A client’s son called and told me that we had a problem. “Dad wrote a $10,000 check to the housekeeper,” he said, “what do we do now?”
I helped establish a trust for the gentleman I’ll call “Don” many years ago. Don acted as his own trustee over his trust, as is common with most clients. Don managed his own bank, investment and retirement accounts. He paid his own bills, competently doing what all of us do in our day to day activities.
When his wife, “Lois”, died, Don hired housekeepers to do laundry and to keep his place clean. This went on for many years. During a visit, Don’s son, “Jim” who lives in the Midwest, discovered that Don’s mind was slipping. A stack of bills lay on the kitchen table unopened. One envelope revealed that Don had let his Medigap coverage lapse. Jim immediately called the company to reinstate the insurance.
Rattled by this revelation, Jim asked Don if he could help manage the bills. Don didn’t object. Another big surprise came when Jim opened the bank checking account statement. Numerous overdraft charges had been levied. And then Jim discovered the cancelled $10,000 check to the housekeeper.
“What’s this for?” Jim asked his father. Don didn’t recall ever writing or signing the check, but it appeared to be in Don’s handwriting. Jim and Don agreed that they should take steps to try and recover the funds.
A visit to the neurologist confirmed that Don had entered the early stages of Alzheimer’s. Suddenly Jim’s world turned upside down. How was he going to manage his father’s affairs? Would he have to put his father into a nursing home? Were there enough funds for in-home nursing care if and when that became necessary? How would he prevent his father from writing checks to strangers and acquaintances?
I explained to Jim that we should first remove his father as his own trustee and put in the named Successor Trustee, who happened to be Jim.
“How am I going to manage this from my home in Wisconsin?” Jim asked. “I have a full time job, a wife and two kids. I don’t have the time to manage Dad’s investments, to take his distributions from the IRA account, to pay his bills and to work with his accountant at tax time. On top of that, what do I do about his care?”
We went through several options. The first item to tackle was Dad’s finances. It appeared that Don had enough money to last him through his illness. But the day to day management, coordination and bill paying had to be taken care of, not to mention the health issues and care Don would require related to his ongoing care.
Don’s estate plan included up to date health care surrogates, living wills and HIPPA (health privacy) waivers. Jim would be in charge of making Don’s decisions related to health care.
Don’s revocable living trust provided for the steps to remove Don as his own trustee. Don didn’t fight the change, and signed a letter of resignation. It was official, Jim was now in charge of the trust assets.
We reviewed the trustee provisions of Don’s trust together. These provisions included a power for a trustee to name a co-trustee to help with the day to day financial, investment and bill paying tasks.
We talked about naming Don’s brokerage house, or a bank or trust company as a Co-Trustee. Another option was for Jim to engage one of the financial institutions as an agent instead of as a trustee. I encouraged Jim to speak with Don’s existing financial advisors about these options with their firm.
Next we walked through the various support services for patients with Alzheimer’s. There are a variety of services in place for families dealing with the dilemma facing Don and Jim.
Neither Jim nor Don’s life would ever be the same. The good news is that Don had the planning pieces in place to provide Jim the support that he needed. As our population ages, I believe that this scenario may play several times over many families. If you feel that a loved one might be spiraling toward issues similar to the ones described in this column, don’t hesitate to begin taking steps with your loved one’s professionals sooner rather than later.
