It will take months for tax lawyers, accountants and financial advisors to digest the voluminous Tax Cuts and Jobs Act passed by Congress and signed by President Trump on December 22, 2017.  At Cipparone & Zaccaro, PC, our attorneys have been digesting the new tax law.  Here are some key observations to ponder so far:

#1 Estate, Gift & GST Tax Exemptions Double.

In 2017, the federal estate, gift and generation-skipping tax exemption was $5.49M per person. Under the new tax law, the federal estate and gift tax exemption will be $11.2M per person.  The GST exemption will be the same. Thus, a married couple can pass $22.4M to their children and pay no estate or gift tax.  This doubling of the exemption means that very few people will need to concern themselves with federal estate taxes at death.  Only Connecticut estate tax will be relevant to our clients.  By 2020, the Connecticut estate tax exemption is scheduled to equal the federal estate tax exemption.  Will the Connecticut General Assembly reconsider its recent increase in the Connecticut estate tax exemption now that the federal estate tax exemption is so high?

#2 Individual Tax Changes Are Temporary.

All of the tax changes that apply to individuals are temporary.  Only the corporate tax changes are permanent.  The individual tax changes expire in 2025 and our 2017 law will apply once again.  Thus, it will be difficult to plan estates and financial transactions because the tax laws will revert back by design in 2025. 

#3 Some Itemized Deductions Disappear.

Many itemized deductions no longer exist. Here are some that will be missed:

• Miscellaneous Deductions. Many taxpayers use the miscellaneous deduction to deduct tax preparation fees, legal fees, investment management fees, financial publications and other expenses associated with tax preparation and investing.  The 2% floor did not present much of a hurdle.  Starting in 2018, the deduction no longer exists.  
• Alimony. Currently, spouses in a divorce get a deduction for alimony paid. The spouse receiving the alimony must show the deduction on his or her tax return. Starting in 2019, no one gets a deduction for paying alimony or has to declare alimony as income received.  This new provision only applies to divorce agreements reached after 2018. 
• Casualty Losses. For 2017, you can deduct losses from a fire, flood, or other natural disaster on your income tax return if the loss exceeds 10% of your adjusted gross income. Starting in 2018, you can’t deduct casualty losses unless the loss arises out of a federal disaster declared by the Federal Emergency Management Agency (FEMA). 
• Moving Expenses. For 2017, you can deduct job-related moving expenses. Starting in 2018, you can no longer deduct job-related moving expenses unless you are in the military. The income exclusion for moving expense reimbursements is also gone.

#4 Standard Deduction Doubles.

The new federal tax law increases the standard income tax deduction for single filers from $6,350 to $12,000 and for couples from $12,700 to $24,000. Taxpayers over 65 can also take $1,300 per person as an additional standard deduction.  Thus, a couple over 65 gets a $26,600 standard deduction.  Many couples will simply not bother with itemizing their deductions.    How great to not have to document those deductions.  It could ruin charitable organizations like small churches and homeless shelters that depend on small donations.  You will only itemize your deductions if you have large charitable deductions, state and local tax deductions, medical expense, or interest deductions. The state and local tax deduction for both income taxes and real property taxes was capped at $10,000. 

#5 What happened to the personal exemption?

In 2017, each taxpayer and their dependents received a personal exemption of $4,050 per person. The personal exemption reduced adjusted gross income. Starting in 2018, the personal exemption disappears.  For large families, this elimination of the personal exemption could seriously increase their taxable income.  

#6 A new credit for dependents who are not children under 17.

The Act creates a new $500 credit for dependents who are not children under the age of 17.  A credit is better than a deduction because it reduces the tax owed.  For instance, if your child is a full-time college student who is your dependent, you can take a $500 credit. If you have a disabled child who lives at home regardless of age, you can take the $500 credit.   This credit phases out if your income exceeds $200,000 for single filers and $400,000 for joint filers. In true Trump fashion, the new credit only applies to dependents who are U.S. citizens.

#7 Kiddie Tax Rises.

If your children under 19 receive unearned income (e.g. – income from a trust or Uniform Transfers to Minors Act (UTMA) account), they must pay tax on that income. In 2017, you show the dividends, interest or capital gains on the parents’ return and the income is taxed at the parents’ rate. Starting in 2018, unearned income of a child is taxed at the rate paid by trusts and estates. Parents don’t pay the top tax rate (now 37%) unless their taxable income exceeds $600,000; trust and estates pay the top tax rate (now 37%) if their taxable income exceeds only $12,500. Thus, a child receiving investment income will pay much higher taxes on that money than their parents would pay.  It will be interesting to see if the IRS comes out with a separate tax return for children subject to the kiddie tax.

#8 Parents Can Use 529 Plans for Elementary & Secondary Schools.

Starting in 2018, 529 Plans are not just for college.  Parents can now use 529 Plans to save for private school before college.  Private schools include religious or parochial schools. Students can only use the distributions for tuition and distributions cannot exceed $10,000 per year.

#9 The New 20% Deduction for Qualified Business Income. 

The new tax law gives owners of sole proprietorships, LLCs, partnerships and S corporations a new deduction. The owner must conduct the business in the USA. Reasonable compensation from an S Corporation and guaranteed payments from a partnership or an LLC taxed as a partnership do not count. Thus, it will be better to be self-employed instead of practicing in a group. The deduction reduces the business owner’s taxable income but not the owner’s adjusted gross income. Thus, it will not help with financial aid calculations for college and private schools. The deduction phases out at $157,000 for single filers (over the next $50,000 of income) and $315,000 (over the next $100,000 of income) for joint filers if you are in a service business like law, medicine, etc. For non-service business, above the threshold, the deduction can’t exceed the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified tangible personal property. It is enough to make your head spin. It will take the government and tax professionals years to understand the nuances of this complex deduction so stay tuned.  

#10 Charitable Deductions Change.

Congress made a couple of changes that we find interesting: 

• Contribution Limit. If you make a large charitable donation, you can’t deduct all of it in one year.  In 2017, you can deduct up to 50% of your adjusted gross income (AGI) for donations to churches, schools, colleges, hospitals, governments, and other public charities.  In 2018, you can deduct up to 60% of your AGI for cash donations to those charities. The new limit does not apply to gifts of artwork, real estate, and collectibles to charities but would include marketable securities. If the cash contribution exceeds 60% of the individual’s AGI, the taxpayer can carry the deduction forward to future tax years. 
• Football and Basketball Tickets. In 2017, you can make a donation to a college in exchange for the right to buy athletic event tickets and receive an 80% charitable contribution deduction.  Under the new tax law, no charitable contribution deduction is allowed for the donation.  This provision could seriously affect University of Connecticut season ticket sales.

We could go on and on talking about the Tax Cuts and Jobs Act because it was the most fundamental change in tax law since 2001.  There are more provisions in the new federal tax law besides these 10 points.  Our estate planning attorneys continue to attend webinars and seminars to learn the Act’s many nuances.  We may even change our view on some of what we have written in this blog. Stay informed about what we learn about the new federal tax laws by signing up for our newsletter. As you might expect, no taxpayer can avoid tax penalties based on the advice given in this blog.  Let’s all just keep learning about this new tax law.

Governor Malloy created the Connecticut State Department on Aging in 2013.  It consisted of two parts: (1) The State Unit on Aging; and (2) The Long Term Care Ombudsman Program.  The State Unit on Aging administers several programs for older Connecticut residents such as in-home services, home-delivered meals, senior community employment, health insurance counseling and respite care for caregivers.  The Long Term Care Ombudsman advocates for people living in nursing homes, residential care homes and assisted living communities.  The Ombudsman seeks to improve the quality of life and care for seniors living in those facilities.

To provide these services, the State Department on Aging conducts needs assessments of seniors.  The Department surveys methods of various services and how those services are delivered.  Further, it evaluates and monitors those services.  It also maintains a data-base of information and service providers for the public.  Finally, it collaborates with other agencies to provide various services to Connecticut’s seniors.  Ultimately, the goal of the State Department on Aging was to empower older people to enable them to live fuller and more independent lives and to provide leadership on issues facing older Connecticut residents.

On November 6, 2017, the Governor consolidated the State Department on Aging with the State Department of Rehabilitation Services (“DRS”).  The State Unit on Aging and the Long-Term Care Ombudsman Programs will continue to remain together under DRS.

Undoubtedly, keeping the State Unit on Aging and the Long Term Care Ombudsman Program together – under one roof – has been a source of relief to many people. This “shell game” of shifting and combining state agencies is clearly designed to save money at a time when Connecticut government undergoes austere measures. We hope this consolidation will not reduce the State’s commitment to providing services to seniors.  The website for the State Department on Aging remains live today but may close by June 30, 2018, when the fiscal year ends. 

If you have questions related to what you’ve learned in this blog or would like to learn more about the changes to the Connecticut State Department on Aging, please don’t hesitate to call the elder law attorneys at Cipparone & Zaccaro, PC.  

At Cipparone & Zaccaro, we regularly receive a call from a child who wants to assist his or her parent with an estate plan.  Often, the child schedules an appointment for us to meet with the parent or the child brings the parent to our law office.   

In the first meeting, we must clarify who our client is.  In many cases, the child is already one of our clients.  As you can imagine, this creates an ethical dilemma that must be carefully navigated. When a parent hires one of our lawyers to create an estate plan, we make it clear that the parent is the only one to whom we owe a duty of competence, diligence, loyalty and confidentiality. We have this duty regardless of who pays our fee.

Initially, many people are surprised at learning that we have an ethical dilemma.  The child helping the parent may be more involved with the parent’s care than other siblings.  Nevertheless, the lawyer’s duty is to make it clear that in order to avoid any potential conflicts of interest or any appearances of impropriety, the firm only represents the parent when drafting the parent’s estate plan.

A lawyer has a duty to keep a client’s confidences.  This means the lawyer has to protect information and communications between the parent and the lawyer by keeping them confidential.  At that point, the child may be asked to stay in the waiting room while the lawyer meets with the parent.  This practice is purposely done for the parent’s protection, which is a goal that everyone agrees on.  Meeting with the parent privately not only gives that person the opportunity to think about what they want and explain it to the lawyer but it also provides the lawyer with assurances that the client really understands what’s going on and is making choices that aren’t influenced by anyone else.  

If the child were in the same room as the parent and the lawyer, did most of the talking, and answered most of the questions, it would be very difficult for the lawyer to determine whether the wishes conveyed were those of the parent or the child.  If one child is allowed to participate in the discussion, the other children of the parent could challenge the estate plan at a later date.  This can lead to family feuds and no one wants their estate plan to cause division within their family.

Obviously, there will be times when we – the lawyers – will conclude that the parent does not have the capacity to sign estate planning documents.  In that case, our advice will include recommending other options to the client and their family.  Ultimately, however, our role is to draft an estate plan that captures the parent’s true intent.

The safer practice is for the child to stay in the waiting room while the parent consults with the lawyer.  This practice greatly decreases the chances of a subsequent legal challenge.  The lawyer does not want the parent’s Will or Trust challenged at a later time because the lawyer thought it was okay to allow a child to participate in the parent’s estate plan.  

If you have questions related to our ethical duties, please don’t hesitate to call the estate planning attorneys at Cipparone & Zaccaro, PC.  

THIS ARTICLE HAS BEEN SUPERCEDED BY:  Update on the Connecticut Estate Tax Exemption

The new Connecticut state budget, signed by Governor Malloy on October 31, 2017, increased the individual exemption for Connecticut estate and gift taxes over the next three years.  In 2017, the exemption in Connecticut was $2,000,000.  Under the new law, the exemption increased to $2,600,000 in 2018 and then to $3,600,000 in 2019.  In 2020 and beyond, the Connecticut exemption will match the federal estate and gift tax exemption.  From 2018 to 2025, the federal estate and gift tax exemption is $11,200,000. The exemption is indexed for inflation each year. A married couple with proper planning will be able to shield up to $22.4 million from federal estate tax. 

Additionally, the new Connecticut law lowers the cap on the maximum estate and gift tax payable, from $20 million to $15 million, starting in 2019.  The law also modifies the marginal rate schedule for Connecticut estates and gifts over $5.1 million, by raising the initial rate to 10%, with graduated increases of 10.4%, 10.8%, 11.2% and 11.6% for each million dollar increase, until reaching the top rate of 12% for a taxable estate or gift over $10,100,000 (see the tax rate schedule at the end of this article). 

The most important factor that no one seems to discuss is that both bills in Congress do not disturb the powerful step-up in basis at death.  To compensate for the estate tax, Congress allowed assets subject to estate tax to increase their basis to fair market value.  For example, if you bought a commercial property for $100,000 in 1980 and it rises in value to $1M at the time of your death, the basis will step up to $1M. When your children sell the commercial property after you die for $1M, they will pay no income tax because the sales price does not exceed the tax basis. By raising the exemption while retaining the step-up in basis, most people with highly appreciated assets will never pay any tax on the appreciation.   

Given the new estate tax exemptions, the Connecticut estate tax has become irrelevant for most of Connecticut’s citizens. By 2020 an individual would have to own property worth more than $11M to incur estate tax. Connecticut does not have portability but an exemption in excess of $11M will exempt most Connecticut residents from estate taxation.   

In addition to the increasing estate tax exemption, the annual exclusion amount for gifts is $15,000 in 2018, after remaining at $14,000 since 2013. As a result, starting in 2018 gifts of $15,000 or less to any number of recipients (or $30,000 or less, if made by a married couple who elect to split the gift on a properly filed gift tax return) in a calendar year will have no gift tax consequences. 

As with any change to increase estate tax exemptions, many clients will want to consider simplifying their estate plans. For instance, if your current estate plan contains special trusts to avoid estate tax, you may want to consider whether you want to use such trusts. Trusts have many useful purposes besides estate tax planning, however.  They can keep assets in the family, preserve property for children of a prior marriage, supplement public benefits, and protect assets in a divorce or a legal dispute.  If you have any questions on the current estate tax landscape and its potential effect on your estate plan, please contact the estate planning attorneys at Cipparone & Zaccaro, PC.

Many nursing homes will draft a power of attorney for their residents. Doing so is often framed as saving money. However, if a power of attorney is done without an examination of the circumstances, it can cost many times more money than it saves.

A recent publication of the National Academy of Elder Law Attorneys (NAELA) reported on a Chicago nursing home that drafted a power of attorney (hereinafter “POA”) for an elderly resident.  In the POA, the woman appointed her son as agent.  When her children asked the nursing home about the POA, the home told them that their mother did not need an attorney to prepare the POA because once their mother enters the home, they will take care of everything. In other words, the nursing home was a “turn-key” operation.

Unfortunately, what the nursing home did not know was that the son who was named as agent under the POA had a severe drug addiction.  He also lived in the home owned by his mother.  That addiction led to the son using one million dollars of his mother’s money to support his drug habit.  How did he get away with this betrayal?  He logged into his mother’s various asset accounts to transfer money over to himself.  Further, he intercepted all mail notifications and bank statements, so that no one – other than him – could see the activity taking place in the mother’s accounts.  

At some point, the other children found out that the nursing home was not being paid for the mother’s care.  Unfortunately, three years had gone by before this discovery.  The nursing home threatened to evict the mother from their facility.  She only had $30,000.00 remaining in liquid assets.  As for the drug-addicted son, his lifestyle caught up with him.  He was ultimately imprisoned on drug charges.  Most of the money was gone.

Should nursing homes prepare POAs as a convenience to its residents?  I submit that they should not.  Nursing homes should no more provide legal services to the elderly than attorneys should provide long-term care for those same people.  Why not?   Nursing home staff are not educated, trained or experienced in adequately discerning the legal complexities of a POA and its potential misuse.  In addition, nursing home staff are not likely to appreciate the importance of client confidentiality, building trust with a client, assessing their legal competency to execute a document such as a POA or protecting the client.  Last, nursing home staff may not know all the relevant facts and circumstances about the proposed agent such as a son who has a significant drug problem.

Most people believe that POAs are simple documents and it could save attorneys’ fees to have nursing homes prepare a resident’s POA.  The story I’ve told above illustrates how terrible the outcome could be when a nursing home engages in this kind of practice.  The nursing home might have thought that they were doing something good for their resident but in the end, this was certainly not in this woman’s best interests. Ironically, the home didn’t get paid for the care that they gave to their own resident.  Further still, they undoubtedly exposed themselves to a potential lawsuit, not to mention taking an enormous hit to their reputation.

Connecticut (like all other states) prohibits the unauthorized practice of law.  Generally speaking, the unauthorized practice of law is defined as giving advice to another person concerning their legal rights and applying legal principles and judgment to the circumstances or objectives of that person.  The practice of law includes drafting legal documents involving or affecting one’s legal rights.  

If your elderly parent is in a nursing home and your family dynamics are not unlike what I’ve described here, be your parent’s advocate.  Don’t accept the nursing home’s representation that it is a “turn-key” operation.  A properly drafted power of attorney should be written by an experienced elder law attorney who practices in the area of elder law and estate planning.  Whether it is the care of your parent or the protection of their legal rights, you must remain vigilant.  Consult with an experienced estate planning attorney about doing what is in your elder’s best interests.  At Cipparone & Zaccaro, we can help you and your parent in this type of situation.

The phone rings at home and the conversation begins with an innocent, 

"Hi, Grandpa."  

"Who's this?" the senior asks. 

"Don't you recognize my voice? It's Michael. I'm in Boston." (All names have been changed to protect the victims.)

The caller was a young male, but the senior wasn't so sure it was his Connecticut-based grandson. He wasn't aware that his grandson was visiting Boston, though his sister, Charlotte, was working there at the time. 

The caller asks: "Can I tell you something in secret that you won't tell anybody else, please?" 

Intrigued, the senior responds, "Of course."

"Grandpa, here's what happened. Charlotte and I went to a Red Sox game last night," the caller began explaining. "We were on our way back to Charlotte’s apartment when our cab was pulled over by the police. They found cocaine in the trunk and arrested us. I'm at the police station now with a lawyer." 

The senior is both stunned and dubious. "Were you carrying any drugs yourselves?" he asked. 

“No, grandpa.  You know I would not do something like that.”

“Then why were you arrested?”

 "The police say I am a suspect and have to stay in Boston for four to six weeks until the cab driver's trial. If they release us, they want $2,000 to make sure we'll come back." Grandpa knew Michael and Charlotte are college students who were due to return to classes in a few days.

The caller wanted the senior to talk to the "lawyer," his partner in crime. "He's right here next to me." The senior hears muted conversation in the background, but it  doesn’t sound much like the noisy Boston police stations.

Increasingly suspicious, the senior says, "If all this is true, Michael, you should talk to your mother, not me."

"Please, Grandpa," was the heartfelt response. “We need to keep this a secret between you and me. Please don’t tell my mother. Is it possible for you to wire the money to my lawyer?”

Wanting to help his grandson who he loves very much, grandpa says “Okay. How do I get it to you?” 

“Can you just send $2,000 by Western Union to the Congress Street branch in Boston? Make it payable to my lawyer, James Sullivan. (pause) Thanks, Grandpa, it will help me get back to college on time.  I knew I could trust you.”

The senior then wires $2,000 to James Sullivan and feels he has done his good deed for the day.  

The next day, the senior’s daughter, Cindy, calls him.  In the course of the conversation, she says that Michael is back at his dormitory at UConn getting ready for the start of his Junior year.

The senior asks “How was Michael’s trip to Boston?” 

When she says, “Michael didn’t go to Boston.  Where did you get that idea?”

“Oh, I just thought that he would visit his sister before he returned to school.”

Crestfallen, he lets the conversation end. Then he realizes what he has done. He just lost $2,000 wiring funds to a James Sullivan that he does not know. Too embarrassed to admit being a victim of a scam, he does not tell his daughter.  

The senior was too embarrassed to call the police. When he tells his friends and they ask, "How could you have done that?" he could only reply, "I was so concerned about Michael and they had the story down so well."

This senior was the victim of a financial trick that is aimed at countless grandparents across the country, costing them millions of dollars.  In 2015 alone, the Federal Trade Commission (FTC) received 10,565 "family/friend impostor" fraud complaints. It is impossible to say how many more recipients of these calls didn't notify the authorities. For more information on these fraud schemes, see the AARP Fraud Watch Network.

The scariest part of the experience? These scammers know a senior’s name, his grandchildren's names, his phone number and even some of his personal information like where his granddaughter was temporarily living. 

How? They find it, buy it, or steal it. And sometimes, we give it right to them. Semi-intimate details about our lives often are available online for anyone willing to dig. And many people routinely announce these details to the world on social media like Facebook. No surprise that scammers scout for targets on these networks.

5 Ways to Protect Yourself from the Grandparent Scam

Following are some things grandparents can do to avoid getting scammed.

Build a “wall” around your computer.

Use both antivirus and anti-spyware software to keep intruders from stealing personal information from your computer. Don't open file attachments in emails from strangers. These can contain programs that enable crooks to get into your computer remotely. Be cautious on social media. Anything a family member reveals about family, travels or schedule can be easily picked up by bad guys.

Ask lots of questions.

Asking to keep it a secret turns out to be a familiar request by scammers. If you get an impassioned call for money from a family member, take a deep breath and try not to get emotional. Instead, ask some questions that would be hard for an impostor to answer correctly. Examples are the name of the person's pet, his mother's birth date, or his boss's name.

Slow the process down.

Never say yes to a money transfer based on a single call. Always hang up and do some research, such as trying to contact the person directly on her cell or work phone, or talking with someone the caller is close with to corroborate the situation. Mentioning an authority figure like the lawyer is another traditional ploy of this kind of scam. The senior could have researched the lawyer.

Don't be embarrassed.

If you fear that you have fallen prey to a scam, do not let pride get in the way of contacting authorities. And if you've wired money, immediately call the money transfer service like Western Union to report the fraud. If the money hasn't been picked up yet, you can retrieve it. Even if you lose the money from one scam, it is best to avoid a pattern of being scammed.

Call your lawyer. 

Run the scenario by your own lawyer before you part with the money.  Better to disclose it to your lawyer in confidence than become a target for financial exploitation. At Cipparone & Zaccaro, PC, we see financial exploitation because we represent seniors.  We can serve as a reality check and help you stop it.  

If you ever get a call from or about a grandchild or any other relative in danger or trouble, and the immediate request is for cash, you need to pause, calm yourself, say you will have to consult another family member first and hang up. Then check by calling others. If the emergency is by any chance real, you can still respond appropriately. If it's not—and the odds point to that—congratulate yourself. You just avoided being on next year's FTC list of those scammed by impostors.

Recently, in a case that was litigated before the New York Court of Appeals, that Court ruled that terminally ill patients do not have the right to seek life-ending drugs from doctors.  The case was initiated by three people with terminal illnesses who argued that New York’s ban on physician-assisted dying should not apply to people who are seeking a merciful end to an incurable disease.  The Court held that while the law allows terminally ill patients to decline life-sustaining help, it does not permit anyone – whether it be a physician or anyone else – to help those same patients end their lives.

Currently, there are six states that permit physician-assisted dying.  They are Colorado, Vermont, Washington, California, Oregon and Montana.  The District of Columbia also allows it.  Oregon is the state where physician-assisted dying has been in place the longest.  In 1994, that state enacted the "Death with Dignity Act" and it has been in place ever since then.

The medical community is torn on this issue.  One the one hand, some doctors feel that physician-assisted dying should be optional for people with terminal illnesses.  They argue that people in this situation want to have control over their own bodies and their own lives and they are generally concerned about the future physical, emotional and mental distress associated with the progression of their disease.  On the other hand, some doctors argue that pursuant to the Hippocratic Oath, doctors should only heal and not do any harm to their patients.  These doctors argue that if they were compelled to take part in physician-assisted dying, then they would be relegated to simply following the will of the patient or perhaps third parties (like insurance companies) or the law.  Further, they argue that they would not be practicing medicine … instead, doctors would merely be providing a medical service that goes against the oath they took to heal their patients.

Where does Connecticut stand on this issue?  In 2014, a bill entitled "An Act Concerning Compassionate Aid in Dying for the Terminally Ill" failed to pass in the Connecticut Legislature.  In April of 2015 it was brought before the Connecticut Legislature for the second time and again, it failed to pass.  The bill was vigorously opposed by pro-life groups on the theory that the sanctity of life is a principle that should continue to be protected by the law.  On January 19, 2017, a bill entitled "An Act Concerning Aid in Dying for Terminally Ill Patients" was introduced to the Connecticut Legislature for the third time.  Right after its introduction, it was referred to the Joint Committee on Public Health.  Currently, there has been no further movement on that bill … it is still pending with the Joint Committee on Public Health.

It’s anyone’s guess as to when or whether Connecticut will enact this legislation.  Undoubtedly, this issue is not going away any time soon.  If you would like to know more about physician-assisted dying in Connecticut, please don’t hesitate to contact the estate planning attorneys at Cipparone & Zaccaro.  We’d be happy to provide you with a draft of the pending legislation and answer any questions you may have about this sensitive topic.  

Over the years, I’ve experienced a couple of instances where a non-family  member brings a client to me for estate planning who was estranged from his family.  The client wants to leave a major part of his or her estate to the non-family member. Let’s consider a hypothetical example.  

An elderly man is brought to an attorney’s office by the man’s financial advisor.  After meeting with both the elder and his advisor, the attorney determines that this man has a son who lives in another part of the country who is rarely involved in the elder’s life.  For his part, the financial advisor checks in on him, helps him to pay his bills, takes him to his doctor’s appointments, takes him shopping, helps him to take care of his home and does all the things that a caregiver would normally do.  The elder – acknowledging what the financial advisor has done for him – wants the attorney to create an estate plan where he leaves everything to his advisor.

The first thing to keep in mind is that from an ethical standpoint, the attorney is required to seek the lawful objectives of his client once he has been retained.  At the outset, therefore, the attorney must arrange to meet with the elder alone at a place where the elder can speak freely without the financial advisor being present.  The attorney must advise his client that this formality is a necessary part of the engagement because he has to make certain that the elder’s son cannot thwart the elder’s decision to leave everything to the financial advisor.

Further still, the attorney should consider recommending under these unique circumstances that a psychiatrist examine the client and submit a written opinion as to the elder’s capacity and willingness to leave his estate to his financial advisor.  While this step may seem like an extraordinary thing to do, it provides an objective, professional opinion to support the client’s unusual wishes.  

Finally, the attorney should advise the client that he would like to learn more about the relationship between his client and the financial advisor so the attorney can better determine whether his client’s decision to leave everything to his financial advisor is based on undue influence.  That means the attorney might have to garner information from other people who could potentially testify, not only to the estranged relationship between father and son but also the close relationship between the client and his financial advisor.  Last, because the financial advisor has a fiduciary relationship with the elder, the attorney should do a search to determine whether the financial advisor has any history of any disciplinary or ethical violations and any lawsuits or regulatory complaints brought against the advisor concerning a breach of his fiduciary duties to a past client.

Ultimately, if the elder has the capacity to make estate planning decisions and there is no evidence of exploitation, an attorney can help his client leave their estate to someone outside their family. The elder and his or her attorney must  proceed with caution, however, to show that the elder had the requisite capacity to understand who were the natural objects of his bounty, the property that he or she holds and the consequences of naming a professional advisor as the beneficiary of the estate.  Further, the attorney has a duty to satisfy himself that facts supporting a claim of exploitation do not exist.  If you have the unique situation described above, please don’t hesitate to call the estate planning attorneys at Cipparone & Zaccaro.  We’d be happy to discuss your scenario to determine what steps are needed to accomplish your unique estate planning goals.