Question of the Day on ElderCareMatters.com: "My elderly but healthy parents own some collectables valued at approximately $100,000. They also jointly own their house with a value of $135,000. They have about $150,000 in cash and retirement accounts worth $125,000. What planning can be done now so that these assets may be retained by the family if my parents need to go into a nursing home in the future?"

Answer:  First, let me say that it is nice to see a family discussing planning in advance of the need for long-term skilled nursing care.  By planning now a greater variety of options are available to meet your goals.  I am going to presume that you are concerned about preserving assets if your parents need to rely on Medicaid to pay the nursing home bills.  The Medicaid rules vary somewhat for each state, but as a general principal to get the most preservation you will need to plan at least 5 years in advance of the need for care. 

Any planning that is done must consider not only the rules for Medicaid eligibility but also the recovery (or payback) rules.  For example, the home is an exempt asset for eligibility purposes and it could remain in your parents’ name, but upon the death of the remaining spouse the state will want to be paid back for the care it provided to the ill spouse, which could result in the forced sale of the home. 

Asset preservation will fall into 2 categories – converting assets from non-exempt to exempt and getting assets out of your parents’ names, i.e., giving them away.  Some examples of conversions include using funds to make repairs or improvements to the home, buying mom and dad a new car, purchasing a Medicaid compliant annuity or entering into a personal care contract. 

Because giving assets away means a loss of control over the asset, your parents need to be part of the plan.  If they are “young” healthy elderly they may not be ready to give up control.  Flexibility in the plan will be important as will giving assets away in the right way.  

Oftentimes assets are given directly to a child with the thought that the child will use the funds for the parents later when the need arises.  But what if the child divorces, is sued or is just not good with money?  Mom and dad’s hard earned assets may be taken away forever.  Included in the definition of “giving away” is adding a child’s name to the house deed or bank accounts.  Therefore giving assets away in the right way is critical.  Special irrevocable trusts work nicely to provide the protections your parents need.  

A final word of warning when giving assets away, if mom or dad needs care prematurely i.e., within 5 years of the gift, a penalty period or period of ineligibility for Medicaid will result.  This period will not begin to run until mom or dad applies for Medicaid. 

When it comes to Medicaid and asset protection planning timing and knowledge are everything and it is not a do-it-yourself project.  An elder law attorney in your state will be able to guide and educate your parents about the Medicaid rules applicable in your state and which preservation techniques will suit them best.

To locate experts in your state who can help you with these elder care matters, go to: www.ElderCareMatters.com – America’s online source for elder care experts plus information & answers about a wide range of elder care matters.

Heather R. Chubb, Life Transitions Lawyer
The Chubb Law Firm
Gold River, California  95670
916-635-6800
Member of the national ElderCare Matters Alliance, California chapter


Question of the Day on ElderCareMatters.com: "My sisters and I worry about our elderly parents and a handicapped sister who all live in the same house in Georgia. We have heard that if one or both of our parents have to move to a nursing home the state can take their home to help pay for the cost. Is this true? Should we talk with them about signing the home over to us while they are both in fairly good health?"

Answer:  The truth is that, the Medicaid department is not authorized to send anyone over to actually take possession of the house.  However, after the death of the second parent the state wants to be paid back and may seek “recovery” from assets owned by the survivor at the time of the survivor’s death.  However, the state may only be paid back up to the amount that they actually paid out, but this still may result in the forced sale of your parents’ home. 

However, in your case there is an exception to the recovery rules because your parents have a disabled child.  When there is a surviving disabled child a recovery claim is prohibited by federal and state laws.  The surviving disabled child will need to provide documentation of disability or blindness, such as a Social Security or SSI award letter and a birth certificate showing they are the child of the deceased. If the surviving child does not have documentation of disability from the Social Security Administration, he/she can still file for a disability determination with the Medicaid department.  It is important to note that the surviving child does not have to live in the home (or even in the State, for that matter) in order for recovery to be barred. 

Signing over the home now may sound like a good idea, but it carries some big risks.  First, when your parents sign over the house they lose control and that can mean that the kids can kick them out at anytime.  In addition, if a child’s marriage ends in divorce or the child is sued the house can be taken away.  Finally, if your parents sign over the house and then need Medicaid within 5 years of the transfer a penalty and ineligibility for Medicaid for a period of time will result with the ineligibility period starting at the time they apply for Medicaid. 

As you can see Medicaid planning is filled with traps for the unwary.  I encourage you to seek the advice of a qualified elder law attorney in your state who will help guide you through the process.

To locate experts in your state who can help you with these elder care matters, go to: www.ElderCareMatters.com – America’s online source for elder care experts plus information & answers about a wide range of elder care matters.

Heather R. Chubb, Life Transitions Lawyer
The Chubb Law Firm
Gold River, California  95670
916-635-6800
Member of the national ElderCare Matters Alliance, California chapter


Question of the Day on ElderCareMatters.com : "My 80 year old mom, who is in relatively good health, just filled out an Advance Healthcare Directive at her doctor’s office and named me as her agent. Now what do I do?"

Answer:  I’m pleased to hear that your mother’s doctor is being proactive and discussing the importance of an Advance Directive with her.  If your mom’s health continues to be good you may not need to do anything except keep in communication with her and stay on top of her medical needs.  It may be valuable to both you and your mother if you accompany her to her doctor’s appointments in order that you can develop a deeper understanding of your mom’s medical conditions and needs.

An Advance Healthcare Directive (AHCD) is a legal document in which the creator, in this case your mom, hand selects a trusted person to make medical decisions for her and speak for her if she is incapacitated or otherwise unable to speak for herself.  These decisions cover a wide variety of actions from making doctor’s appointments to making end of life decisions (i.e., “pulling the plug”).

However, just having this document is not enough and all AHCDs are not created equal.  It is essential that as the decision-maker (aka “agent” in legal terms) you understand your rights under this document, as well as your mom’s rights and healthcare wishes.  Most of those rights are described right in the document so you and your mom need to really read and understand it, so that you understand the importance of leaving instructions and information to carry out your wishes should something happen to you.

Because it is impossible to include instructions for every situation within the AHCD, you need to have discussions with your mom about her healthcare wishes.  And, this is not a one-time discussion.  Over the last few decades advances in medical technology have created an environment where people can be kept “alive” much longer.  But there is a big difference between being “alive” and having a quality life.  Discuss with your mom what quality of life means to her.

To locate experts in your state who can help you with these elder care matters, go to: www.ElderCareMatters.com – America’s online source for elder care experts plus information & answers about a wide range of elder care matters.

Heather R. Chubb, Life Transitions Lawyer
The Chubb Law Firm
Gold River, California  95670
916-635-6800
Member of the national ElderCare Matters Alliance, California chapter


Question of the Day: "What is elder financial abuse, and don’t stockbrokers, insurance salespersons, and bank officials have a fiduciary responsibility to their clients, including their elderly clients?"

Answer:  Elder financial abuse is any practice or conduct that misuses, takes or conceals a vulnerable elder’s funds, property or assets. Elder financial abuse includes any type of investment fraud that uses misrepresentation, deception, trickery, false pretence, or dishonest act to the financial detriment of a senior.

A fiduciary duty is an affirmation obligation imposed on one person to act in the best interest of another person.  Whether or not a fiduciary duty is owed to an elderly client depends on the law of the state where the senior resides. In some states like Georgia, stockbrokers owe fiduciary obligations to their clients but insurance agents and bank officials normally do not. Nonetheless, this does not give an insurance agent or bank official a license to defraud a senior out of his or her money or property and the agent or official can still be sued by the senior for fraud.

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


Question of the Day: "My 90 year old aunt has Alzheimer’s and was recently moved into an Assisted Living Community. While moving her and reviewing her financial records, we noticed that money was being taken out of her account to purchase stock. How can this be – since my aunt is no longer able to think clearly enough to approve these transactions? We suspect that her broker is making these decisions without her prior approval to generate more money for himself. What should we do?"

Answer:  The practice you are referring to is commonly known in the securities industry as “unauthorized trading.” It violates securities laws and securities industry rules. Unauthorized trading occurs when a broker makes trades in a customer’s account without having any authority, either in writing or orally, to do so. Unless a client gives a formal written grant of “discretion” (like a limited power of attorney) to her broker, a stockbroker is not entitled to trade in the client’s account without obtaining prior approval for the specific trade.

In your Aunt’s circumstance, if she has given you a financial power of attorney to act on her behalf, you should immediately notify the brokerage firm’s manager in writing that no new transactions should be executed in the account because of her condition.  Even in the absence of a financial power of attorney, you should notify the manager in writing that your Aunt is suffering from Alzheimer’s.  Either way, this will put the brokerage firm on notice it has potential liability and the broker’s conduct will be more closely scrutinized.

If the transactions in your Aunt’s account have not been authorized, she has a right to recover losses she has sustained on the unauthorized purchases and I would suggest you contact a securities lawyer to advise you further. If the broker’s manager wants to meet with you to discuss your Aunt’s account, keep in mind this is akin to the insurance adjuster trying to get a statement from a car accident victim before the victim can talk with a lawyer. If the broker has engaged in authorized trading someone knowledgeable should do a complete account review to be sure nothing else improper has transpired in the account.

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


Question of the Day: "What exactly is a Ponzi scheme, and what are some warning signs of these financial scams?"

Answer:  A Ponzi scheme is a phony investment plan where investors are promised high rates of returns on their investment but no real legitimate business operations exist to generate profits or earnings. Instead, early investors are paid from funds put into the scheme by later investors. When the promoter of the scheme can no longer attract new investor money to pay early investors (or he has stolen investor funds to fund his own lifestyle) the scheme collapses.

Ponzi schemes derive their name from criminal financier Charles Ponzi who is credited with creating this fraud back in the 1920s.  Charles Ponzi duped thousands of investors through a postage stamp speculation scheme. Ponzi promised to pay investors a 50% return on their investments within 90 days. Ponzi had no legitimate business or investment opportunity in place to generate earnings and used incoming funds from new investors to pay off earlier investors.  

Some warning signs associated with Ponzi schemes are:

  •  Promises of unrealistically high returns with little risk.
  • Claims by the promoter that the investment opportunity is extremely complex and usually only available to large overseas institutional investors like foreign banks and insurance companies.
  • Requirement by the promoter that investors not discuss the investment with third parties and keep all aspects of the investment confidential.
  • Representations by the promoter that investor funds are never at risk and are always held in an escrow account.
  • Lack of transparency/refusal of the promoter to disclose to investors the location of investor funds or how the funds have been invested.
  • Opportunity to reinvest promised payments at increasingly higher rates of return.
  • Inability to pay investors requested withdrawals or refusal to allow investors to cash out their investments.

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


Question of the Day: "What recourse do we have if my mother’s broker inappropriately invested her life savings in risky investments and the value of these investments has decreased by 50% over the last couple of years?"

Answer:  A securities brokerage firm and its brokers have a duty to only recommend investments which are suitable for a customer in light of the customer’s objectives and individual circumstances. This is known as the “suitability doctrine.” Specifically, the Financial Industry Regulatory Authority (“FINRA”) rules state:

In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.”

Where a senior’s life situation dictates a conservative investment approach and a broker recommends high risk investments not designed to preserve the senior’s financial resources, the senior can have a suitability claim against the broker and his or her employer for damages. 

It’s likely your mother signed an arbitration agreement when she opened her brokerage account  and gave up her right to file her case in court.  Therefore, your mother needs to file an arbitration claim to recover her money. Nearly all arbitrations are conducted by arbitrators appointed by FINRA. 

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


Question of the Day: "What are some telltale signs of Financial Elder Abuse or Senior Fraud that we as a family should be looking for to help us determine whether these untoward acts have been committed against our elderly mother, who lives by herself in her home?"

Answer:  Here are some telltale signs of Financial Elder Abuse:

  • Unusual or unexplained expenditures by the senior.
  • Large cash withdrawals from the senior’s bank account
  • Numerous checks being written to a person or company that you do not know
  • Wires or asset transfers out of the elder’s bank or investment accounts that the senior cannot explain or doesn’t want to talk about
  • Numerous unexplained credit card charges
  • Monthly account balances in the senior’s bank or brokerage accounts that have suddenly declined dramatically
  • The senior living without certain basic necessities even though he/she should have the money to afford them
  • The senior recently lending money to someone you don’t know
  • Large amounts of money in the senior’s investment account suddenly being invested in one product like a deferred variable annuity

From a practical perspective, there are a few simple things you can do to help your mother avoid Financial Elder Abuse:

  • Have your mother’s bank and brokerage firm send you duplicate copies of her monthly account statements.
  • Also, most banks allow their account holders to set up daily email alerts.  Ask your mother to let you set up an email alert that sends you the daily balances on her bank accounts.

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


Question of the Day: "What is the process to file a lawsuit against an unscrupulous financial advisor that my elderly parents have been working with for quite some time now? The bottom line is that this advisor has successfully “wiped out” most of my parents net worth."

Answer:  It depends of the type of financial advisor handling your parents’ money. If the advisor is a stockbroker, it’s likely your parents signed an arbitration agreement when they opened their account. This means they agreed in advance to file their case against the stockbroker and his employer in an arbitration forum and gave up their right to file their case in court.  Normally, the Financial Industry Regulatory Authority (“FINRA”) is the arbitration forum where your parents’ case would have to be filed.  Arbitration has both advantages and disadvantages but is less costly than filing an action in court and will likely get faster results. The arbitrators selected to hear the case can award your parents compensatory damages, punitive damages and attorneys’ fees– just like a jury can in court. For an overview of the FINRA arbitration process, click on this link: http://www.sbpllplaw.com/2011/04/an-outline-of-the-finra-arbitration-process-for-customer-broker-disputes/

If the advisor is not a stockbroker and your parents did not sign an arbitration agreement, they can file their case against the advisor and his employer in court. Whether they file their case in federal or state court depends on a number of factors including:

a) where your parents live
b) where the advisor lives
c) where the advisor’s employer maintains its principal place of business
d) how much money your parents lost, and
e) the legal causes of action asserted in the complaint.

Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


Question of the Day: "A stockbroker has solicited me to open a brokerage account with him. He seems like an honest person who genuinely wants to help me. How can I find out information about him?"

Answer:  FINRA’s Central Registration Depository (CRD) system contains registration and background information on stockbrokers. Certain information from this system can be accessed through FINRA’s BrokerCheck website at: www.finra.org/Investors/ToolsCalculators/BrokerCheck/.  

The BrokerCheck report which can be obtained through the website discloses complaints other clients have made against the broker, arbitration cases and lawsuits where the broker has been found liable and shows cases that are currently pending against him. The report also reflects disciplinary actions brought by securities regulators where the broker was sanctioned. Let me know if I can be of further assistance to you.

J. Michael Bishop, JD
Smiley Bishop & Porter, LLP
Atlanta, GA  30338
770-829-3850
Member of the national ElderCare Matters Alliance


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