Take-Away: As mentioned in the past, the Michigan Legislature is currently looking closely at several different proposed Bills that are intended to address and curb in some manner rampant elder abuse. Many of the proposed Bills would specify criminal behavior with respect to an elder’s health and welfare and the abuse/misuse of an elder’s finances. One proposed Bill would amend Michigan’s slayer statute that would cause a beneficiary or heir to be disinherited if he or she is convicted of a crime of elder abuse. Some practical steps can be taken to better protect an elder individual while we await the enactment of these several Bills into Michigan law.

Slayer Statute: The Michigan Estates and Protected Individual’s Code contains a statute that causes the forfeiture of an inheritance in the event of a crime, including abuse and neglect. The key provision states:

An individual who feloniously and intentionally kills or who is convicted of committing abuse, neglect, or exploitation with respect to the decedent forfeits all benefits under this article with respect to the decedent’s estate, including an intestate share, an elective share, an omitted spouse’s share or a child’s share, a homestead allowance, a family allowance and exempt property. If the decedent did intestate, the decedent’s intestate estate passes as if the killer or felon disclaimed his or her intestate share. [MCL 700.2803(1).]

A close reading of this statute suggest that a felonious conviction for abuse, neglect, or exploitation would cause the forfeiture, not just an intentional killing of the decedent. The scope of this forfeiture statute extends to any governing instrument that provides a disposition of property or a power of appointment over property, as well as it severs jointly held property between the felon and the decedent. [MCL 700.2803(2).] The scope of this statute seems to cover an individual who is convicted of elder abuse, without the need to have additional elder abuse specific provisions added to the existing slayer statute. It is something to keep an eye on as the Elder Abuse Task Force’s package of Bills near adoption in Lansing.

Protective Steps: Some steps can be taken to protect an elder individual’s financial affairs, as they age, become more vulnerable, and thus prone to financial abuse and exploitation. Sadly, none of these steps is foolproof if the trusted child or relative is the financial predator of the elder.

Durable Powers of Attorney: These lifetime instruments are obviously helpful to manage an elder’s finances and pay their bills if they are frail and cannot manage their financial affairs. Often a spouse and/or an adult child is named as the agent to manage the elder’s finances, perhaps including making gifts of the elder’s assets.

  • If there is a concern about the named agent abusing the powers delegated to him or her under the durable power of attorney, co-agents could be named to act in concert with each other in the exercise of a power, as a ‘check and balance’. The problem with using co-agents, however, is the practical need to have both of the agents obtain information and act in concert with each other, especially if an emergency is presented. Co-agents can be reassuring, however, if gifts are to be made using the durable power of attorney.
  • Another feature that should be added to the durable power of attorney is the requirement for the agent who exercises a power under the instrument to account, to both the elder, and another third party, e.g. the designated contingent agent if initial agent is unable to act under the instrument. This periodic accounting compels the agent to report all business transactions using the elder’s assets and provide a brief explanation why the decision was made by the agent to expend or move the elder’s assets. The agent should be required to account, in writing, every 90 days for the actions taken under the durable power of attorney.
  • It is a good idea to mention in the durable power of attorney instrument that any self-dealing transactions  that uses the durable power of attorney instrument are voidable under Michigan law, so that the agent is put on notice and cannot later plead ignorance if a transaction engaged in that benefits the agent is later challenged.

Revocable Trust: A revocable trust can sometimes be used to protect against elder abuse. If, however, the elder retains the power to withdraw assets from the revocable trust or to amend the revocable trust, or to revoke the trust and return the title to the assets in the elder’s name, the elder will remain vulnerable to predators. It can be made more difficult, though, to move assets out of the trust without amending or revoking the trust.

  • One very interesting reported court case was when a married couple, the Dunns,  adopted a joint trust, which could not be amended without the consent of both spouses, and without the consent of either their drafting attorney, Patterson, or with a court’s consent. The consent was intended to protect the Dunns from future financial manipulation by others. The Dunns subsequently changed attorneys. Their new attorney wrote Patterson a letter and asked him to consent to his removal from the joint trust as a ‘consent-provider.’ Patterson refused to consent to the proposed amendment without first meeting face-to-face with the Dunns to determine if the proposed changes to their joint trust were consistent with their estate plan, or otherwise in their best interests. The Dunns filed a petition for a declaration that the joint trust provision that required Patterson’s consent was void. The trial court agreed with the Dunns and sanctioned Patterson attorney’s fees the Dunns incurred in having to file their petition with the court. An appellate court reversed the trial judge, noting, “the attorney is often the client’s most trusted friend and advisor.’

Professional Trustee: Obviously, if there is no trusted friend or family member available to serve as trustee, or co-trustee, a professional trustee should be named. The use of a professional trustee offers the additional protection of an unwise choice of an individual trustee, and it assures both the elder and the elder’s family members professionally prepared periodic accountings of the elder’s income and disbursements, along with professional management and preservation of the elder’s assets.

IRAs: Usually elders have individual retirement accounts (IRAs) that require a lot of attention due to the size of the funds held in the IRA, and the tax consequences that result with most distributions from the IRA, not to mention the 50% penalty for failing to take a required minimum distribution. The problem with an IRA is that it is easy to change the beneficiaries of an IRA account (no lawyers, not witnesses, no notaries), and often the IRA custodian is only contractually bound to fulfill the terms of the IRA custodial agreement and not report any suspicious behavior. In short, not much monitoring by third parties is available with regard to the management and preservation of an IRA.

  • There is one interesting Private Letter Ruling that should be consulted if there is a concern with regard to another person using undue influence over an elder. In PLR 201150037 (September 23, 2011) the IRS approved how ‘guardrails’ could be placed on an individual’s IRA without impacting the tax consequences of the IRA. The IRA owner’s arrangement with the IRA custodian was that any distributions from the IRA in excess of the IRA owner’s required minimum distributions (RMDs) for the calendar year could not be made until 30 days after the IRA owner’s request for the ‘excess’ distribution. In addition, the IRA custodian was also required to notify the IRA owner’s attorney of any request for ‘excess’ distributions. Obviously these ‘guardrails’ were placed on the IRA owner’s access to his/her own retirement funds in order to prevent others from unduly influencing the IRA owner. A similar arrangement might be considered for TOD and POD beneficiary designated accounts as well if there is a genuine concern that the account owner might be manipulated by others to access the funds held in the TOD or POD account.

Conclusion: Expect to see a battery of legislation coming in 2020 that addresses the needs and protection of elders in Michigan. Some of the Bills are intended to provide greater consistency among probate courts that are called upon to appoint guardians for elders, or when an elder needs to be removed from his/her own home and placed in assisted living. Other proposals are intended to provide a clearer definition of when an elder is abused, both physically and financially. While many will define criminal behavior, or cause the forfeiture of an inheritance, the concern is that elder abuse, in whatever form, will continue unabated. Consider some of the steps outline above as a partial response to better protect an elder and his/her wealth from predators.