WHAT HAPPENS WHEN A PERSON IS NO LONGER ABLE TO COMPETENTLY MANAGE THEIR FINANCES OR NOT ABLE TO TAKE CARE OF THEMSELVES?

 By Rex L. Crandell

  1.  What are you going to do when you find out that a loved one or someone you is still alive but not competent to think properly or they are not able to take care of their basic necessities of life, for example;  cooking, getting dressed, bathing, using the bathroom, or they can no longer communicate to others what they want or need?    These issues should be considered any time when their competency becomes doubtful.  This might be in the form of not being ability to understand when people speak to them, manage their home or financial affairs, when they cannot keep up with, supervise, and make competent decisions that are in their own best interest at this time. 
  2. It is much better if these issues are addressed before the person looses their ability to continue to manage her own affairs. 
  3. If a person is not able to keep up with what is going on in their life.  Or they are unable to recognize the various people familiar with the people that they normally have contact with, then it is suggested that one or two family members schedule a doctor’s appoint for the person.  You should consider bringing them to a licensed medical physician and have a written competency evaluation report prepared.  It might be a good idea to ask in advance if this particular doctor’s office customarily provides competency evaluations and issues written letters if it is determined that the person is no longer able to take care of themselves or they are diagnosed as being incompetent.  
  4.  When a person is unable to comprehend and make the necessary decisions in their lives, the California Probate Code uses the term that the person “lacks competence”.  When a licensed medical physician makes a written competency report indicating that the individual is not competent, in the doctor’s written opinion, then many things need to change regarding the care and supervision of the person.
  5. If the person has a Revocable Living Trust and most of their assets are labeled in the name of the trust, then you should read the trust instrument to find out what it says about a competency determination.  A creator of a revocable trust that names themselves as the initial trustee cannot continue to act in the capacity of a trustee when they have been declared not competent.  In addition, the person would not have the right or legal ability to sign or enter into any type of contract or agreement if they are incapacitated. 
  6. You should re-read the trust instrument to see what it says about the process and who will step into the office of successor trustee when a determination of non-competency has been issued by a medical doctor or by other specific terms spelled out in the trust.  This section should be read before contacting a medical doctor to examine the person for competency issues.  The specified successor(s) trustee will take over the office of trustee for the trust (as written in the trust document) assuming that the successor(s) trustee is ready, willing and able to assume the trustee’s duties and responsibilities.
  7. For assets that are not labeled in the name of a trust there will need to be some procedure to manage those assets if a non-competency determination is properly issued.  These assets frequently could include pension plans, annuities or IRA accounts that are governed by a beneficiary statement with the asset holding entity.  Other assets that are labeled in the person’s individual name and do not show the trust as the owner will also fall into this category of asset, like bank accounts or real estate held in the person’s name alone and not in the name of the trust. 
  8. If the person does not have a Durable Power of Attorney for Financial Management, then a court supervised conservator will need to be nominated, appointed and confirmed by the local probate court.  Then the appointed conservator will need to make regular reports to the court because the entire process is done under court supervision to protect the rights, assets and health for the incapacitated person. 
  9. There is much more paper work involved when the person does not have a revocable trust and a Durable Power of Attorney for Financial Management because that creates the need for a Conservatorship which is supervised closely by the courts.  You would be well advised to attempt to avoid the costs, regulation and time involved in the court supervised Conservatorship path when there is any way to avoid it. When the person becomes incompetent and they had previously created a revocable trust and labeled most of their assets in the name of the trust, then a court supervised conservatorship can be avoided for management of all assets in the trust. 
  10. If the person had previously prepared and signed a Durable Power of Attorney for Financial Management and a determination of incompetency has been medically issued in writing, then the person specified in the Durable Power of Attorney for Financial Management document will then step in and begin managing the assets that are not held in the name of a trust.  When the person becomes incompetent and they had previously signed a Durable Power of Attorney for Financial Management form, then all assets that are not in a trust will be managed by the named financial manager without court intervention.  Again, if one exists, then the provisions should be read, evaluated and understood, especially by the person named in the document to take over the financial management duties.  Normally, the provisions are written in a way that is understandable to most people. 
  11. In other words, do not be put off that it might be written in that ancient, (never spoken publicly form of Old Roman Latin) language commonly referred to as “legalese”.  Just read the document, determine what it says and discuss it between all family members.  If you do not clearly understand what the document means, then hire a professional to assist you in your understanding.  
  12. You should also hire an attorney to be your legal advisor to help the family keep within the proper legal bounds when dealing with these types of situations.  Now days, when well-meaning but mistaken family members do not follow the legal rules law enforcement officials may try to prove criminal elder financial or physical abuse took place.  A well meaning but not informed about the laws in this area can create personal liability for the care giver for not following proper procedure.  Caring is not enough; it also has to be the proper thing to do for the incapacitated person to keep the care giver out of the frying pan, so to speak.
  13. If the possibility of incompetency exists, then the reality of the situation should be dealt with directly and promptly.  It is becoming an increasingly more common situation in our modern society, that most of us will eventually become incompetent and not able to manage our own affairs at some point in our life. 

DISCLAIMER AND WARNING AGAINST SELF-HELP

This information is general in nature and not intended to be legal, tax, accounting, or other professional advice, nor does it create any form of professional relationship.  If you need professional or technical advice, then you should contact a competent person to evaluate your factual situation because the situation discussed above is not the type of situation where people should attempt to go it on their own without competent advisors to direct and advice on your particular situation.  Each situation is different so no canned approach would usable or advisable.  If any of this information applies to you are someone you know you should immediately seek the services of a competent professional.  Rex Crandell & Firm is not affiliated with any governmental agency and does not claim to be a government employee nor have any special insider affiliations with any governmental agency.  This is because the information is designed exclusively for advisory purposes only to provide a general background of the area discussed.

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A MESSAGE FROM REX CRANDELL’S TAX OFFICE:
Our firm provides income tax preparation and planning services for individuals, families, C Corporations, S Corporations, LLC Limited Liability Companies, Partnerships, domestic partners, for income and deductions generated in California, the United States, and assist taxpayers internationally comply with the USA income tax reporting requirements.  Rex Crandell, Esq. also provides services in the area of Estate Planning, Estate Administration, Probate Procedures, Advance Healthcare Directives, Durable Powers of Attorney for Financial Management, and Advance Health Care Directives.

You can contact Rex Crandell’s offices in Walnut Creek and San Francisco, California by calling; 1 (800) 464-6595; or (925) 934 6320; and you can contact our office by e-mail at rexcrandell@astound.net

http://www.rexcrandell.com

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We would be happy to hear from you.

…FROM REX CRANDELL’s  OFFICE…

Please contact our office if you have any questions. 

Very truly yours,
/s/ Rex L. Crandell
Rex L. Crandell. CPA, Esq.

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          STATEMENT PURSUANT TO IRS CIRCULAR 230: The drafter of this document did not intend nor write this document for the purpose that this document would be used to avoid any penalty imposed by a taxing authority, for promoting, marketing or recommending this advice to another party. The recipient of this document may not use this document for that purpose. Rex Crandell Firm would be pleased to prepare or arrange to have prepared by legal counsel, as applicable, a document that would meet the specific requirements of IRS Circular 230 and could be used for those purposes. Please advise us if you desire such a document.

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