Brokerage found not liable to non-customer in joint account dispute

The owner of a financial account may choose from a variety of designations and forms of ownership for the account. It may be solely-owned; it may be jointly owned with right of survivorship but no independent access during lifetime; it may be “either-or,” it may be “pay on death to …,” it may be “in trust for …” Each of these carries very different legal ramifications during the lifetime of the account holder and after his/her death.  If a solely-held account is changed by the account holder to be jointly held with someone else, to what extent can the disgruntled heir of the estate seek compensation from the corporate financial entity which holds the account and processed that paperwork? The  NJ Appellate Division decision in Wolens v. Morgan Stanley Smith Barney  sheds some light on this subject.

The Court explained, “As a general proposition, the case law in our state has not recognized that a financial institution owes a legal duty to injured third parties who are not their customers unless a statute, regulation or other codified provision imposed such a duty, or where a contractual or “special relationship” has been established between the non-customer third party and the financial institution.”

What happened in this case? The Plaintiff’s mother had owned investment account(s) in her name alone at Morgan Stanley Smith Barney (MSSB). The accounts made up most of her estate.  At some point, she presented MSSB with a written request to change the account’s title so it was jointly held with one of her three daughters. She passed away four months later. Another of her daughters learned about this after her mother died, when it was disclosed that this “non-probate asset” would not be passing through the probate estate and would not be shared with the people inheriting under the mother’s Last Will and Testament.

The dissatisfied daughter sued MSSB for honoring her mother’s request. The Court dismissed the action, finding that MSSB did not owe any legal duty to the plaintiff to protect her potential interest, because the plaintiff was not a customer of MSSB and MSSB had not established any contractual or special relationship. The Court emphasized that even if there had been wrongdoing on the part of the daughter whose name was added to the account, that would merely provide a possible cause of action against her in connection with the estate, and it would not establish a basis for liability on the part of MSSB, who had no relationship with potential heirs of their customer’s estate.

The Estate planning process involves looking carefully at all of your assets and how they are structured, to be sure that the Plan you think you have is the Plan you actually have.

Call us for advice on estate planning and elder care planning ……….

732-382-6070

 

 

Section 121 exclusion of capital gains available if nursing home resident resided in home 1 of last 5 years

Sale or transfer of a primary residence is often a major consideration in elder care planning. Property may be transferred from an infirm spouse to the “healthy spouse.” Property may be sold because the homeowner has to move into a nursing home or other care facility. Property may be transferred to the “caregiver child” in connection with a Medicaid application. A residence may be transferred “to the kids” to preserve its value for their benefit. When a sale or transfer takes place, there may be substantial capital gains incurred due to the large increase in value that has occurred during the decades that the elder resided in the property since time of purchase. This is where Section 121 of the Internal Revenue Code comes in. Let’s examine a few of the provisions.

Section 121 provides an exclusion from income tax of up to $250,000 of capital gains ($500,000 for a married couple) once every two years upon sale of the primary residence. The basic requirement is that the seller has resided in the property for 2 of the 5 years prior to sale. This would mean at least 2 years from the date the seller acquired title.

What about sales by widow/widowers? Under Section 121(b)(4), if the widow/er sells the residence within 2 years of the death, and all the other basic criteria are met, they can exclude up to $500,000 of gain.

What if the seller didn’t reside in the house the entire time? The time in which the person resided elsewhere before moving out for good is referred to as “nonqualified use,” and Section 121(b)(5)(C) specifies that there will be a proportional reduction in the exclusion based on the ratio of nonqualified use since 2009 to the whole period. There are a few exceptions.

What if the couple is married filing jointly, but only one spouse meets all of the requirements? Under Section 121 (d), They can claim the full $500,000 exclusion.

What if the seller has to move into a nursing home before the sale, or has resided in and out of health care facilities during the 5 years before the sale? Section 121(d)(7) has special provisions about that. If the individual “becomes physically or mentally incapable of self-care” and resided in the home for periods of time that, in aggregate, equal at least 1 year out of the past 5, “then the taxpayer shall be treated as using such property as the taxpayer’s principal residence during any time during such 5-year period in which the taxpayer owns the property and resides in any facility (including a nursing home) licensed by a State or political subdivision to care for an individual in the taxpayer’s condition.”

What if the parent transfers the property to a child who does not live there? The Section 121 capital gains exclusion will not be available to a family member who has received the property but then does not use it as his/her primary residence. When the property is later sold, there will be probably be capital gains to contend with, because the adjusted cost basis in the hands of the parent is “carried over” to the child who received the property.

Call us about asset protection planning and elder care ……… 732-382-6070

WW II Crew memoirs available for interested readers

I have a group of books about  World War II bombers that I would love to give to any of my readers who are interested in these subjects. Some of the books are crew memoirs with photos and mission descriptions from the  Air Force campaigns in Foggia, Italy and North Africa, others are about related incidents in the Italian and eastern European Campaigns. Why do I have these? My late father  Walter (“Wally”) Ershow was a B-17 bombardier on the 15th Air Force, 2nd Bomb Group, 20th squadron, crew # 7619 based at Amendola in the Apuglia region of southeastern Italy. In his later years he started collecting books about the bombadiers and their crews. I have the books, and if you or anyone you know is interested in reading any of these, I will be glad to send the book to you. Please get the word out to anyone who’s potentially interested. Send me an email at linda@FinkRosnerErshow-Levenberg.com or call my office 732-382-6070 and leave me a voicemail.

Here’s what I can offer you:

Wrong Place, Wrong Time! The 305th Bomb Group & the 2nd Schweinfurt Raid by George C. Kuhl (8th Air Force);

Crew Umbriago (Third Air Force; 463rd Bomb Group) original copy, crew memoirs  compiled by Maj. Daniel P. Carroll USAF;

Chick’s Crew: A Tale of the Eighth Air Force by Ben Smith, Jr. (303rd Bomb Group under Lt. Anthony J. Cecchini)

Those Brave Crews by Ray Ward (signed by the author 12/23/1991)(B-24 heavy bombers; Ploesti Romania raid);

Nightmare in Bari – the WW II Liberty Ship Poison Gas Disaster and Cover Up by Gerald Reminick;

Bombing Iron – Airworthy bombers of WW2 and Korea by Michael O’Leary;

The War Between the Generals – Inside the Allied High Command by David Irving, and

Guidebook of the Unites States Air Force Museum (Photos of the planes)

Call us for advice on legal issues in New Jersey concerning aging and disability, nursing home care and family protection planning ….. 732-382-6070

Thoughtful Catholic approach to conversations about end of life care

I had the opportunity today to read a very thoughtful article about a meeting of Catholic physicians who are helping their very ill patients to wrestle with hard decisions about whether to utilize palliative care in place of active treatment with mechanical life support. The organization is the Catholic Health Association of the United States (CHA) and the online newsletter article in the section on Physicians Articles is called  “Pathways to Convergence: EXAMINING DIVERSE PERSPECTIVES OF CATHOLICS ON ADVANCE CARE PLANNING, PALLIATIVE CARE, AND END-OF-LIFE CARE IN THE UNITED STATES,” subtitled ” Untangling the Gordian Knot of Language and Attitude about Palliative Care and Advance Care Planning: Pathways to Convergence,”

The article reports on the findings that stemmed from a 2015 initiative in which the Pew Charitable Trusts “gathered a group of six Catholic ethicists who worked in and with the Catholic health ministry from a variety of perspectives. All of them served as resources to help organizations in the ministry remain faithful to and compliant with Catholic teaching. Serving as a kind of steering committee, this initial group sketched out a framework for a project that would look at three main topics in Catholic health care” [including] …”:3. the specific issues and decisions made by patients and families and providers in the setting of living with serious illness and, ultimately, dying from it.”

The article goes on to report thatPathways to Convergence, a project supported by The Pew Charitable Trusts, enabled a broad array of clergy, clinicians, practitioners and ethicists to explore Catholic perspectives on these issues for more than a year. Participants engaged in a series of in-depth conversations on how Catholics accompany the sick and dying, how end-of-life medical decisions are made and what role the church has in promoting its message and vision in the public square. It was acknowledged at the outset that although Catholics share many strongly held views that converge, they also hold divergent views and practices that cause confusion and misunderstanding. The project was established with the hope that, through a respectful exploration of the convergence and divergence of views, participants could recognize a path forward that would enable Catholics to speak more clearly and distinctly about these issues to one another and to others as well. …”

Discussions between physician and patient, or patient and nurse practitioner, about care at end of life are challenging, sensitive, and fraught with the difficulty of accepting certain medical inevitabilities without giving up hope. One’s concept of what constitutes good life at end of life must be explored. Individuals can sign advance directives, and patients or their authorized proxies can confer with physicians about POLST – Physicians Orders for Life Sustaining Treatment — that become part of the medical record both in and out of the hospital. Above all, the issues need to be explored with the team that is important to the patient, which will often include clergy as well as health care personnel and trusted family members.

 

Call us for advice on personalized advance care senior planning … 732-382-6070

Section 8 housing rules for live-in caregivers

Did you know that if a person with physical or cognitive disabilities resides in section 8 funded HUD housing, the law requires the Public Housing Agency (PHA) to allow a necessary home health aide to reside with the tenant? The concept is that the PHA is required to make a reasonable accommodation for the tenant’s needs pursuant to the Americans with Disabilities Act, to enable the participating tenant to reap full benefit from this federal housing program to enable them to dwell in the community and avoid nursing home placement. The regulation is in surprisingly plain English:

             “24 USC § 982.316 Live-in aide. (a) A family that consists of one or more elderly, near-elderly or disabled persons may request that the PHA approve a live-in aide to reside in the unit and provide necessary supportive services for a family member who is a person with disabilities. The PHA must approve a live-in aide if needed as a reasonable accommodation in accordance with 24 CFR part 8 to make the program accessible to and usable by the family member with a disability. (See § 982.402(b)(6) concerning effect of live-in aide on family unit size.)”

Normally, the income of other occupants of the apartment will be counted in the household income calculation for Section 8. However, if the person resides there because s/he serves as the live-in aide, his/her income is not counted. The criteria for exclusion of that person’s income are in the federal regulations and are basically that (1) the aide’s services are essential to the care and well being of the person(s); (2) the aide is not under a legal obligation to support the person(s) with the disabilities, and (3) the aide would not be living in the unit except to provide the necessary supportive services. The tenant needs to formally request the accommodation by submitting an application to the PHA. The tenant who is applying for this special accommodation would need to provide relevant and necessary medical proofs as to the disability and need for a live-in aide, including physicians’; opinion reports, and evidence concerning the identity of the aide and services to be provided. A sample detailed explanation of the requirements for this application are here, from the Georgia Department of Community Affairs.

The person being proposed as the live-in aide must still be eligible to reside in HUD housing based on other federal criteria, but that is a different topic.

Senior care planning involves looking at the opportunities to enable a person to age in place in his or her preferred environment. There are a wide array of legal questions that are relevant to that planning, including the public benefits that might be available.

Call us for advice about planning for senior care …. 732-382-6070