make decisions, the agent named can step into your shoes and make important financial decisions on your behalf. Without a Power of Attorney in place, a court-appointed guardianship or conservatorship may need to be established, and that can be a time consuming and very expensive process.
Someone who does not have a comprehensive Power of Attorney at the time they become incapacitated may have no lessor restrictive alternative and a third party would have to petition the court to appoint a guardian or conservator. The court would then choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court would continue to monitor the situation as long as the incapacitated person is alive. While this is not only a costly process, the incapacitated person would likely have little or no input in deciding who will be appointed to serve.
- Provides family members the opportunity to discuss wishes and desires.
Much thought and consideration goes into creating a comprehensive Power of Attorney. One of the most important decisions is who will serve as the agent. When you or a loved one make the decision to sign a Power of Attorney, that provides a good opportunity to discuss wishes and expectations with the family and, in particular, the person named as agent in the Power of Attorney.
- Minimizes questions about principal’s intent.
There are often times court battles over a person’s intent once that person has become incapacitated. A well-drafted Power of Attorney, along with a health care directive, can eliminate the need for family members to debate or disagree over a loved one’s wishes. Once written down, this document is excellent evidence of your intent and is difficult to dispute.
- Allows agents to talk to other providers.
An agent under a Power of Attorney is often in the position of trying to reconcile bank charges, make arrangements for health care needs, engage professionals for services to be provided to or on behalf of the principal, and much more. Without a comprehensive Power of Attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration, as well as lost time and money.
- Allows agents to plan for the principal’s eligibility for public benefits.
Having a Power of Attorney is extremely important in helping a loved one become eligible for public benefits, such as Medicaid and/or Veterans Administration benefits, as well as in assisting them with maintaining their eligibility and in making benefit-related decisions. The Power of Attorney gives the agent the authority to access the supporting documentation required during the application process and to manage and potentially transfer the loved one’s assets and income to gain eligibility. Once eligible for public benefits, the Power of Attorney provides the agent with the power to write checks on behalf of the benefit recipient to cover co-payments or share of the costs.
- Provides peace of mind for everyone involved.
Taking the time to create and sign a Power of Attorney lessens the burden on family members who would otherwise have to go to court to get authority for performing basic tasks, like writing a check or arranging for home health services. Knowing this has been taken care of in advance is of great comfort to families.
How do I get a Power of Attorney in place?
The laws governing Powers of Attorney are specific to each state, so it is important that you understand the applicable laws both where you live, and where you have assets. Most states require that your Power of Attorney be in writing, witnessed and notarized. You must sign when you are still mentally competent for your Power of Attorney to be valid. This is a good reason to plan early for your later years, so that your affairs are in order.
Nobody can predict exactly which powers will be needed in the future. Although each client’s goals are different, generally the primary goal is to have a Power of Attorney in place that empowers your agent to do whatever needs to be done in the future. At Elville and Associates, we take a two-tiered approach to meeting these planning goals. The first tier is use of the Maryland Statutory Power of Attorney that was created under the Maryland Power of Attorney Act of 2010. This is a straight-forward document that, while not customizable, must be accepted by law at the financial institutions in the State. It is a simple document, enforceable by law, that provides the average person with the ability to grant his or her agent with basic powers.
Many people, however, choose to supplement the statutory Power of Attorney with a durable Power of Attorney which can be customized, and which allows much broader and more extensive powers to be granted to your agent. Examples of these enhanced powers are powers granted to your agent:
- To establish, amend, revoke or terminate revocable and irrevocable trusts during the principal’s lifetime
- To fund or make withdrawals from trusts
- To create or change beneficiary designations
- To manage government benefits
- To care for and deal with pets
- To make a gift of money or property
- To perform a Medicaid spend-down of assets
- To be compensated
Using the combination of the statutory and the durable Power of Attorney documents is a powerful tool because each has a tactical advantage. The statutory document is enforceable through the state statute which requires banks and other financial institutions to accept it. The durable power of attorney document, on the other hand, is much more comprehensive and places the principal in a much stronger position should need arise when the principal becomes incapacitated.
Summary:
No one likes to think about a time when he or she is unable to make their own decisions, but it is critical to plan for it. Accidents happen and illnesses can come on unexpectedly. If and when you become incapacitated, your family and loved ones will not automatically have the access and authority to make your decisions and manage your affairs. Without that access and authority in place, your wishes may not be followed and your assets may not be protected.
In Maryland, unlike with health care decision making, there is no such thing as surrogate decision making in financial matters. This is why the Power of Attorney is essential. Powers of Attorney can and do provide you with peace of mind – you choose who will act for you when you are unable to act for yourself, and you define that person’s scope, authority and limits. Even if you are unable to handle the decision making yourself, having a Power of Attorney document in place assures you that everything you have worked for during your life will continue to be managed according to your wishes.
For more information or to schedule a time to discuss your incapacity and estate planning needs, including a “powerful power of attorney,” please contact me at renee@elvilleassociates.com, or by phone at 443-393-7696 x111. All initial estate planning consultations are free and typically run about 1-1/2 hours. This is a time for you to get to know Elville and Associates and me, ask questions, and have me learn about your overall situation, your goals and you so I can create a solution and path forward for your planning. I look forward to meeting you!
Renee Q. Boyd is an Associate Attorney with Elville and Associates and an key member of the firm’s busy Estate Planning Department. She partners with clients to educate them and provide them a perfect client experience through the entire estate planning process – along with future maintenance and updating of their planning as changes occur in the laws and their lives. Renee may be reached at renee@elvilleassociates.com, or by phone at 443-393-7696 x111.
What Can ABLE Accounts Qualified Disability Money Be Spent On (Qualified Disability Expenses)?
ABLE (Achieving a Better Life Experience) accounts offer people with disabilities a great, tax-free way to accumulate money without jeopardizing their qualifications for Supplemental Security Income (SSI) and other means-tested programs. Withdrawals are tax-free as long as the money is used for “qualified disability expenses.” The arguments for starting and maintaining such funds are overwhelming, not least of which is the wide variety of things on which the money can be spent.
To build 529A ABLE accounts, beneficiaries (and other contributors) can put up to $16,000 total into these funds each year. Other restrictions apply. Only those whose disabilities were diagnosed before turning 26 are eligible for an ABLE savings plan. The total value of the account must remain below $100,000 for the beneficiary to qualify for government benefits. Also, the money must be spent only on items, services and activities that the Internal Revenue Service (IRS) deems qualified disability expenses (QDEs).
The ABLE Act, passed by Congress in 2014, originally defined qualified disability expenses as:
- education, housing, transportation
- employment training and support
- assistive technology and personal support services
- health, prevention, and wellness
- financial management and administrative services
- legal fees
- expenses for oversight and monitoring
- funeral and burial expenses
The language of the Act concludes this list with: “and other expenses which are approved by the Secretary under regulations and consistent with the purposes of this section.”
Subsequent regulations and recent revisions by the Social Security Administration (SSA) and the IRS have expanded the list. As of 2022, for instance, the SSA has determined that food qualifies as a qualified disability expense, whether in the form of groceries or restaurant meals. ABLE money can also go toward vacations.
To clarify the purpose of ABLE accounts, the Treasury Department and IRS issued a bulletin in 2015 to the effect that “qualified disability expenses” should be “broadly construed” to include any benefit related to the designated beneficiary “in maintaining or improving his or her health, independence, or quality of life.”
“There is no complete list of ABLE accounts qualified disability expenses, but the category is very broad, including any expense paid for the benefit of the eligible beneficiary,” Juliana Crist, senior consultant at AKF Consulting, an advisor to state-run municipal plans, told Investopedia.
The ABLE National Resource Center offers advice on what to spend ABLE funds on and when, stressing that an expenditure need not be disability related. Need a car? That’s eligible, as is a smartphone. As noted above, education qualifies, as does anything needed for classes, such as books and a laptop.
It is always best to use ABLE funds on those things that are explicitly described as qualified disability expenses, while using money from other sources for those things that might not qualify. The ABLE National Resource Center advises using public benefits for key expenditures, reserving ABLE funds for those things less likely to be covered by such things as Medicaid. Experts advise keeping records on what you have spent ABLE funds, should the IRS decide to include you on one of its random audits. Misuse of ABLE account funds could result in tax penalties and possible loss of public benefits.
But the rationale for starting and building an ABLE account is compelling — and keeping the account growing more so, as more items are included in allowable expenditures. Before you open an ABLE account for yourself or a family member with disabilities, or if you have questions on how the money should be spent, be sure to consult with your special needs planning attorney at Elville and Associates.
For a directory of state ABLE account programs, click here.
Webinar — A Caregiver Panel
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The education of clients and their families through counseling and superior legal-technical knowledge is the mission of Elville and Associates. We hold multiple educational events every month. Click to view our calendar of educational webinars and events or visit the Elville and Associates YouTube channel to view recordings of our past webinars.
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They say that life is cyclical, and that is also the case with you and your parents. Our mother and father take care of us when we are born and when they reach their elder years, we start taking care of them. We all know this, but we don’t always know when the best time is for us to jump in and start taking over. Here at Elville and Associates, we are here to help. We know how important it is to care for our elders, so we have some advice on signs that it is time to help and the best ways to do so.
Watch the Signs
When your parents reach a certain age, it is a good idea to visit them on a regular basis to check in and say hello. When you do so, if you notice signs that their housekeeping isn’t up to par, the yard has been ignored, and or you notice new stains and dirt on the furniture, it is time to start asking questions.
While paying attention to the home is essential, it is more important to think about your parent’s personal appearance as well. If you notice significant weight loss, then that is a telltale sign that they don’t have the capacity to take care of themselves. Also, pay attention to their hygiene. If they don’t appear to be bathing, that is a red flag.
Last but not least, keep an eye out for sudden outbursts of anger, especially when they are unprovoked. Unnecessary anger can be a sign of cognitive decline, including dementia or Alzheimer’s disease according to the Alzheimer’s Association.
Moving In
If the signs show that you need to intervene, then you can move into the home, buy them a new property, hire in-home health care or place them in an assisted living home. For in-home care service, it’s important to find an agency that matches your budget but who can also provide a caregiver your parent will “click” with.
If you do decide on the eldercare facility, then know that the process will be very costly, so you will need to factor your budget into the equation. Many people opt to sell the parent’s house and use the proceeds to help pay for care. On the good side, you can be confident that your parents will receive the care that they need to live a productive life during their later years.
When choosing to move into their house instead, make sure to make a plan and talk it over with your parents so they are not caught off guard. Also, AgingCare.com advises making sure that you manage your stress properly so you don’t have outbursts of your own. Moving can be stressful enough, especially if you’re self-employed, as taking time off is more difficult.
For those who decide to buy a new home, you’ll need to look at how much you can afford. To do so, you’ll need to learn what you owe and what you’ll have left over. You can use a debt-to-income calculator to make quick work of this decision so you know the best way to proceed.
Repairs
Whether you move in or not, there are likely improvements that you can make to your family member’s home to make it more safe and secure. So, if they struggle to get up and down the stairs, consider installing a ramp, or if they have trouble seeing, you may want to add brighter, LED lighting.
For many repairs, professional contractors can provide the services you need. They can do anything from fixing up floors and walls to repairing roofs so your parents don’t have to worry about leaks. A common issue in many older homes is faulty windows that prevent energy efficiency and leak in cold air.
As a tip, before you hire any contractor, make sure to do your due diligence so you get the best deal. Start with an online search for window repair pros, then look through the options, reading customer reviews as you go. Make sure to ask for quotes and see what fits your budget. Your final decision should be affordable and highly recommended.
As you can see, there are several considerations that you need to make when it comes to caring for your parents in your elder years. By taking time to carefully review the options, you’ll feel better about making the right decision.
The elder law attorneys at Elville and Associates are here to guide you through matters that arise as your parents age, be they pre-crisis or crisis situations, through client education, collaboration, and compassion. Contact us today to set a consultation with one of our elder law attorneys to discuss your family’s needs so we can help you navigate through your situation and create a path forward.
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