You have lived and worked in Minnesota for 35 years. Your mom, age 85, lives in the home you were raised in and has lived for 50 or more years. Unfortunately, she has just fallen and is badly bruised, but is physically able, with paid services, to still get around. However, her attending physician does not believe that she can continue living alone in her present situation. Given that he knows that she has had a few recent episodes of failing to pay his bill and has also overpaid it substantially on occasion, has expressed concern that she may not be able to manage financial affairs any more. Mom designated you, as the oldest child, to act as their agent under their power of attorney and as the successor trust of their revocable living trust. She named your sister as her health care agent in an advance directive.
The power of attorney authorizes you to utilize mom’s assets for her “best interest”, while the trust states that you should pay to or for the benefit of mom for her “health, education, maintenance and support.” What do you do?
First, you need to obtain the appropriate financial documents from your mom if you do not have them. Assuming this raises no difficulties, you now have authority to act.
Next, review the terms of the documents. Your actions on behalf of your mother are now governed by certain “fiduciary” duties to her and to the secondary beneficiaries (you, your sister, and the surviving children of your deceased sibling who died 1 year ago).
A Trustee’s Dilemma. Unfortunately, the terms described in this scenario only offer vague direction. Of course you desire that your mother have things she needs for a good quality of life, but you also understand you have some duty to preserve and grow the property in the trust for the benefit of the secondary beneficiaries.
Where do You find Guidance?
Her Financial Resources. Your mother receives social security of $1,500 per month and has a teacher’s pension of about $1,000 per month.
Her Current Lifestyle. For many years, she has been going out to eat (often 3-4 times per week) with her long-time friends and often even picks up the dinner bill for the group. She doesn’t “need” to eat so extravagantly, but she loves the dinner fellowship. Her outings are very important to her emotional well-being at this stage in her life, and she looks forward to such outings with great pleasure. Yet her monthly entertainment costs sometimes exceed $1,000 per month. She also enjoys shopping for clothing, shoes, and handbags, sometimes spending $500-$1,000 per month on such things. As she often uses coupons that she gets in the mail and charges such purchases, she has not yet had any financial difficulties. However, unknown future costs surrounding her living arrangements and needed caregiving assistance concern you. What do you do? How do you invest her trust assets to provide “support” for her lifestyle?
Her Health Care Practices. With regard to her “health”, you also know that your mom will need hearing aids, normal dental work and eyeglasses in the near future. You anticipate that such items will cost several thousand dollars. It is likely that her “income” will not be sufficient to maintain her lifestyle, while also paying for these needed medical expenses. Finally, in order to relieve chronic pain in your mother’s back that arose following surgery several years earlier, you know that your mom routinely gets acupuncture and other non-western, non-prescribed types of comfort treatments that offer some relief. Does your authority to pay for “health” permit distributions from her trust funds to pay for such unconventional treatments?
The Importance to Her for the Secondary Beneficiaries. While making decisions about how and what to pay for to “support” and “maintain” her lifestyle, as Trustee, you also need to consider the interests of the secondary beneficiaries. Unless stated otherwise, the law requires that fiduciaries act “impartially” with regard to all of the beneficiaries. You are worried that your deceased sibling’s son, who lives in another country and have not seen his grandmother in a long period of time due to geographic distance and travel costs, may dispute your payment for these treatments. What can you do?
ADD RELIGIOUS/CHRONIC ILLNESS PROVISIONS/PERSONAL LIFESTYLE CHOICES
Clear Written Priority and Directions Provide Guidance and Direction to the Trustee. These are just some of the dilemmas that trustees routinely face often only with standard, vague provisions to use as guidance for their actions. A clear direction about such issues from your mother would ease this dilemma and inform you, as the fiduciary, about her preferences. Perhaps, it is more important for your mother to maintain her existing lifestyle choices even if that may exhaust the trust assets. Alternatively, perhaps it is more important for her that you eliminate some extravagant expenses that your mother has been paying and instead pay for air fare for her grandchildren to visit her for an extended period at her home. Special language can be added to her trust, or could be otherwise added to her estate plan, to direct what her priority would be so that you know more clearly how to go about administering your mom’s affairs. Actions to personalize her estate plan can not only provide for her preferred lifestyle, but also passes on to you and her other loved ones a statement of values to live by. Finally, providing clear direction to her agents about her chosen lifestyle and the types of “health” care she desires also relieve you, as your mom’s agent, of the burden of making difficult decisions that can ultimately impact who gets what.
If you desire to ensure your voice is heard, or if you are currently in the midst of the dilemma of making such decisions, give our firm a call or send an email. We have substantial experience dealing with these types of issues, and can provide you with clear guidance about steps to take to make safe and respected decisions.
