According to the Centers for Disease Control and Prevention (CDC) more than 7 million American adults suffer from dementia. That figure may double in the next ten years. While modern medicine keeps us alive longer, it has not yet discovered a cure for the deterioration of our mental faculties.
Many retirees who reside in Florida are not near family members, who may live in the Northeast or Midwest. They are therefore more vulnerable to scam artists and others who prey on the elderly.
About twice or three times a month my office receives a call from an adult child of one of our clients, expressing concern about a parent’s cognitive decline. The child will typically request a copy of a durable power of attorney, or of the client’s revocable trust to examine what must happen so that they can assist their mother or father with legal and financial affairs.
My office typically helps with that process. In today’s column I’m going to outline some ideas you may want to consider combatting legal and financial issues that arise when one suffers from mental decline.
Release from Confidentiality
First, it is imperative that my client execute a release from confidentiality so I, and members of my staff, may interact and share information with loved ones. This might include a spouse, adult children, or others. Without such a release, the Florida Bar Rules of Professional Conduct prohibit my law firm from sharing confidential information, which includes most, if not all, of a client’s file.
Some clients are reluctant to waive confidentiality to a limited group, even their children. In that case, I advise to provide copies of important documents like the durable power of attorney, health care surrogate and living will to their loved ones. Otherwise, they wouldn’t know that the documents even exist or what powers and direction they convey.
Financial Information
Second, it is also important to share financial information. Where are the accounts? Whose name is on them? If the account is in the name of a trust, where is the trust document? Who is the successor trustee if the client can no longer act?
Financial information is perhaps the most delicate for clients to share with their adult children. While some families are very open, others remain tight lipped. There could be valid reason for nondisclosure, but if there isn’t, then perhaps once one retires he might consider sharing, at a minimum, who his financial advisor is, and how to get in touch with him.
As E*Trade, Vanguard, Schwab, Fidelity and other low-cost platforms proliferate, many clients don’t engage a personal financial advisor. These clients are perhaps the most vulnerable when cognitive ability declines. Yes, low-cost platforms are less expensive than a typical financial advisor, but at what cost? When a client loses the capability to manage his own portfolio, will inaction lead to major loss?
Beware of Predators
Finally, I’ll leave you with a true story. Several years ago a client’s son came to visit me, concerned about his father, who was suffering from Alzheimer’s. The client’s wife died some time ago, she was the mother of their children, but the client had entered a new relationship with a woman the children were suspicious of. She professed great love for the client. He wanted to transfer his home and several financial accounts to her.
The son told me he didn’t want to appear to protect his inheritance, but instead, son was worried that his father wasn’t truly aware of the consequences of what he was doing, as he needed the money for his growing care needs.
We investigated the woman, and found out that she had eight prior marriages, all to men with Alzheimer’s!
Even if our client were removed as his own trustee, since he wasn’t yet adjudicated incompetent, he still had the power to transfer accounts, homes or even marry the woman, which would have resulted in her acquiring up to half of his assets at his death unless she signed a nuptial agreement.
The danger instituting an action – most likely a guardianship action – is that the individual has lucid moments during the hearing and the judge denies the order. The individual might then take vengeance against the family members who were just trying to protect him.
Solution: Preneed Guardian
Here it’s very important to have a “preneed guardian” document in the file. This document names who the client wants to be his legal guardian if he is adjudicated incompetent. Otherwise, the person trying to take advantage may obtain those legal rights.
Planning for incompetency hopefully occurs well before the client is in any danger of becoming mentally impaired. Hopefully today’s short column stresses the importance of getting your affairs in order, and having important conversations with your legal, tax and financial advisors, as well as your loved ones.
© 2021 Craig R. Hersch learn more at floridaestateplanning.com
