Facebook Changes Memorialized Accounts to Give Users Greater Control

3D Facebook logo posted by jomblo3
on February 26, 2014 at HDWalling
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Facebook recently announced changes that will give its users more control over Facebook accounts after death.  Facebook will discontinue its practice of restricting access to the account by altering the privacy settings of a memorialized account. In the announcement, members of Facebook’s Community Operations team explained:

Up to now, when a person’s account was memorialized, we restricted its visibility to friends-only. This meant that people could no longer see the account or any of its content unless they were Facebook friends with the person who passed away. Starting today, we will maintain the visibility of a person’s content as-is. This will allow people to see memorialized profiles in a manner consistent with the deceased person’s expectations of privacy. We are respecting the choices a person made in life while giving their extended community of family and friends ongoing visibility to the same content they could always see.

Facebook is also now permitting anyone who has suffered the loss of a loved one to access that person’s “Look Back” video. In recognition of Facebook's ten-year anniversary, Facebook created personal movies for people using posts and photos shared over the years. Facebook now offers this video on all memorialized accounts to the  friends of the deceased user. 

Facebook explained the genesis of these changes:

For one man in Missouri, the Look Back video he was most desperate to watch was one that had not yet been made. John Berlin reached out to ask if it was possible for Facebook to create a video for his son, Jesse, who passed away in 2012. We had not initially made the videos for memorialized accounts, but John’s request touched the hearts of everyone who heard it, including ours. Since then, many others have asked us to share the Look Back videos of their loved ones, too, and we’re now glad to be able to fulfill those requests.

Loved ones can now request the video using an online application.  The video is not, however, transferable, and the link to the video apparently cannot be shared.  Regardless, the video may provide loved ones of deceased Facebook account holders comforting access to the departed user's photos, pictures, and timeline posts.

Evan Carroll, writing for The Digital Beyond, welcomed the changes. Noting that the most recent is Facebook’s second major announcement about how accounts are handled after death, he concluded:

...it is their first step to allow users control over the process.  [t]ogether these announcements indicate a trend towards greater control of the process by users.  At the Digital Beyond, we advocate primarily for individuals to have control of what happens to their digital assets following death, and in the absence of instructions, for access to be granted to an executor with a fiduciary responsibility to make decisions in the best interest of the deceased. We believe Facebook’s announcement, while limited in scope, is in-line with our stance and is a step in the right direction, therefore we applaud their efforts.

In a subsequent article, Mr. Carroll predicted future changes coming from Facebook.  To read his predictions, click here.

The Impotent Power of Attorney

The General Durable Power of Attorney (GDPOA) has a mixed reputation, judging by articles in financial magazines and newspapers. Some tout it as a powerful tool, whose broad and sweeping grant of authority to another can well serve the maker.  Others warn of its misuse by others in facilitating financial fraud.  The public is left twisted and confused. Moreover, planners and drafters often reflect, sometimes intentionally, this schizophrenic view of the document, and its attendant risks, and draft either "watered-down" documents or "springing" powers designed to capture the "best of both worlds."  Unfortunately, we know intuitively that the "best of both worlds" approach often leaves much to be desired; aren't we taught that a house divided cannot stand? 

For most estate plans, the GDPOA is employed to permit a surrogate to make decisions during a time that the principal is unavailable, incapacitated, or incompetent.  As such, the grant of authority should generally be broad and comprehensive.  Limiting the grant of authority only means that the authority of the attorney-in-fact is limited, and, therefore is his or her ability to solve problems or complete necessary tasks.  Because one never knows what decisions will be needed at some future date, limiting the attorney-in-fact means limiting the available solutions, options, and opportunities. 

Generally, then, "springing,"  "contingent," or "limited" powers should be avoided in broadly defined estate planning.  Financial institutions have a variety of incentives to reject, for their own reasons and purposes, an otherwise enforceable GDPOA.  Forcing a financial institution to "jump through hoops," in order to verify the occurrence of conditions, contingencies, or circumstances, before accepting a GDPOA only increases the likelihood that the attorney-in-fact will be thwarted. 

Springing, contingent, or limited powers make sense in specific situations and should be so tailored to fit the situation presented.  For example, an elderly homeowner desiring to grant a local grandchild authority to sell a home while the homeowner vacates with his children warrants a limited power of attorney.  An elderly business owner desiring to grant authority to vote his shares of stock in any emergency meeting called for specific purposes, such as to cause the the sale of assets, warrants a springing GDPOA.  Conditioning a GDPOA upon "unavailability," "illness," "dementia," "incapacity," ""incompetency" or any marital circumstance (separation, dissolution, or divorce) may be tantamount to no grant of authority at all.

For those with estate plans employing a revocable trust, it is important to remember that the attorney-in-fact, the person who you appoint by your GDPOA, is not necessarily your Trustee, and the authority of an attorney-in-fact is limited regarding trust assets.  In other words, an attorney-in-fact cannot, using your GDPOA, legally direct trust assets.  An attorney-in-fact will typically have the authority, if such authority is included in the GDPOA, to transfer or convey assets to the trust.  Moreover, the attorney-in-fact may have the authority to amend the revocable trust, so long as that authority is included in both the GDPOA and the trust.  In many cases, this power to amend is limited to administrative provisions of the trust and does not permit amendment to the distribution provisions of the trust. 

For those who have a revocable trust, the common question is, "why do I needa GDPOA?" There are several important objectives served by the GDPOA in an estate plan  governed by a revocable trust:

• The attorney-in-fact can convey property and assets to the trust in the event that the trustee becomes incapacitated or incompetent;

• The attorney-in-fact can manage or direct insurance policies, annuities, retirement plans, and accounts that are left out of the ownership or control of the trust;

• The attorney-in-fact can communicate with third parties, and manage debts of the estate, such as credit cards, mortgages, and utilities; and

• The attorney-in-fact can communicate with government agencies, such as the social security administration, internal revenue service, and the united states postal service. 

A GDPOA is, undoubtedly, an indispensable legal document in a comprehensive estate plan. Sadly, many people do not have one, and most of those that do have one, rely upon a document that does not contain powers and provisions that are absolutely essential in the modern world of estate planning.

Properly drafted powers of attorney should include a broad grant of authority to the attorney-in-fact.  But there are some specific "powers" that are best made specifically, and best included in almost every GDPOA. The first of these is the power to make gifts.  Tax considerations for gifts generally do not discourage gifting; there is a five-million-dollar exemption for all lifetime gifts before a gift tax is levied.  There is, nonetheless, an annual gift tax filing exemption for gifts in the amount of $14,000.00 to any one person.  Such gifts do not need to be reported. Keep in mind, that you are also permitted to make unlimited gifts for medical expenses so long as the payments are made directly to the medical care provider, as well as unlimited gifts for educational expenses so long as the payments are made directly to the educational institution.

In the event of your incapacity, however, the person holding your Durable Power of Attorney cannot legally make the tax-free gifts unless they specifically have the power to make those gifts. Moreover, the IRS does not consider a gift made under a Durable Power of Attorney that does not specifically mention the power to make gifts to be tax-free.  A general power to do “anything that I can do myself” or words to that effect is not specific enough, at least in the eyes of the IRS. You might believe that this is not an important power because you don’t commonly make gifts to your family, but this power may be more important than you think.

Consider a situation where you need long-term care and don’t have enough money to support yourself for the rest of your life. Or you might find yourself in a situation where your long-term care costs may financially ruin your family, leaving your spouse or other loved ones destitute. In this situation, the person holding your Durable Power of Attorney may need to transfer assets out of your name so that you can qualify for Medicaid, or for the veterans' benefit Aid and Attendance.  Here the power to make a transfer in the form of a gift is vitally important.

The second power is to establish and fund trusts. In a situation where you are incompetent but you need the person holding the Durable Power of Attorney to qualify you for Medicaid as I described in the last paragraph, not only must the holder of your Durable Power of Attorney need to have the ability to make transfers of your assets, but they also may need the power to create and fund trusts. Trust planning may be integral to qualifying for long-term care benefits – or minimizing taxes. Unless the Durable Power of Attorney specifically includes such powers, chances are the governmental agencies dealing with the issues will not consider it to be sufficient for the holder of your Durable Power of Attorney to create and fund your plan legally.

The third power concerns the authority to direct retirement plan assets, including, but not limited to the authority to withdraw funds from a retirement plan or IRA, to alter automatic payments, and the authority to control the minimum required distribution.   When you attain the age of 70½, the IRS mandates that you withdraw a minimum distribution from your account annually.  You may already have the minimum distribution automatically deposited into your checking account. But if there is a medical or other emergency requiring greater access to the IRA account, your Durable Power of Attorney should the power holder the ability to withdraw funds from the account, or to change your minimum required distribution.

The fourth power that might be important for your Durable Power of Attorney regards third parties.  The GDPOA should include not only provisions for your own financial and medical care and support, but provisions to authorize distributions to others, particularly if you are responsible for the financial or medical care or support of another.  A common example is when you might be financially supporting an aging parent or another relative. If you should fall ill, the person holding your Durable Power of Attorney should be expressly authorized to use your financial accounts to continue to support those that you have always supported and who may need your support.

Finally, although not a "power," the GDPOA should contain provisions encouraging third parties to accept the GDPOA when presented.  These provisions include a release of liability for third parties accepting the power of attorney, and a provision permitting the copy of the document to serve as an original.  GDPOAs are routinely rejected by financial institutions, one of the many reasons supporting use of a lifetime trust, and the document should be drafted and executed to minimize this risk.

A GDPOA does present a risk of misuse, and particularly in an estate plan where the existence of a trust does not naturally limit the attorney-in-fact, the possible damage from misuse can be substantial.  There are, of course, steps one should follow to minimize the risk. First, and foremost, only appoint someone with whom you have the utmost trust and confidence. Second, review the appointment frequently for changes in circumstances that might suggest a lack of trustworthiness or competence.  Third, appoint another fiduciary, such as a trustee of a trust, that can review the decisions of the attorney-in-fact.  Fourth, keep the GDPOA  in safe-keeping until it is needed, thereby minimizing the temptation and opportunity for misuse.        

The bottom line is that you should consider your Durable Power of Attorney an important document necessary to fulfilling the objectives of your estate plan. You simply should not accept an impotent document, unable to protect you or your estate when needed.  Read it carefully to ensure that it is drafted completely and correctly, and if not, consult an elder law attorney for revision.

Crummey Powers Targeted by 2015 Budget Proposal

President Obama's proposed budget for fiscal year 2015 includes several important tax changes, some  of which would, if adopted, impact many estate, financial, and business succession plans.  Most of the proposals that appear in each year’s budget proposal never make it into law, or even into the following year’s budget proposal.  It is worth noting the proposals, however, because they represent what the President would sign into law if unbridled by the legislative process,  and what might end up as potential bargaining chips in the legislative process.  

The latest budget proposal includes the elimination of Crummey powers in estate planning   under the misleading title, “Simplify Gift Tax Exclusion for Annual Gifts.” Crummey powers are currently drafted in a trust in order to allow a gift to the trust to qualify for the annual gift tax exclusion. By granting the beneficiary of the trust the right for a limited period of time to withdraw the gift, the Crummey powers give the beneficiary a “present interest” in the gifted property, allowing the gift to qualify for the annual exclusion.  Without the Crummey powers, the gifts would be considered incomplete or future gifts, meaning that the gifts would be taxable. Crummey powers are named for the Ninth Circuit decision in Crummey v. Comm’r, 397 F.2d 82 (9th Cir. 1968), which approved and explained the use of this tool to satisfy the present interest requirement for gifts.

Currently individuals can gift up to $14,000 a year per donee without reporting the gift for gift  tax purposes.  Under current law, everyone can each transfer up to $5.34 million tax-free during life or at death without incurring a tax of up to 40% on the gifts. That figure is called the basic exclusion amount and is adjusted for inflation. In addition, widows and widowers may be able to add any unused exclusion of the spouse who died most recently to their own, thus permitting them together to transfer up to $10.68 million tax-free.

The annual gift tax exclusion, however, does not apply to gifts to a trust unless the donor gives the beneficiaries Crummey powers.  Crummey powers are central to many estate planning trusts.  Crummey powers are used by wealthy donors, for example, to create trusts for multiple beneficiaries and gift large amounts of money to the trust tax-free.  By drafting a trust with a large number of beneficiaries, some of which will never exercise their withdrawal power or ultimately receive a distribution from the trust, each additional donee means  more property can be transferred using the annual exclusion.

But, the technique is also used by not-so-wealthy individuals to protect life insurance benefits from taxation.  The planning technique is particularly effective and commonly used in irrevocable life insurance trusts that utilize annual exclusion gifts to fund large insurance premiums on the life of the grantor.  These trusts, while also common in wealthy estates, are also popular in more modest estates where the risk of estate taxes is particularly unacceptable, such as for family farmers, or family business owners.  These insurance trusts often provide taxpayers the best opportunity to leverage their annual exclusion, and can be a key part of ensuring necessary liquidity for an estate.

The new proposal would eliminate the present interest requirement and Crummey powers altogether. Instead, there would be a new category of transfers that would allow a donor to give an additional annual maximum of $50,000 within this category and qualify for the gift tax exclusion. The new category would include transfers in trust and transfers to other entities that normally do not qualify as a transfer of a present interest. This means, however, that if the donor gave more than $50,000, the gift would be taxable, even if the total gifts to individual donees did not exceed $14,000.  It also means that existing wealth transfer trusts, such as irrevocable life insurance trusts, that currently require or intend a total annual contribution or gift in excess of $50,000, would begin to eat into the current  lifetime exclusion. 

The proposal explains the administration’s justification for the change:

"The IRS’s concern has been that Crummey powers could be given to multiple discretionary beneficiaries, most of whom would never receive a distribution from the trust, and thereby inappropriately exclude from gift tax a large total amount of contributions to the trust. (For example, a power could be given to each beneficiary of a discretionary trust for the grantor’s descendants and friendly accommodation parties in the hope that the accommodation parties will not exercise their Crummey powers.)  The IRS has sought (unsuccessfully) to limit the number of available Crummey powers by requiring each powerholder to have some meaningful vested economic interest in the trust over which the power extends. See Estate of Cristofani v. Comm’r, 97 T.C. 74 (1991); Kohlsaat v. Comm’r, 73 TCM 2732 (1997).”

The IRS has attempted for some time to challenge the broad use of Crummey powers by arguing that each beneficiary must have a reasonable chance or expectation of receiving the property held in the Crummey trust.  The Tax Court has repeatedly rejected this argument, holding that the legal right to withdraw funds creates the present interest, thus upholding the right of taxpayers to employ such trusts. 

The Proposal also notes  the administrative costs to the taxpayers who utilize this planning technique and the costs to the IRS in enforcing the rule. Of course, by administrative costs to the taxpayer the  proposal means the legal and accounting fees taxpayers willingly pay in order to avoid what they consider to be an onerous additional tax on wealth transfer, wealth acquired only after paying taxes for an entire lifetime on income and realized gain, and the taxpayer expense in fighting the IRS as it has attempted to challenge otherwise court-approved Crummey powers.  By IRS costs in enforcing the rule, the proposal ostensibly includes the cost of the IRS’s protracted battle against taxpayers to limit Crummey powers, which would undoubtedly be saved.  

To read the Proposal, click here.

One-Third of Nursing Home Residents Injured or Killed In Treatment

Photograph by:
 Chalmers Butterfield

A federal study has found that about one-third of nursing home residents receiving skilled care were harmed by the treatment in the facility. The  study, conducted by the Department of Health and Human Services, Office of Inspector General (IG), is entitled, “Adverse Events in Skilled Nursing Facilities: National Incidence among Medicare Beneficiaries.” "Adverse events" reported include medical errors and more general substandard care that results in patient or resident harm, such as infections caused by the use of contaminated equipment.   A “skilled nursing” facility (SNF) provides specialized care and rehabilitation services to patients following a hospital stay of three days or more. There are more than 15,000 skilled nursing facilities nationwide, and about 90 percent of them are also certified as nursing homes, which provide longer-term care.

According to the study, an estimated 22 percent of residents experienced at least one adverse event that resulted in a prolonged stay, transfer back to a hospital, permanent harm, a life-sustaining intervention, or death. An additional 11 percent experienced temporary harm while in the nursing home. Physician reviewers determined that 59 percent of these adverse events and temporary harm events were clearly or likely preventable. 

Projected nationally, the study estimated that 21,777 patients were harmed and 1,538 died due to substandard skilled nursing care during one month, August 2011, the month for which records were sampled.  These projections suggest that as many as 261,324 patients are harmed, and 18,456 patients killed, annually, from skilled nursing facility care and treatment.

Veterans and Their Families Missing Benefit Opportunities

According to the most recent VA demographic report, there is an estimated U.S. veterans population of over 21 million, with approximately 2 million being WWII veterans. Of the total population, approximately 322,000 of these veterans are receiving VA non-service connected pension benefits. The number of surviving spouses receiving pension benefits is roughly 318,000. These statistics begged Karen McIntyre, President Veterans Information Services, Inc., to ask, "Why so Few?"

She recently wrote in the Veterans Information Services, Inc., newsletter, Veterans Family Matters that:

Non-service connected pension benefits are a needs based VA benefit for war time veterans and their surviving dependents. These benefits have absolutely nothing to do with an injury, condition, or death related to military service. Even though these benefits are needs based, the veteran or dependent does not have to be poor to receive them, because medical expenses such as Medicare and insurance premiums, prescriptions, full costs of assisted living, doctor and hospital co-pays, etc. are used to offset income and assets. 

Although some veterans and surviving spouses are obviously not eligible due to their financial situation or non-wartime service there is a huge number who are eligible, but do not know it. Unfortunately, the ability for our veterans and their families to get financial assistance for medical care has been a well kept secret that is just now being "let out of the bag". 

A single veteran, who served 90 days active duty with even one day during a qualified war time, may be eligible for up to $1,758.00 per month to help pay for home care, assisted living, nursing home care, and other medical necessities. A married veteran may be eligible for up to $2,085.00 per month, a surviving spouse for up to $1,130.00 per month, and a veteran married to a veteran for up to $2,790.00 per month. None of this money affects Social Security or other sources of income and ALL is tax free to the claimant.

Sadly, many vets and their families are unaware of these benefits.

Others incorrectly assume that they are ineligible, or relying upon shoddy assessments and/or poor advice, believe that there is nothing that they can do to become eligible for these benefits.  Others confuse the standards for eligibility with those for Medicaid. Eligibility planning for veterans benefits is very different than planning for Medicaid eligibility, and there are, as a result, a wider array of opportunities to qualify for these benefits.

If you know a veteran, pass this information along.  At a minimum, we owe those who served, and the families that sacrificed for and with them, an obligation to ensure that they receive what is promised to them.