Have you ever noticed how difficult it is to accumulate a sum of money and how simple it is to spend that same sum? If you set aside $50 per month in your savings account for six months, you have $300 plus a tiny amount of interest. Then you take your car in for inspection and you learn that you need a muffler and two tires. Total cost to pass inspection: $310.66. All of a sudden your hard- earned savings is gone, and that extra $10.66 comes out of your pocket. No movie popcorn this week.

Think how you would feel if the nest egg you had saved your entire adult life were to disappear in one day due to a scam. Imagine how angry you would be, or how embarrassed. You might be so embarrassed that you might not even tell anyone; fearful that they would think you were stupid, gullible or weak. What would you do if this happened to your elderly parent or close relative? Worse yet, what if you learned that your brother, your cousin or your aunt pulled off the scam.

There are two categories of scams that I am planning to discuss - inside scams and outside scams. Inside scams involve family, dependents and caretakers. Outside strangers, such as phony investment people, telephone marketers, or income tax scammers, perpetrate scams. We will look at those next month.

A common inside scam works like this: You decide that you need some help paying your bills, so you enlist the help of one of your children. The two of you head to the bank, where some helpful but uninformed clerk has you put your son on your account.” There are two ways to do this, and both are quite legal. One is to have your child named as ‘agent” under a bank’s power of attorney, and the other is to make your child an owner of the account.

I see an alarmingly high number of clients who are in one of these types of arrangements, but who do not know which one they have. While they think that they appointed an agent, they really have created a joint account. In either case the child now starts “managing’ the parent’s finances. The bills get paid and some groceries and prescriptions are purchased. Then the clerk asks your son, “Do you want any cash back?” It becomes very easy to get $20 for every trip to the store, and the justification in your child’s mind is that he is investing his time, energy, gas and wear-and-tear on his car. And, furthermore, none of his brothers or sisters cares enough to help out, so why not get a little something for his effort?

Soon this course of conduct escalates. Now your son starts picking up a few things at the store for himself and putting it all on mom’s tab. He buys a few toiletries at the drug store while waiting to get mom’s prescription filled, and by the time he checks out, he has added another few dollars to the bill. Then, on the way home he realizes that his gas gauge is near “empty” so he slips into the gas station and slides mom’s card into the pump. By the end of the trip, mom has spent twice as much as she should have, and she doesn’t even know it. Why? Because she probably isn’t even there with you. She is probably at home, at the doctor’s, at therapy, or simply unaware that she is losing hundreds of dollars a month to this little strategy.

Now you may be asking yourself why would write a primer on how to steal from your parents. Well, I am really writing to your parents and asking them to watch out for themselves in two ways. First, be careful whom you choose to handle your finances. And second, count your money and keep close tabs on it. The best way to not become a victim is to protect yourself at all time.

These inside scams go further. In some cases you will be asked to put a child’s name on a certificate of deposit, stock certificate, mutual fund account, or even the deed to your home. I recently dealt with a case in which the son whose name was put on the deed simply sold the house when his mother went to the nursing home. He then pocketed the money, refusing to assist his mother or share the proceeds with his siblings.

Some simple planning could have prevented that case. Whether the mother could have sold the home and the proceeds used to assure her quality care in a nursing home, or the mother could have deeded the home to a trust, which would have been for her benefit. A last resort would have been to deed the house to all four children so that there would have at lease been a chance for fairness.

Caretakers can perpetrate other inside scams. The elderly are quite vulnerable, as they get older and weaker, becoming more and more dependent upon those around them. A caretaker with a sour heart can leverage that dependency and despair into compromising financing maneuvers such as placing a document before the elderly person while threatening to withhold food, drink, or other services. That document may end up being power or attorney or a will in favor of the caretaker. How can this be avoided? By getting your elderly relative to a qualified estate planner before the need arises. A trust agreement can be created for the client, and when the client needs help, the trustee can step in and handle the hiring and firing of help. If need be, the trustee can even post bond for the faithful performance of his or her duties.

As our young people continue to move away in search of better career opportunities, they are leaving behind an ever-aging group of potential victims of these and other creative scams. We must try to get to these folks, get them to plan for their later years, and be vigilant to their needs.

Meanwhile, if you or your parents need guidance through the estate planning process, seek assistance from a qualified attorney.

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Last month we took a look at being taken advantage of by your friends, relatives or caretakers. This month we will look at a different set of circumstances: being taken advantage of by strangers.

There has been a lot written on the subject of identity theft, 50 I will not deal with it in any detail, other than to pass along the usual precautions against giving your credit card number, checking account number or Social Security Number out to anyone, especially over the telephone. You can also give yourself an ounce of prevention by shredding personal financial documents before throwing them away.

Years ago I got a call from a lady in West Deer Township asking why several unused checks with my name on them were in her yard. It seems that the bag I had placed these checks in had burst when the garbage man compressed his load, and any number of checks had blown out across the landscape. Luckily, the account was closed and there weren’t too many of those things out there, so no harm was done. But I learned a valuable lesson. I bought an office shredder and used it until we became customers of an on-site shredding company. What a relief that has been.

Like many of you, I read the AARP Magazine. In a recent issue (July & August, 2004), there was a very informative article by Sid Kirchheimer detailing 17 Rip-Offs to watch out for. Before I read the article, I wondered what he could tell an attorney with nearly 30 years of experience who might think he has seen or heard them all. After reading it, I am quick to admit that I had only heard of a few of the rip-offs that he wrote up.

There were several dealing with car dealers, auto and appliance repair shops and similar scams. Others focused on home repairs, such as plumbing, electrical and even chimney sweeps who discover dangerous situations that require immediate attention and often cost hundreds, or even thousands of dollars to repair. There were exposes regarding financial security, travel swindles and internet security, but the most intriguing dealt with the medical profession.

I don’t mean to suggest that the medical people are not playing straight up, but some of the things that the writer recounted have happened to us, and I never thought about them being schemes to extract money from our insurance carrier or from us. One of his suggestions was to bring your own prescription drugs to the hospital to avoid being charged ridiculous amounts of money by the hospital’s pharmacy.

When my wife went to the hospital last winter for hip surgery, we were told to leave her daily medications at home, that the doctor would leave the proper prescriptions and that the hospital would fill her needs. After all, they had their own pharmacy, so we were confident of their ability to deal with these simple medications. The truth was far different. We arrived early in the morning, and by the time everything was finished and she was up in her room, we had been in the building for 15 hours. During that time, she had missed two rounds of her daily medications.

When I raised the issue, I was told that the doctor had left no prescriptions. I suggested calling him to have the prescriptions ordered. I was then informed that the pharmacy was closed. Rather than argue the point, I elected to take mailers into my own hands. So at 10:30 PM I left the hospital, drove home, picked up everything she would need for the next three days, and returned to the hospital just before midnight. I would like to tell you how I got up to her room, but the statute of limitations has not yet expired so I will keep that part to myself. Believe it or not, the first time that her regular medications were offered to her was after dinner on the second day, more than 36 hours after she had arrived.

The simple lesson that we learned was to take your own daily medications to the hospital when you go, and dose yourself at the right times. Tell the doctors or nurses that you are doing so, and if they want some papers signed acknowledging the plan, go ahead and sign them. Forget that the cost of the medicine from the hospital’s pharmacy was 3-5 times the normal charge, as the article’s writer pointed out. it was simply impossible to get the medicine at all.

There are a lot of ways that the scheming person can separate you or your loved one from your hard-earned money. Keep a vigilant eye on yourself and on your loved ones. It is possible to head off a disaster if you are aware of the risks and take precautions in advance. The idea of taking your own drugs to the hospital is relatively small money compared to the hundreds or thousands of dollars at risk with car or home repairs, but as Ben Franklin said, “If you watch your pennies, your dollars will take care of themselves.”

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Books are written on how to avoid probate, avoid death taxes and avoid paying for nursing home care. Often the theme is to give away everything that you don’t need. The trick for this type of plan is the ability to predict your future needs. However, if you find that your holdings are more than adequate to support your lifestyle, there are some things you can do to reduce your estate. The two types of gifting we will discuss today are charitable and non-charitable.

There are a few ground rules for gifts to charity. The most obvious is to determine that the charity of your choice is legitimate. Not all are, and it does no harm to look them up online or go to the library.

Another ground rule is the limitation on the size of income tax deductions. While you can give away as much as you like, not all of the donation will be deductible on your income tax return. Another ground rule is that not all donations need to be made in cash. For instance, we often see or hear ads suggesting that we donate our used car to a charity. The IRS has tightened the rules on deductions for cars, however, and now for cars valued at $5000 or more, you get a deduction equal to the amount the charity can get for the car.

And the last ground rule is that it often makes sense to donate stock from your portfolio directly to the charity rather than selling the stock, paying income tax on the gain, and donating the difference. When the charity sells the stock, it pays no tax. This device allows you to give away fewer shares in order to meet your charitable goal.

Non-charitable gifting involves people-to-people gifts, and most often those people are your family. There are several excellent reasons for giving money to family members. One is that it feels good. Another is that you get to see what they will do with it. And a third is that it helps to keep your estate from being heavily taxed at your death by slowing the growth of your holdings.

Who are the usual suspects when crafting a gifting plan? Children, their spouses (in-laws), grandchildren, nieces and nephews, dependent parents of siblings all make sense. How much can you give away? The annual limit of $11,000 per person. So a married couple can give their son and his wife $44,000 without having to report the gift to the IRS. Do you have to give that much? No, that is the upper limit, but you can give away any amount below that.

Do you have to give equal amounts to everyone? No, you may discriminate in favor of or against anyone. If you are estranged from a child, or if you do not get along with that child’s spouse, skip him. My father-in-law once told me that the difference between in-laws and outlaws is that outlaws

are “Wanted.” Do you have to make gifts every year? Not at all, In fact, when you make your gift, it makes sense to write a note that explains what you are doing and why. If you have had a good year at work and got a bigger bonus than you expected, tell the kids this is a one-time gift.

Do you have to give away “money?” No, you can transfer stock or mutual funds. In fact, if your gift is going to someone in a lower income tax bracket, this is an excellent way to pass along a gift. One quick call to your broker will handle it. You can even set up accounts for your children or grandchildren with your broker to make these transfers simpler.

What about college savings plans? They are called “529 Plans” because that is the section of the tax code that permits them. Ask your broker about them, If you intend to assist your children or grandchildren with the ever increasing cost of college, the earlier you start one of these the better. The account can receive gifts of up to $11,000 per year, and there is a special provision allowing you to accelerate five years worth of gifting into the plan all at once. Imagine the value of a gift of $55,000 that grows tax-free in an account for 18 years. As long as the money goes for tuition and other qualified expenses, it comes out of the plan tax-free.

One last gift-giving technique is to set up a Roth IRA for a child or grandchild. So long as the child has income, you can put away the first $4000. By making this contribution for them, you receive no income tax deductions, but that money grows tax-free and comes out tax-free when they qualify to withdraw it. What would be the value of such an account at age 67 if you started it at age 20 and put away $4000 per year? With a reasonable amount of success in the market, that account could be worth over $500,000. Of course, you would have to tell your child to keep putting in the $4000 every year because you are going to have to stop making these gifts at some point. You are either going to pass away, go broke, or both.

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Alternatives To Nursing Homes

I get a lot of mail. Some of it is mine, but when I handle estates, I get their mail, too. I enjoy reading other people's mail, especially their magazines. I recently read an article in "Military Officer," about alternatives to the standard vacation. This piece described a vacation of tornado tracking. I feel certain that the idea of riding around in trucks full of electronic gizmos during tornadoes appeals to many of you, but I get queasy driving past the Radio Shack when it is partly cloudy.

This led me to think of alternative types of living arrangements for my elderly clients. I recently attended a lecture about nursing home avoidance, and I was surprised at what I learned. For example, if you or someone you care about is hospitalized, the doctor will often recommend a stay at a nursing home after discharge. This will allow the patient to get better and stronger, and perhaps relearn some of the activities of daily living: basic skills, such as getting up out of bed or a chair, as well as cleaning and feeding oneself.

It seems all too often that the short stay becomes a long stay, even a permanent stay, because it is safe for the patient and convenient for the rest of the family. They know where Mom is, that she is being taken care of, and that they don't have to worry so much about her. But what does Mom think? And what is the impact on the family's finances after her twenty days of Medicare benefits expire? With many nursing homes approaching or exceeding $200 per day, the financial impact is very obvious.

But what are the alternatives? One starts with an evaluation of Morn's needs conducted by an independent service. This evaluation is not costly and it is conducted wherever Mom is located, so there is no need to transport her. The examination will disclose which activities of daily living she can or cannot perform. It will also assist the family in determining whether Mom needs to be in a facility or if she can stay at home. If she can stay at home, and if there can be a trained helper at home for part of the day, the spouse or another caretaker can leave the house during the day to work shop or just get out with friends.

Maybe Mom only needs help in and out of the shower, but Dad can't do it due to his own frailty. Why pay $200 per day at a nursing home if an aide can come in for a couple of hours a day? Even if Mom lives at home alone and needs homecare around the clock, the cost of that is around $150 per day. But if there is some family member who is flexible enough to be able to move into Mom's home, or move Mom into their place, the financial savings of bringing in only the level of help required can be dramatic. And the psychological impact on Mom and the rest of the family can be positive.

Many people ask me: What is it like to have someone come into your home? Although it can be strange initially, it can be a great help and a great relief. You might think running your home is difficult, but to be honest, it is a universal skill that some people perform better than others. You may have to do some training to show the aide where things are, and tell them whether you like paprika or oregano on your vegetables, but anyone can find the dishes and the glasses.

Some people ask: What should we do to prepare our home for the helper to come in? This depends on the circumstances of Mom's situation. If Mom needs to be able to function without steps for a few months, move the dining room table to the basement and put her bed in there. It may be a little goofy for a few days, but believe me, she will get used to it and will appreciate it. Also, if Mom has been a “saver” (read: packrat) all her life, make some space for her and the aid to move around.

Most people want to know: What about the finances? Who is currently paying the bills? If no arrangements have been made, some of the service companies can provide bill paying services. This is where a Durable General Power of Attorney is invaluable. The son or daughter can take care of the finances, leaving the aid to attend to Mom's needs.

Families can become paralyzed into inaction during times like this. If the parent is a strong-willed person, the children may be reluctant, or even afraid to go in and start moving things around or throwing things away. And as between family members you often see children deferring to the older brother or sister, just because they are older. They may live hundreds or thousands of miles away and they may not have visited Mom for three years, but suddenly they are making all of the decisions. These are unpredictable family dynamics, and need to be addressed.

This is a time when the family can turn to an elder law attorney who can advise them and guide them. And this is where an outside evaluation of Mom's capabilities can prove to be a valuable component of an overall care and treatment plan. Reaching out for help in a time of need is a sign of strength.

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The Final Plan

As some of you may recall, I have written about my aunt in the past, using her experiences as a guide for us as we plan for the inevitable. The inevitable happened on Easter Monday, and I spent the subsequent week working on the details left behind by the end of her life. I was so busy with the work that I forgot to grieve. There is a lesson there, but this piece is not about me.

When clients arrive at my office, whether they are new or whether they have been here before, there is a certain amount of trepidation attached to the meeting. The medical profession calls it "white coat syndrome." It means there is anxiety when dealing with a professional, and there are some things you can do to prevent that. I have acquired some of these tips from my experiences with clients, and others from my aunt's situation.

The most important piece of the puzzle, by far, is to be prepared. Walking into a lawyer's office with no particular plan in mind can be a costly mistake. If you want to talk about preparing a will, know a little about wills before you start. Look up some information on the Internet, or read one of the wonderful books on the subject, like AARP's new book, A Crash Course on Estate Planning. Know in advance that you will be asked about the appointment of an executor for your will, and that you will also be asked about an alternative selection of executor. Likewise the appointment of an agent in a power of attorney. Have two possible agents in mind and write down their full names with middle initials. If you are really well prepared, you will have their addresses and phone numbers, too, and you can leave those for future reference.

I often wonder why people don't think of these things before they arrive, but then I remember that there is that pre-appointment panic or anxiety in all of us, so I understand. I know that I have the same anxieties about going to the doctor's office, so I usually write down my concerns and questions on note cards before I go. There is something about the smell of the doctor's office that wipes my memory banks clean.

My aunt had worked with her attorney for decades to refine her wishes. She made sure he knew the full names and addresses of all of her relatives and their children. It is a great help when the time comes, because the responsible person doesn't even know where to look for this information. She had her power of attorney in place, she had her will written, and she made a point of revisiting them every few years to make sure they properly conveyed her intentions. Of significant importance to me in this process was the existence of an up-to-date living will with specific health care directives. She had appointed me to serve as her agent, and as her health declined, I was enabled to make medical decisions while under pressure, knowing I would not have to bear any guilt over carrying out her decisions.

My aunt had never married, and she had lived alone for fifty years. She took some of that time to think about avoiding becoming a burden to anyone. That was her mantra, to be self-sufficient. She selected a living arrangement that allowed for progressively higher levels of care to be available if she ever needed it. Then, when it came time for her to move out of her apartment into a skilled nursing facility, the place she went had been selected by her in advance, so we just moved her in.

She went so far as to pre-plan her funeral arrangements with the funeral director, and to communicate that information to her agent (me). When the news came in, I knew who to call, what to do, and where to go. When I arrived, the funeral director handed me an envelope with the funeral service outlined in detail, including selected scripture readings, hymns and poems. The entire ceremony was scripted, down to the last detail. Her service went flawlessly, and I was able to let down and properly grieve as I heard her chosen words spoken and read. I recalled our last real conversation, a mere month before, when she asked me how business was. I told her I was busy. She nodded and said, "Always busy being busy."

I will always remember that life lesson, that one can allow other things to interfere with a life well lived. That constant battle for balance between one's chosen profession, by which one's peers judge him versus one's pursuit of a great family like, the so-called "real life," which always seems just out of reach. She succeeded in reaching it, and in leaving one more lesson for her nephews.

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Considering Special Needs

In the context of being a grandparent or a parent, we all like to think of our offspring as special, and they are. But in the field of estate planning law, there is a very different meaning to the concept of "special." We ask clients all the time if their children or grandchildren have any special needs, and we mean, "Do they require assistance in the performance of their regular daily activities?"

Until you have this situation thrust upon you, it is difficult to imagine. However, we all know someone who has an adult child residing at home, or perhaps one who lives alone, but nearby. I am not talking about that thirty-something lump on your couch who refuses to work, clean his room or take out the garbage; or who got divorced and moved back home. That is another set of problems for another day. I am talking about the adult child who, for any number of reasons, cannot properly care for himself. Perhaps his situation arose from a birth defect or a childhood disease, or from an accident.

This individual may be participating in some form of assistance program, such as MH/MR or Medical Assistance, or SSI benefits. For many families, the income generated by these assistance programs is the financial lifeblood needed in order to allow the affected individual to enjoy some of the fruits of life. In addition, the day-to-day costs are such that the income derived from these programs only provides a portion of the money needed to allow the individual to live. And even more important, this money can sometimes offer some relief to the caretaker, who may be an aging parent of an infirm individual who is so dedicated to the task of taking care of the special needs person that they forget to take care of themselves.

The issues that arise when discussing estate planning are what to do after the parents die. Not only the issues relating to the care of the special needs individual, but also there is a huge issue about what to do with the money. For example, assume Mom and Dad have accumulated a home valued at $100,000 and other assets worth another $150,000. This is a fairly typical estate in the area, so it bears up well under our close inspection. They have three children, one of whom lives at home and is cared for by the parents, while the other two children have married and live elsewhere with their families.

The couple is now faced with two major decisions, the first is: What happens to their child when they die? My clients have usually figured out where their child is going to go, but sometimes the answer to that question can be difficult. How do you uproot a 40-50-60-year-old person from the only home they have ever known and move them to Boston or Phoenix overnight? They will be dealing with the loss of their parents, as well as trying to adapt to new surroundings that are completely foreign to them. And what about the siblings who have agreed to take their brother in, or look after him? Consider the impact on them and their lives. How will the grandchildren take it that they now have to bunk together because Uncle Dave has arrived? This decision is probably more important than the next one, which deals with money.

Now Mom and Dad are looking at how to divide their family's assets, $250,000. With two healthy, "normal" children, they will often think it is a good idea to split the money between those two children and hope they take care of their brother. There is the other school of thought where they want to split it evenly among all three, which is really a bad idea since many of the assistance programs have provisions limiting how much money a dependent person can possess. Neither of these decisions has much going for it, so we introduce people to the third alternative: the "Special Needs Trust." There are two types of these trusts, one of which is funded with money from a third person, such as a parent; and one of which is funded by the special needs person himself, perhaps with the funds generated by an insurance settlement.

What we have to convince the parents to consider is that if they hand the money to their two other children, there can be a myriad of ways that money can be depleted before any of it goes to the special needs person. For instance, if one of the children has an income tax lien, or a judgment, or is simply in deep debt, this money can be gobbled up quickly. The cost of a wedding or a college education can be a temptation to "borrow" from these funds, and that loan never gets repaid. Or in another ironic twist, the spouse of the brother who has to take Uncle Dave in decides that this is the last straw, and she files for divorce. Now the money from our clients is jeopardized.

This is the perfect place to insert a "Special Needs Trust," which will segregate the funds for Uncle Dave, provide some benefits to him for his lifetime, and not interfere with his ability to obtain the other programs and benefits. And it eliminates the temptations or the pressures on the money from outside influences over which even those with the best intentions cannot resist.

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