A recent case I am currently litigating for a client illustrates perfectly why everyone needs to take steps to protect their estate – even when there's no foreseeable need to protect it. In this case, what seemed a natural transfer of wealth between an 85-year-old senior and the beloved nephew who was to be sole heir of his estate turned into a hotly disputed lawsuit when the county adult protective services agency got involved. Now the once half-million-dollar estate is likely to be significantly drained by $10,000-per-month nursing home fees for an unnecessary stay forced upon the senior by the county agency.
All his life, the nephew had been close to his uncle. Approximately three years ago the uncle, who had no other family or heirs, moved in with the nephew and his girlfriend after taking a spill. Initially, the uncle paid his nephew $1,000 per month for upkeep and care. Later the uncle increased payments to $3,500 per month, in part to reduce the estate tax that would eventually be paid on the estate when it passed to the nephew. On occasion, the uncle would make additional payments to his nephew, such as an $8,500 payment to install new windows of the nephew’s house. This arrangement went on for about three years without incident.
Good Intentions Lead to Inappropriate Interference
Eventually, the local bank where the uncle kept his money noticed that the nephew was writing checks on the uncles's account for being his caretaker. Concerned about the uncle's welfare, the bank notified Adult Protective Services who advised the bank to no longer accept the nephew’s power of attorney and reject checks signed by the nephew. About the same time, the uncle fell and broke his hip at the nephew’s house. The injury required surgery and afterward the uncle went into a nursing home for rehab. At this point Adult Protective Services intervened and advised the nursing home not to release the uncle into his nephew’s care. So, instead of the uncle going home to recuperate with his only family, he was forced to stay in the nursing home paying $10,000 per month.
Adult Protective Services also hired a local attorney to apply for guardianship over the uncle. Meanwhile, the nephew also applied to become his uncles's guardian. Although the attorney hired by the agency didn't know the uncle and the nephew was designated the preferred guardian in the uncle's power of attorney and named executor and sole beneficiary of the estate, the county agency turned the situation into a hotly disputed lawsuit as they allegedly tried to protect the uncle from giving away assets to his nephew – who is going to get them eventually anyway.
Meanwhile, litigation costs and nursing home fees continue to drain the uncles's account as the court takes its time to reach a decision. This is clearly a case of a government agency overstepping their bounds and asserting their authority in a situation where it is not warranted. There are far too many legitimate cases requiring intervention for them to waste resources in a case like this.
How Could This Have Been Prevented?
Several steps could have been taken to avoid these circumstances, or at lease minimize their possibility. Protecting the uncle's assets in a trust would have allowed the uncle to specify exactly how the assets could be spent, including caretaker expenses for the nephew, house maintenance and other expenses. Had the trust been set up far enough in advance, it is also possible that the uncle could have qualified for Medicaid when it came time to enter a nursing home. That would have prevented nursing home fees from eating away at the nephew's inheritance.
Protecting assets against loss to unforeseen medical situations or interference by government agencies is an important step of the estate planning process. It is impossible to predict all the ways a person's estate can be whittled away and all the ways that plans to pass an inheritance to a particular loved one can be contested or thwarted. Proper estate planning early on can eliminate most forms of loss and minimize others.