In the attached Carnahan decision, the Tennessee Court of Appeals appointed a disabled man’s daughter as his conservator despite his objections.  The Court also allowed the daughter to file a divorce on behalf of her father.

It is somewhat unusual for a child to be appointed as a conservator ahead of a spouse who is willing and able to serve in such role. However, in this case, the ward’s wife had signed a prenuptial agreement that waived her right to seek the appointment of a conservator for him. If there had not been a prenuptial agreement, it is likely that the wife would have been appointed as the conservator due to the priorities set forth by Tennessee law.

It is also unusual for a court to give the conservator the power to file a divorce on behalf of the ward. This is generally thought to be such a personal matter that it should not be exercised by a conservator. When the daughter’s father had legal capacity, he decided to get married. By allowing the daughter to file for divorce in her capacity as conservator, the court allowed the daughter to substitute her judgment regarding her stepmother in place of her father’s decision made while he was competent. Have you ever seen a friend or family member marry someone whom you did not approve of?

There are two lessons to be learned from this case. You should address conservatorship in your prenuptial agreement and your financial and healthcare powers of attorney. If you do not want your future spouse to participate in the appointment of your conservator, then make sure that point is addressed in the prenuptial agreement.

Your financial and healthcare powers of attorney should clearly state who you want to serve as your conservator in the event that you become incapacitated. Further, your powers of attorney should state whether or not you want the agent or conservator to be able to file for a divorce on your behalf. I personally do not like the idea of an agent under a power of attorney or a conservator being able to file for divorce. When your spouse is not your agent or conservator, it will often be one of your children. Your children are likely to benefit financially if you obtain a divorce before you die. Therefore, your conservator or agent has a built-in financial conflict of interest. Even if there is not a financial conflict of interest, a lot of step-children dislike their step-parents and might file for divorce just to be mean.
 

The brother of one of our clients recently became convinced that he had sold his soul to the devil. Upon questioning by his psychiatrist, he could not remember where he had met the devil, what the devil looked like, or what he had received in exchange for selling his soul. Perhaps the sale to the devil actually occurred. However, the psychiatrist believes that our client’s brother is having paranoid delusions.

Fortunately, the brother, who is now in his 40s, had prepared a financial power of attorney, a healthcare power of attorney, and a revocable trust when he was 35 years old. He had previously experienced some psychological problems. His doctors were concerned that he could experience severe mental illness in the future. Upon urging from his parents, he signed good estate planning documents.

The powers of attorney have been triggered. The healthcare agent is making medical decisions. The agent under the financial power of attorney, who is also the trustee of the revocable trust, is changing the ownership of various assets into the name of the revocable trust. A court appointed conservator will not be necessary. This will avoid an expensive, cumbersome process.

It is not always possible to foresee potential mental illness in the future. Nevertheless, it is my understanding from healthcare professionals that persons who experience severe mental illness often show signs of things to come before they fall off the deep end. If you or one of your loved ones show these signs, make sure that you put into place good estate planning documents before the major trouble arrives.
 

As my clients age, I am more likely to encourage them to establish a revocable trust. There are several reasons for this preference.

First, if my clients become incapacitated, it is easier for the successor trustee to manage my client’s assets in their capacity as Trustee. Experience has shown that financial institutions are more suspicious of powers of attorney than revocable trusts. Second, if my client is successful in changing the title of all of his/her assets to the Trust, probate can be avoided in Tennessee.

Third, if my client owns property in another state, probate can be avoided in the other state. Fourth, my elderly clients are less likely to acquire additional assets during their remaining lifetimes. Thus, it is more likely that they will be able to keep all of their assets titled in the name of their trust. Finally, my elderly clients have a keener appreciation of the privacy afforded by a revocable trust.

I am currently establishing revocable trusts for two of my clients who are approaching their 80th birthdays. During the last few years, the husband has become incapacitated due to Alzheimers. Fortunately, when he signed his Will in 2006, he also signed a durable general power of attorney which authorized his wife to establish a revocable trust for him. She may only exercise this power if the dispositive provisions of the revocable trust after the husband’s death are consistent with his Will. This means that she will not be able to change the manner in which his assets will be distributed.

The wife is making a change to her dispositive provisions. She is changing the bequest to her son from an outright disposition to a bequest in trust. She would like to make the same change to her husband’s revocable trust and is confident that he would approve of this change if he was able. However, she does not have this power under the power of attorney. If the husband dies first, his assets pass to two separate trusts that will benefit the wife during her lifetime and will give her a testamentary limited power of appointment over the trust assets upon her death. Therefore, if the husband dies first, the wife will be able to change the son’s bequest from her husband to a trust. She would have this power under his current Will; therefore, she is not changing anything that would otherwise happen if her husband did not change from a Will to a revocable trust.

After the wife signs the revocable trusts, she will change ownership of various assets to the trusts. This will allow probate to be avoided for both clients, will simplify the management of the assets during my clients’ remaining lifetimes, and will simplify the disposition of my clients’ assets following their deaths.

If you choose to use a Will to dispose of your estate, consider signing a power of attorney that gives your agent the ability to create a revocable trust for you after you become incapacitated.  This can make it easier to manage your assets during your remaining lifetime and simplify the dispositon of your assets following your death.   

Over the course of my career, I have worked with several clients who knew they had but a few months to live due to inoperable cancer. As a general rule, these clients have been mentally sharp when I have worked with them.

The knowledge that death will occur in the near future causes the client to be keenly focused on making sure their estate planning affairs are in order. It is basic to make sure that the client has incapacity documents such as a living will, health care power of attorney, and a financial power of attorney.

There are numerous financial matters to be considered. Perhaps ownership of assets can be changed to avoid probate or to provide tax benefits. Should gifts be made to children and grandchildren? Should a revocable trust be utilized in order to avoid probate? Beneficiary designations on assets such as retirement accounts and life insurance policies should be verified.

One married client changed the ownership of the house into his name and changed the beneficiary of his life insurance policy to his estate. These steps will provide his estate with enough assets to fund a credit shelter trust. The credit shelter trust will save substantial estate and inheritance taxes upon the subsequent death of his wife.

The estate planning steps outlined above would be equally effective for any client nearing the end of his or her life. Unfortunately, a lot of terminal illnesses incapacitate the client to the point that he or she is not able to accomplish them. The only “good” thing about terminal cancer is that it generally gives the client adequate time to get their affairs in order and to say their good-byes.
 

I have received several inquiries about steps that can be taken to protect assets when your spouse or parent continues to drive when they should not be driving.

The obvious answer is to try to persuade the person to give up the car keys. It helps if you can offer a plan for providing transportation assistance. When the person refuses to stop driving, there are some steps that can be taken to protect assets.

I advised one woman to change the ownership of the car from joint ownership to her husband. If her husband has a wreck, this should decrease the chance that her assets will be endangered. Incidentally, you should also change the title for your child’s car when your child turns age 18.

Another couple decided to transfer their assets to two separate asset protection trusts, one for the husband and one for the wife. In addition to providing asset protection, these trusts will operate as a probate avoidance mechanism, similar to a revocable trust.

For years, my durable general power of attorney form has authorized the agent to transfer the principal’s assets to a revocable trust established by the agent for the principal’s benefit. I have now expanded this power to provide the agent with the ability to transfer assets to an asset protection trust established by the agent for the principal’s benefit.

Incapacitated persons seldom attempt to drive. However, I know of situations in which persons with dementia have assaulted other persons. If assets have been transferred to an asset protection trust prior to the assault, the assets should be protected from any monetary judgment resulting from the assault.
 

Coping with the death of a family member or friend is one of the most difficult emotional challenges we ever face. The challenge is magnified for those who must make end-of-life medical decisions for their loved one.

The attached article, His Own Private Death Panel: We Pull the Plug on Dad, by Ira Rosofsky in Psychology Today, gives a realistic view of the decisions that must be made on behalf a person who is nearing the end of his or her life. In the article, two children eliminated a slim chance of recovery for their father by deciding not to give him a feeding tube.

I was recently told by the son of one of my clients that his father’s Living Will and Health Care Power of Attorney made matters much easier with the hospital as his father was dying. His father had told his children that he wanted to die quickly when his time came. Accordingly, the children told the doctors not to use heroic measures to keep their father alive for a few more days.

A Living Will and Health Care Power of Attorney can certainly help, but there is no substitute for having frank conversations with those who will be faced with making decisions for you. You need to have these conversations while you have your full faculties. If you avoid these conversations, the decision may not be what you would have wanted. Furthermore, the decision makers are more likely to feel guilty about their decisions for a long time.
 

I occasionally receive inquiries from a child whose parent has early stage dementia. The conversation frequently starts out with statements like “Dad’s short-term memory is awful” or “Mom is beginning to make some really bad decisions.”  Even better, “Dad has had 3 wrecks and refuses to quit driving.” The Child wants to know what can be done to protect the parent.

I encourage the child to seek medical help from the parent’s physician and to build a strong support group of friends and family members who will watch out for the parent.

 

Today, I received an inquiry from the son of a man who recently gave $100,000 to a stranger that is currently in FBI custody.  Apparently, this stranger has persuaded several other elderly folks to make "investments" with him.  The father has horrendous short-term memory, but still recognizes family members and other close acquaintances and can handle routine financial transactions such as writing a check to pay the electric bill.

 

I told the son that he has two choices. The best course of action is for the son to try to convince the father to visit with an attorney to discuss ways of protecting his assets.  I encouraged the son to enlist the aid of his father’s closest friend in discussing this matter with his father.

 

If the father is unwilling to cooperate in seeking a solution, the son’s other alternative is to petition the court to appoint a conservator for his father. This course of action should not be taken lightly. Judges are very hesitant to take away a person’s legal rights. Proof of “bad decisions” is not enough to take away a person’s legal rights when that person has periods of “lucidity.” Furthermore, even if the Judge agrees to appoint a conservator, this does not necessarily mean that the father will be unable to change his Will. The dilemma for the son is that he may jeopardize his future inheritance by applying for conservatorship.

 

I have seen the problem from other perspectives.  I have been involved in several lawsuits involving decedents who had a period of dementia prior to dying and either made suspicious gifts or changes to their Will late in life. The net effect of the gifts or Will changes was to distribute the decedent’s assets in a significantly different manner than had been intended by the decedent before the onset of dementia. As a general rule, it is very difficult to change this result.  The beneficiaries who were harmed by the change must prove that the decedent lacked legal capacity and/or was unduly influenced to make the change. Because the decedent is not available to testify, his mental condition can only be proved by inference.

 

Sometimes, my clients ask for my assistance on how to plan ahead to protect themselves from making bad decisions if they later suffer from dementia.  There are some very good safeguards that can be put in place.

 

In summary, the onset of dementia poses a great risk to a person’s financial well-being. There are no foolproof solutions, but planning ahead can minimize the damage.


For sound policy reasons, your Will cannot be changed by your conservator or attorney-in-fact after you become incapacitated. The downside of this rule is that it is not possible to make sensible adjustments to changed circumstances, such as changes in the tax laws.

Fortunately, a recent Tennessee law (TCA Section 35-15-602(e)) recognizes a method for you to authorize changes to the disposition of your estate after your become incapacitated. Two years ago, I prepared a revocable trust agreement and a general power of attorney for one of my clients that authorize a family friend to make changes with certain parameters.

Even though my client is now incapacitated, I am preparing an amendment to her revocable trust that will change a $1,000,000 bequest to her daughter to a $2,000,000 charitable lead trust. Estate tax savings from the charitable deduction accounts for the different amounts. For 20 years after my client dies, the charitable lead trust will make payments to charity that the daughter and her children would have otherwise made from their own assets.

The amendment power is a very powerful tool. This power needs to be drafted carefully and should be given to someone whom you really trust.