Food for Thought

We have all heard sad stories in the media about predators targeting the elderly.  Often these stories involve phony investment scams, reverse mortgage scams, or lottery scams.  Sometimes we hear about a sinister nurse’s aide who steals an elder’s identity and cleans out the elder’s bank accounts.  In almost all of these media accounts, the con-artist is an outsider who comes into the elder’s life, wins their trust and steals their assets.  Yet, you may be surprised to learn that most financial exploitation of the elderly is not done by opportunistic strangers, but by close family members. 

When family members exploit the elderly, the culprit is often the family caregiver—the family member who lives with the elder providing care, companionship and assistance.  This person usually has the motive, means and opportunity. 

The motives can be tricky to pin down, and can be related to family dynamics that go back decades.  Yet, for larcenous family caregivers, one of the strongest motives is usually a sense of entitlement related to the sacrifices inherent in the caregiver role.  When one family member is doing the bulk of the caregiving for an elderly loved one, it is only natural that they can feel overwhelmed and resentful of other family members who are not contributing as much.  Most caregivers have the strength of character to deal with these difficult feelings in a constructive way.  Yet, some caregivers allow these feelings to fester, which can lead to, among other things, a sense of entitlement.  Often this sense of entitlement will drive the morally weak caregiver to justify a decision to financially exploit their loved one. 

When you are dealing with a morally weak caregiver, the bad news is that the opportunity to pull off a heist is inherent in the caregiving role.  Usually the caregiver lives with the elderly victim, who becomes more and more dependent upon them as time goes by.  As the elderly victim becomes more and more reliant upon them, the dishonest caregiver will enjoy more opportunities to increase the subtle and not-so-subtle pressure on the elder to give them control of their assets.  Some of their standard textbook plays are to get themselves named survivor on the bank accounts and the deed to the house, and to convince the elder to execute a power of attorney that enables them to move assets from the elder’s accounts to their personal accounts. 

The good news is that most family caregivers are honest, caring people who truly are making a great sacrifice to honor their loved ones and to assist the family as a whole.  In these situations, I would advise all other family members to make sure that they thank them, show appropriate appreciation and offer to help out whenever they can.  Living by this Golden Rule is not only the right thing to do, but it also has the practical benefit of dampening any resentment that may be brewing inside the caregiver—resentment that could blossom into financial exploitation.   

If you have any concerns about a caregiver in your family, you should talk to a qualified elder law attorney, who will be able to help you with both preventative and remedial measures. 

Preventative measures keep the theft from happening in the first place—kind of like investing in a good security system for your home.  Such measures can include drafting instruments that name the elder’s most trustworthy and suitable family member or friend to make medical decisions for them and/or to handle their finances in the event that they ever need assistance.  Preventative measures are most effective when a qualified elder law attorney works with an elder who is still relatively independent, and mentally sharp. 

Remedial measures are taken when some damage is already done—kind of like calling ServPro after the basement flooded.  Such remedial measures could include a strongly worded letter from the attorney to the culpable family caregiver; a petition to the Probate Court to have a more responsible family member appointed conservator; a complaint filed with the Department of Social Services Elder Abuse Unit; and, if necessary, a complaint with the local police.  With remedial measures, I always counsel restraint at first.  One can always escalate the remedial measures if necessary, but one cannot always heal the divisions that more extreme measures (like calling the police) can cause within the family. 

            For many people, their family is their most prized asset—a wonderful gift that keeps giving.  Most people have such high regard for their family that they do not want to think about the possibility of a family member doing them wrong.  Yet, sometimes, a little bit of wise planning might be needed to protect the family from itself.  

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If you have an aging loved one who has agency-assigned companions or home health aides, you need to be mindful and watchful of these caregivers.  Many of them are looking for an opportunity to financially exploit your loved one.

As we age, we become weaker more dependent on others and generally more trusting.  We become less able to protect and defend ourselves.  Caregivers know this, and many of them, given the right opportunity, use their position to financially exploit the elderly person in their care. 

These sharks in scrubs work their craft in a predictable pattern.  At the onset, they try to establish a close family-like bond between themselves and their victim.  They will shower the victim with love and affection, bake them cookies, give them small gifts and cards, and perform special tasks that go way beyond the call of duty.  As time goes by, they will encourage their victim to become progressively more dependent upon them, discouraging the victim from doing too many activities on their own, asserting more control over the running of the household.  Likewise, they will try to isolate their victim from others, reinforcing the victim’s dependence on the caregiver and shielding their activities from their prying eyes of family and friends. 

Having established trust, dependence and isolation, the rogue caregiver starts to cash in.  They may start by encouraging and/or accepting disproportionate gifts from their elderly victim for Christmas, birthdays and other occasions.  At some point, they usually start bringing their personal financial problems to the victim’s attention—they can't pay the rent, can't pay the electric bill, can't make the car payment, can’t pay the special tutor for their special needs kid, can’t afford the co-pays on prescription drugs for their elderly mother, etc., etc.  They will complain that the agency underpays them, regardless of what they actually get paid.  Whether they come right out and say it, or whether they imply it, the threat to your loved one will be made clear—unless your loved one is willing to supplement their income, they will have to move on, and your loved one will be taken care of by a “stranger.” 

Vulnerable elders will often give in to this threat.  The victim may pay the caregiver a supplemental salary and/or pay the caregiver’s personal bills directly and/or “lend” money to the caregiver.  Some victims even allow the caregiver to drive them to the bank, or to the caregiver’s favorite estate planning attorney.  This is scary stuff. 

 The good news is that there are lots of things that family and friends can do to minimize the risks to a vulnerable elderly person. 

 The most important take-away from this posting is that you should never let your loved one become or feel isolated.  The rogue caregiver will look for lonely, isolated, and needy targets.  Their game plan depends on stealth and darkness.  When lots of relatives are dropping by, checking up on the elder, encouraging their loved one to stay active and asking the loved one and the caregiver lots of questions, it throws a monkey wrench in the plans of any potential con artist.  Remember, cockroaches are most active in the dead of night; once you turn on a bright light, they scatter under the appliances.  It is the same with scheming, thieving caregivers. 

 You and your family must choose your agency carefully, and be sure you are comfortable with the caregivers assigned before they start work.  There are many reputable agencies that are very careful about whom they hire, and these are the agencies that you need to do business with.  Do not base your decision solely on price, as many of the cut-rate agencies have lower hiring standards and practices.  Interview at least three agencies, asking lots of questions about how these agencies qualify and screen potential caregivers during the hiring process.  Unfortunately, even at the best agencies, some bad actors are going to slip through the cracks.  For this reason, you may want to conduct your own interview with each prospective caregiver before they enter your loved one’s home.  If you get a bad feeling about any individual, trust your gut and ask the agency to assign someone else. 

 After the caregiver is hired, watch the caregiver like a hawk.  Check in frequently and unexpectedly at unpredictable times.  Have other family members do the same.  When you visit, put on your Sherlock Holmes deerstalker hat and ask your loved one and the caregiver some questions about what they talk about during the day.  If your loved one grants you a power of attorney, keep a very close eye on all bank account transactions and credit card statements. 

If you suspect that a current caregiver is taking advantage of your loved one, report it to their agency, and get a new caregiver assigned.  If you believe the elder has been seriously exploited, consider notifying the Connecticut Department of Social Services Elder Abuse Unit and/or the local police department in the victim’s town.  If things have progressed to this point, you should also consider consulting a qualified elder law attorney, preferably one with litigation experience and a background in criminal law. 

Following the above recommendations may take a bit more time in the short run.  Yet, in the long run, these precautions could help your loved one avoid a financial crisis, and you and your family will sleep better knowing that your loved one is protected.  As Ben Franklin wisely stated, “An ounce of prevention is worth a pound of cure.” 

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As an estate planning attorney, I hear this question a lot, but a better question would be, “Do I need just a will, or should I also have a trust?”  That’s a better question because all people need a will, while some people would also benefit from a trust. 

A will is a written instrument that dictates how one’s assets are to be distributed after your death.  It does not have any legal effect until you die, and a person of sound mind can revoke or change it any time prior to death.  Upon death, all assets personally owned by you become part of your probate estate.  The assets of your probate estate are first used to pay the costs of administering your estate, your funeral bill, your final medical expenses and any outstanding debts incurred during your lifetime.  Your remaining assets are then distributed to the beneficiaries named in your will, per the written instructions provided by your will. 

A trust, on the other hand, is a written instrument created by a person, the maker or “settlor,” that provides that a named third party, a “trustee,” will manage certain of the settlor’s assets for the benefit of a beneficiary (or beneficiaries) named in the trust.  Commonly, settlors will name themselves and/or family members as beneficiaries.  Of course, the beneficiaries do not have to be family members, they could be friends, charitable organizations, or any other person or entity.  Trusts can be set up so that the settlor can revoke them at any time during his or her life, or they can be set up as irrevocable trusts, trusts that can never be changed after they are executed.  Trusts can be structured in a multitude of different ways to accomplish a wide variety of estate planning objectives. 

There can be many advantages to having your assets in a trust.  For instance, they give you greater control during your lifetime over how you distribute your assets to the people you care about.  The assets in trusts do not pass through probate, and this can simplify the administration of your estate by sheltering these assets from probate court.  Furthermore, trusts can be structured in certain ways that may help you reduce or, in some cases, eliminate estate/inheritance taxes.  Moreover, there is usually no public record of the trust assets, giving you and your family greater privacy.  Trusts can be set up to make special provisions for a child with special needs.  Trusts are ideal for providing for a child who is not good with money, as they can contain certain “spendthrift” provisions that protect the trust’s assets from a beneficiary’s creditors.  People also like to use trusts to keep assets out of the hands of their in-laws, as one can very easily draft clauses that guarantee that distributions go only to blood-relatives.  These are just a few of the many advantages trusts can provide.  The bottom line is that trusts can provide unparalleled flexibility and utility in helping you reach your estate planning goals. 

Unfortunately, trusts have some very distinct disadvantages.  First off, they are expensive to set up, and expensive to maintain.  Compared to a will, a qualified attorney can easily spend five to ten times more time drafting a trust, and this is reflected in the amount attorneys charge for drafting them.  Moreover, after the trust has been set up, there is a lot of expensive paperwork involved, as the Trustee has to file annual state and federal tax returns, and is usually required to file periodic accountings for the beneficiaries to review.  This paperwork in turn generates regular billing from the trustee, her attorney and her accountant.  Moreover, if a beneficiary is unhappy with the way the trustee is managing the trust, they can bring legal actions that the trustee will have a duty to defend, and the legal fees in these types of disputes can be astronomical.  The worst news, not surprisingly, is from the Federal Government.  If the trust earns over $12,500 in income, and this income is not distributed, that income can be taxed at a marginal rate of 37% at the Federal level.  Adding insult to injury, Connecticut will charge an additional 7% on all federally taxed trust income.  Finally, from an emotional standpoint, when a settlor places most of her assets in a trust, she gives up a great deal of autonomy over her finances, and this is especially true if the trust is irrevocable. 

Given the potential costs outlined above, when advising clients, my general rule of thumb is that the larger and more complex the estate, the more likely a client is to benefit from having at least some of their assets in a trust.  Yet, the decision about whether or not to make a trust should not be determined solely by the size of the estate, because each client has unique needs and circumstances.  In the final analysis, you will not be able to make a meaningful decision about whether to set up a trust, or what kind of trust you need, until you have sat down with your attorney, your accountant and, preferably, a competent financial advisor. 

  My advice regarding wills is much more straightforward—everyone needs one.  If you do not have a will, the estate is considered “intestate” and you will have no say in how your wealth is passed on.  Instead, the distribution of your assets is determined by the statutes, and enforced by the Probate Court.  More critically, when an estate is intestate, you have no control over who the court appoints to manage your affairs after you die.  The Probate Court could very well appoint the most incompetent and self-serving family member as administrator of your estate.  The bottom line is that the Probate Court does not know your family the way that you do, and you have the right to tell the court who should be in charge of your estate when you are gone.  Unfortunately, you forfeit that right when you die without a will. 

Many people make the mistake of thinking that they do not need a will because they have “everything in a trust.”  The problem is that no one—and I mean no one—dies with “everything in a trust.”  Trusts often do not account for the personal bank account that folks pay their day-to-day bills with.  They frequently to not include cars, boats, antique motorcycles, coin collections, fur coats, jewelry, fancy Rolex watches, royalties, shares in small businesses, undistributed inheritances from other relatives, etc.  I could go on for several pages listing valuable items that are frequently not included in the trust, but you get the point.  Those assets that are not part of the trust create a lot of loose ends that have to be tied up in Probate Court.  Moreover, while trustees can be authorized to pay funeral expenses and other final expenses, they usually look to the will for guidance, and if there is no will, that could create a lot of unnecessary confusion.  So, even if you have a trust, you need a thoughtful, up-to-date will.

So, if you do not already have one, have your attorney get started on your will today.  You needed one yesterday!  If you have a will, and your estate is of any significance, then you would do well to meet with an estate planning attorney and explore the possible benefits of setting up a Trust. 

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