Representative Payee Rules Change

On April 13, President Trump signed the Strengthening Protections for Social Security Beneficiaries Act of 2018. The law directs state Protection & Advocacy (P&A) system organizations to conduct all periodic onsite reviews along with additional discretionary reviews. In addition, the P&As will conduct educational visits and conduct reviews based on allegations they receive of payee misconduct. The new law allows the Commissioner to exempt custodial parents of minor children and disabled individuals, as well as spouses, from annual payee accounting.

Representative Payees can complete a Representative Payee Report form online  to account for the Social Security or SSI benefits received or P&As may select a representative payee for review.

The P&A review includes:

• an interview with the individual or organizational representative payee;
• a review of the representative payee’s financial records for the requested beneficiary or sample of beneficiaries served;
• a home visit and interview for each beneficiary included in the review; and
• an interview with legal guardians and third parties, when applicable.

Financial Records Representative Payees Should Have Available for Review

When the P&A schedules the review, the reviewer will request the records needed for each beneficiary. Some common financial documents that representative payees may be asked to provide are:

• a beneficiary budget;
• a beneficiary ledger;
• individual bank statements;
• Collective account bank statements;
• receipts of income;
• account balances;
• bank reconciliation records;
• cancelled checks;
• expense documentation including receipts, bills, and rental agreements;
• how the payee keeps conserved benefits (e.g., checking, savings, etc.); and
• any other financial documents that pertain to a beneficiary’s Social Security and/or SSI benefits.

New Law Helps Prevent Wandering of Impaired Adults and Children; Provides Aid Locating the Lost

Congress recently passed bipartisan legislation to help families locate missing loved ones with Alzheimer’s disease, autism and related conditions.  Kevin and Avonte’s Law (S. 2070), named in honor of two boys with autism who perished after wandering from safety, also supports training for caregivers to prevent and respond to instances of wandering. In response to the massive search and tragic death of Avonte Oquendo in New York City, Lori McIlwain, co-founder of the National Autism Association, assisted Senator Schumer’s office in drafting legislation that would help to prevent similar cases in the future. 

The following press release was sent from the Senate Judiciary Committee:

“The feeling of dread and helplessness families must experience when a loved one with Alzheimer’s or autism goes missing is unimaginable. But when communities are empowered to lend a hand, these terrifying situations can have positive endings and even be prevented altogether. This bill, named for two boys – one from Jefferson, Iowa, and one from New York City, improves access to technologies that advance the search for missing children.  It also expands specialized training for caregivers and first responders to help prevent wandering by vulnerable individuals. I’m grateful for all of those who worked together to get this important bill on the books to honor Kevin and Avonte and prevent future tragedies,” Grassley said.

“Families and caregivers should have the support they need to keep their loved ones with Alzheimer’s, autism, and other developmental disabilities safe. This legislation will help to educate and train caregivers to prevent wandering and provide our law enforcement officers with the tools they need to help recover missing loved ones,” Klobuchar said.
“I’m pleased Kevin and Avonte’s Law will become law so we can help save lives and give families a greater peace of mind. This legislation has a deep personal meaning for me, as I was a caregiver for my grandmother during her battle with Alzheimer’s disease. I want to thank Chairman Grassley for his tireless efforts to support this law that will help families and caregivers reunite with loved ones who wander and disappear. Kevin and Avonte’s Law will truly make a difference in preventing tragedies,” Tillis said.

“Making voluntary tracking devices available to vulnerable children with autism or adults with Alzheimer’s who are at risk of wandering will help put countless families at ease. After Avonte Oquendo ran away from his school and went missing, I learned just how prevalent wandering is among children with autism and other development disorders. I am proud to have continued to speak up for those who cannot and to have co-authored this important bill, which will help Avonte Oquendo’s memory live on, while helping to prevent other children and teens with autism from going missing,” Schumer said.

Information on the introduction of this legislation is available here, a bill summary can be found here, and full text of the legislation can be found here.

More Adults Now Share Living Space As More Parents Live With Adult Children

The Pew Research Center has posted a new report  indicating that more adults are sharing  a home with other adults with whom they are not romantically involved. This arrangement, which Pew identifies as “doubling up” or shared living, gained notice in the wake of the Great Recession.  Nearly a decade later, the prevalence of shared living has continued to grow.

While the rise in shared living during and immediately after the recession was attributed in large part to a growing number of Millennials moving back in with their parents, the longer-term increase has been partially driven by a different phenomenon: parents moving in with their adult children.

In 2017, nearly 79 million adults (31.9% of the adult population) lived in a shared household – that is, a household with at least one “extra adult” who is not the household head, the spouse or unmarried partner of the head, or an 18- to 24-year-old student. In 1995, the earliest year with comparable data, 55 million adults (28.8%) lived in a shared household. In 2004, at the peak of homeownership and before the onset of the home foreclosure crisis, 27.4% of adults shared a household.

A shared household is defined somewhat differently from a multigenerational household (although the two can overlap), as shared households can include unrelated adults and adult siblings. More adults live in shared households than multigenerational households: In 2014, 61 million Americans (including children) resided in multigenerational households.

The nearly 79 million adults living in a shared household include about 25 million adults who own or rent the household. An additional 10 million adults are the spouse or unmarried partner of the head of the household. Another 40 million, or 16% of all adults, are the “extra adult” in the shared household. This share living in someone else’s household is up from 14% in 1995.

Adults who live in someone else’s household typically live with a relative. Today, 14% of adults living in someone else’s household are a parent of the household head, up from 7% in 1995. Some 47% of extra adults today are adult children living in their mom and/or dad’s home, down from 52% in 1995. Other examples of extra adults are a sibling living in the home of a brother or sister, or a roommate.

In 2017, only 18% of extra adults lived in a household in which the head was unrelated (typically a housemate or roommate). Living with nonrelatives has become less prevalent since 1995, when 22% of extra adults lived with a nonrelative.

Regardless of their relationship to the household head, young adults are more likely than middle-aged or older adults to live in someone else’s household. Among those younger than 35, 30% were the extra adult in someone else’s household in 2017, up from 26% in 1995. Among 35- to 54-year-olds, 12% were living in someone else’s household, an increase from 9% in 1995. Today 10% of 55- to 64-year-olds are an extra adult, up from 6% in 1995. The only adult group that isn’t more likely than before to live in another adult’s household is those ages 75 and older (10% in both years).

The rise in shared living may have implications for the nature of household finances – that is, how income and expenses are shared among members.  The complexity of the interpersonal relationships, together with interrelated financial relationships complicate estate planning  solutions.  Often, these relationships beg for planning to clarify, crystallize, and memorialize expectations arising from the relationships.   

In addition, the increase in “doubling up” is offsetting other social trends bearing on the nature of the nation’s households and demand for housing. While Americans are less likely to be living with a spouse or unmarried partner in their household, the rise in doubling up means more adults are living with nonrelatives and with relatives other than romantic partners. As a result, the average number of adults per household has not declined since 1995, and consequently, the number of households per adult has not increased.

In fact, household formation, or the number of households for every 100 adults, has recently fallen to very modest levels for several age groups. For example, in 2017 there were 31 households headed by an adult younger than 35 for every 100 adults in that age bracket (adjusted for the age bias in head-of-household status), among the lowest rate of household formation for this age group since the early 1970s. Decreased household formation is not confined to young adults. Last year there were 61 households headed by a 65- to 74-year-old for every 100 65- to 74-year-olds. While this marked a slight statistical increase from 2014, the last time household formation rates were that low among this demographic was 1972.

The rise in shared living is likely not simply a response to rising housing costs and weak incomes. Nonwhite adults are much more likely than white adults to be doubled up, mirroring their greater propensity to live in multigenerational households. Nonwhite adults are a growing share of the adult population, and thus some of the rise in shared living arrangements is due to longer-running demographic change.  

Regardless of the causes of these trends, families are well-advised to consider their specific circumstances when designing, drafting and implementing individual financial and estate plans.  Experienced counsel and advisers will ordinarily consider these relationships in the fact-finding portion of planning.  Individuals must, however, fully advise their advisers of such relationships, and their expectations in order to ensure full consideration of goals and objectives.     

Ohio Bill to Remedy Third-party Refusals to Accept Lawful Powers of Attorney

According to a special editorial published in the Akron Legal News, proposed state legislation may make General Durable Powers of Attorney (POAs) more effective, by prohibiting third parties such as banks, insurance companies, and financial institutions from baseless refusals to accept the planning instruments.  A power of attorney document gives authority to an agent to act on behalf of another in legal or financial matters. Elder law and estate planning attorneys commonly use POAs as a tool to plan for the incapacity of their clients.

Ohio has enacted a Uniform Power of Attorney Act, which lays out the mandatory language that must be incorporated into these planning instruments in order to comply with Ohio law. In most cases, a power of attorney specifies that it will continue after the incapacity of its maker; such instruments are known as a durable power of attorney.

Democrat Rep. John Rogers of Mentor-on-the-Lake has championed a bill that addresses the growing problem of third-party institutions rejecting lawful Ohio powers of attorney.  House Bill 446 would prohibit a person from refusing to accept an acknowledged power of attorney for a transaction or requiring an additional or different form for any authority granted in a statutory power of attorney.  The measure would be subject to specified exceptions and provide sanctions for a person who fails to comply with the bill's provisions.  This blog contains several articles discussing how powers of attorney can be rendered impotent as a planning tool.  For example, consider the 2014 article, The Impotent Power of Attorney, available by clicking here. 

Rogers told the Akron News that he has had a number of POAs refused to be honored in recent years in both his personal life, and in his professional capacity:

Reasons that these legal documents have been rejected include the document having been prepared more than six months prior to the presentation date and a successor agent was named on the document.

"Attorneys who draft documents are subject to malpractice if documents they have prepared were done so contrary to law." Rogers said. "Consider the grave consequences that could ensue to a denied client."

*    *    *

Rogers shared with members of the House Civil Justice Committee the circumstances of a now-deceased client.

"This senior was wheelchair bound and scheduled a 'Dial-A-Ride' service through the local public transit authority to take him to his financial institution," Rogers began. "Once there, he presented his POA to a (bank) employee, who after reviewing the document advised my client that his POA was not to be honored in its present form.

"Specifically, my client was told that having named a second adult child as a successor agent was not permitted. The employee proceeded to advise my client that the document needed to be redrafted according to their specifications and offered to refer my client to someone in house to help, if necessary."

Rogers recounted when his client called him after the incident and requested Rogers draft another power of attorney.

"I offered to contact the institution on his behalf, but he asked that I redraft the document in accordance with the bank's instructions," the lawmaker said. "I did so, at no expense, but in my opinion, what had happened was unconscionable."

HB 446 would prohibit a person from refusing to accept an "acknowledged" power of attorney - one defined as verified before a notary public or other individual authorized to take acknowledgments - for a transaction or requiring an additional or different form of power of attorney for any authority granted in a statutory form power of attorney unless any of the following applies:

• The person has actual knowledge of the termination of the agent's authority or of the power of attorney;
• The person in good faith believes that the transaction is outside the scope of the authority granted to the agent in the power of attorney;
• The person in good faith believes that the power of attorney is not valid.

"In keeping with our desire to cut unnecessary and duplicative red tape in business transactions, this bill will eliminate the need for citizens to pay for two POAs when only one is needed," HB 446 joint sponsor Rep. Bill Seitz, R-Cincinnati, said in the press release quoted by The Akron Legal News [the press release was not yet publicly available on Rep. Seitz's archive of press releases.  "Pride of authorship is an insufficient reason to reject a POA that was properly prepared by a different Ohio attorney."

A failure to comply with the law would result in sanctions with liability to the dishonoring institution for reasonable attorney fees and costs to confirm or mandate the acceptance of the properly prepared and executed document, the lawmaker duo said during testimony.  

Eight fellow House members have signed on as cosponsors of the bill, which had not been scheduled a second hearing at time of publication.

Whether this bill becomes law remains to be seen.  There is, of course, a powerful bank lobby that may frustrate the bill's passage.  The bill, at least as presently written, does not appear to contain a release from liability for institutions, such as banks, that accept an instrument  based upon the representations of the presenter and the notary before which the instrument is signed and acknowledged.  That means that institutions like banks might remain liable for damages when accepting forged or fraudulent instruments despite being encouraged to do so by the penalty for refusing to accept the instrument.  One can imagine that this situation might put the institution in a precarious Catch-22 or dillemma.  

Regardless, the bill is a welcome acknowledgment by at least some lawmakers regarding the weakness of the instrument as a planning tool.  Since most people employ a power of attorney for the expressed purpose of avoiding resort to a more cumbersome legal process through the courts, it is unfortunate that third parties so easily frustrate this objective without cause.   

Massachusetts High Court Reminds Reverse Mortgage Holders- Foreclosure IS possible; Rules that Lenders Don't Have to Spell Out Foreclosure Risk to Consumers

The Supreme Judicial Court of Massachusetts ruled in favor of a reverse mortgage lender in a foreclosure case earlier this month, finding that mortgagees don’t have to explicitly spell out their legal right to foreclose in their paperwork.

The case involved James B. Nutter Company and three reverse mortgage borrowers, all of whom secured Home Equity Conversion Mortgages in 2007 and 2008. Within the span of a few years, two had died and the third became too ill to remain in the home; J.B. Nutter then moved to foreclose by bringing actions against the borrowers or their executors in local land court.

But the case was delayed due to an objection over the company’s ability to foreclose on homes under state law. In Massachusetts, the Supreme Judicial Court (SJC) wrote in its opinion, foreclosures can proceed without a judge’s confirmation as long as the mortgage itself gives the lender “the power of sale” in such situations.

The problem stemmed from some imprecise language in J.B. Nutter’s standard reverse mortgage paperwork. The company informed borrowers that it “may invoke the power of sale and other remedies permitted by applicable law … At this sale, Lender or another person may acquire the Property. This is known as ‘foreclosure and sale.’ In any lawsuit for foreclosure and sale, Lender will have the right to collect all costs allowed by law.”

The disclosure, though left unresolved issues.  The form language  fails to directly refer to the “statutory power of sale,” which was insufficient to justify the lender’s power to foreclose after the death of a borrower or his departure from the property.

But despite the lack of legal specificity, the SJC found that “no reasonable borrower” could assume that a reverse mortgage lender did not have the power to sell his or her property in the event of a foreclosure.

“It matters that this is a contract for a reverse mortgage, rather than a traditional mortgage, where the borrower makes no monthly payments of principal or interest, where the lender cannot hold the borrower personally liable for the debt, and where the lender’s only recourse on default is to obtain repayment through a foreclosure sale,” the court wrote in its opinion.

“Without a power of sale, the only way that a lender can recover the principal of the loan, not to mention interest and fees, is through foreclosure by entry — a process that would take three years — or foreclosure by action, ‘a method rarely used’ in Massachusetts.”

The court also noted that J.B. Nutter would still have to abide by all other rules regarding foreclosures in the state.

Interestingly, the court had some words of praise for the reverse mortgage product in general — while also citing a controversial report from the Consumer Financial Protection Bureau that advised consumers against taking out the loans to delay Social Security payments.

“For many retirees, one of the most reliable potential sources of income in later life is the accrued equity in their homes,” the court wrote by means of introduction.

Like many financial products and strategies, a reverse mortgage has a specific purpose, and specific circumstances justify its use.  Unfortunately, like most financial products, consumers do not always understand fully these purposes or circumstances and find themselves suffering disadvantage or harm when they are misused. The consequences can be devastating. 

As discussed preciously on this blog, these financial devises can be particularly troubling for elderly couples that do not plan carefully.  See the articles posted here and here, for example.